How to Start a Candy-Making Business
Do you have a sweet tooth? Can you go to a candy store without sampling? No? Statistics show that Americans eat, on average, 22 pounds of candy a year.
Are you also the creative confectioner in your circle of friends and family who always brings fantastic, homemade treats to every gathering? If you’ve answered yes to these questions, then starting a candy-making business might be a fantastic way to become your own boss and follow your passion.
If you are a candy manufacturer, you’re making a variety of chocolate and non-chocolate confectionaries, such as fudge, toffee, marshmallows, chocolate-covered nuts, pralines, bars, chewy candy, licorice or hard candy, etc.
Your business will be dealing with suppliers of raw ingredients – such as cocoa, sugar, dairy, nuts, dried fruits, glucose, etc. – packaging and equipment. Buyers of your products may include grocery stores, drug stores, delicatessen, cafes, and vending machines. Alternatively, you may decide to sell your own products online, at market stalls, or in a brick-and-mortar store.
The candy production industry is a $27 billion operation. Within that total, the non-chocolate confectionary holds a $12 billion market share employing well over 24,000 people in the US (IBISWorld). Chocolate-based products make up over 60% of the entire candy market.
Most candy making is quite capital intense. This is mainly due to the equipment needed and the restrictions and regulations on food production and safety. The industry is also heavily influenced by the prices and sugar availability. Therefore, a detailed business plan and budget will be essential.
This is a very concentrated industry. Large corporations such as Mars Inc, Nestle SA, and Hershey Co dominate the sector with around 70% of the market share in the US.
Candy will never go out of fashion, but the trend is clearly toward healthier options, sustainable and ethically sourced ingredients, and flavor mixes.
These trends drive innovation in this industry. According to the US National Confectioners Association, most companies dedicate resources solely to developing and introducing new products.
This trend also supports the rise of highly specialized confectioners. Handmade, unique products, made in small batches with high-quality ingredients, can fetch premium prices and be quite sought after.
Americans do love their candy! Consider almost 100% of the American population your market. However, it pays to narrow that down as you will also have considerable competition from the more prominent manufacturers. They can mass produce and sell their products at a comparatively low price point.
So it pays to identify your potential competition, online or ‘brick and mortar’, and use current trends to your advantage.
Potential segmentation could be low-sugar or gluten-free products, organic ingredients, handcrafted specialty confectionary, treats for gifts and special occasions, and candy perhaps relevant to and representing your regional produce.
Checklist for Starting a Candy Making Business
So you have a sweet tooth, and you’ve always wanted to start your own candy business? Here is a checklist of what you need to do to get started. From choosing a type of candy to market to finding the right supplier, follow these tips, and you’ll be on your way to success!
Step 1: Write a Business Plan
Starting a candy-making business may seem sweet and simple, but it’s important to remember the importance of having a solid plan in place. First, determine your target market and assess your competitors.
First of all, what sets your candy apart? Why should people buy from your business versus the competition? Next, outline the financial aspect of your business, including start-up costs, estimated profits and expenses, and potential funding sources. Don’t forget to include marketing strategies as well as plans for distribution and growth.
It may seem overwhelming at first, but with thorough research and dedication to creating a strong foundation, a well-written business plan can sweeten the chances of success for your candy company. Not only that, but a bank requires you to have one to get funding, and multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Come up with a Company Name
Naming a business can be a difficult task, especially when it comes to something as playful and whimsical as candy making. One approach is to think about the kind of image and branding you want your business to have. Do you want a fun and quirky name like “SugarPuss” or “Sweet Dreams Candy Co,” or do you want a more sophisticated and elegant name like “The Confectionary” or “La Dolce Vita Sweets”?
Another strategy is to consider word play and puns related to candy, such as “Candy by Design” or “One Sweet Deal.” Brainstorming with friends, family, and colleagues can also help generate creative ideas. Ultimately, the perfect candy making business name should capture the essence of your brand and make customers eager for a taste of your delicious offerings.
Related: Tips on naming a business
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a candy making business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
When starting a candy making business, the location of your shop or kitchen space is crucial to success.
First, assess the potential customer base in a particular area. Is it a heavily trafficked area with foot traffic and visibility, or will you have to rely on online orders? Next, consider the proximity to suppliers for ingredients and packaging materials. Will you have easy access to fresh produce or will it require additional shipping costs? Finally, think about the competition in the area. Are there already established candy shops nearby?
Once these factors are taken into consideration, you can make an informed decision about where to set up your candy making business.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
It’s important to make sure you have all the necessary licenses and permits in place before getting started.
Depending on the state and specific type of business, you may need to obtain a license from the local Health Department. In addition, any food service business may need a Food Handler’s License or ServSafe certification and will likely also require inspection by health officials.
It’s also important to consider whether your location will require a retail license, Certificate of Occupancy, state sales tax permit, or Employer Identification Number, in addition to any requirements for conducting business in your chosen location.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a candy making business is another. Fortunately, the cost to start a new candy making business is relatively low; however, funding to start a business can be difficult. Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
When it comes to marketing a candy making business, one important thing to showcase is your unique offerings.
What sets your candies apart from others on the market? Do you use organic ingredients or interesting flavor combinations? Whatever it may be, make sure to highlight these selling points in your marketing materials.
In addition, consider offering sample taste tests at local events or partnering with related businesses (such as coffee shops or ice cream parlors) for cross-promotion. Active engagement on social media platforms like Facebook, Instagram, Pinterest, Twitter, etc. can also help to spread the word about your brand and entice new customers to try your sweets.
Above all, don’t be afraid to get creative and have fun with your marketing strategy – after all, who doesn’t love candy?
Step 9: Get Business Insurance
When starting a candy making business, it’s important not only to consider the ingredients and equipment needed, but also the types of insurance needed to protect yourself and your business.
At the top of the list, every business should have general liability insurance in case of accidents or injuries that occur at your workplace or as a result of your products. Additionally, if you have employees, workers’ compensation insurance is necessary to cover any on the job injuries or illnesses. Also, if your candy-making operation involves vehicles for deliveries or transport, commercial auto insurance is a must. And if your facility has expensive equipment or inventory, a property insurance policy can help protect against unforeseen damage or loss.
Covering these basic types of insurance can give you peace of mind while running your candy making business.
Step 10: Hire Employees
When hiring employees for a candy making business, it’s important to first consider the specific skill set needed for the job.
Candymakers typically require proficiency in cooking and baking, as well as attention to detail and creativity. It’s also important to look for candidates with strong communication skills and the ability to work well in a team. As candymaking can be physically demanding, it’s important to search for candidates that are able to stand for long periods of time and lift heavy equipment.
Understanding safe food handling practices is also crucial for any candymaker. In addition to these practical qualifications, it’s vital to hire individuals who share your passion for confectionary excellence and customer satisfaction.
Also, creating a positive work environment where employees feel valued will not only lead to happy staff but also satisfied customers and successful business growth. Overall, the best way to hire employees for a candy making business is by finding talented individuals who possess both technical skills and enthusiasm for the sweet craft.
Related: Hiring your first employee
Step 11: Set up an Accounting System
When starting a candy making business, it’s important to have a strong accounting system in place. This will not only keep track of your expenses and income but also provide useful information for future business planning.
One option is to set up a spreadsheet using software like Excel or Google Sheets. Make sure to include columns for income sources (such as sales at farmer’s markets or wholesale orders) and expenses (ingredient costs, packaging materials, and advertising expenses). It’s also helpful to include a column for monthly totals, so you can easily track your profits and losses over time.
Another option is to use bookkeeping software specifically designed for small businesses, which often includes features like invoicing and tax preparation support.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a candy making business?
Start-up costs depend heavily on your starting point and your target market. Will you enroll in a course to learn your craft first? Will this be a home-based business, or will you rent commercial space? What kind of equipment do you need to produce your confectionery? Where will you be selling your candy?
Here are a few budget items for you to consider:
Equipment: Depending on your products, the equipment can be anything from molds, bowls, and mixers to machinery such as an industrial caramel-making machine, candy thermometers, etc. You might also need cold storage. Likewise, your equipment costs can start from as little as $500 to as much as several thousand US dollars.
Raw materials: Depending on the size of your operation, raw materials may only be $200 at a time. It is good to know that the more you can buy in bulk, the smaller the costs will likely be.
Packaging and labeling: How will you present your product? Will you sell it in boxes? Packaging material can cost between $100 and $300 to start with.
Marketing and advertising: Depending on how savvy you are with a website and social media, taking quality photos, and communicating well, your marketing and communications budget can be between $300 – $4000. Keeping a website working well is another expense, including an online ordering system can be quite labor-intensive. Consider outsourcing these tasks so that you can concentrate on the actual candy-making.
Ongoing expenses: Also, don’t forget about deposits and ongoing expenses like rent, insurance, and utilities like electricity and internet.
How profitable is a candy making business?
It is somewhat tricky to determine wage expectations for candy manufacturers in the US. DataUSA reports the average income in this industry is around $55,000. That reflects the income of a salaried worker, not a business owner. Your income will largely depend on your profit margin and your target market. Understanding trends in the raw ingredients market and the ability to price your products correctly will be critical.
For example, your production will likely be small-scale when you start your business. In this case, your profit margin should sit around 40%. However, once you have an established customer base and move into larger-scale production, your profit margin could go down to 20%.
Are there grants to start a candy making business?
It’s extremely rare to find a grant to start a candy making business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a candy making business?
Know your craft. Candy making is quite an artistic but also precise process. Especially if you need each candy to look and taste the same once you have experimented with flavor combinations.
If you are new to candy making, we strongly recommend you join a relevant confectioners course. It will give you the basic skills to produce a range of different candy and make you aware of necessary food safety and hygiene standards. In the long run, it will help you run your business viably and successfully and give you the confidence to experiment and develop new products.
Business management skills.
Whether you run a business manufacturing candy from home or a rented space, sell your products online, or employ staff to produce and sell them, business management skills are always valuable.
Accounting and pricing skills will be instrumental, as is competency in using e-commerce platforms. You will also need to be able to price your products correctly, work out profit margins and ensure your accounting is in line with tax regulations.
What is the NAICS code for a candy making business?
The NAICS code for a candy making business is 311352, which is categorized under Confectionery Manufacturing from Purchased Chocolates.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Are you a curious and creative person with an entrepreneurial vain and a knack for sweet treats? Starting your own candy manufacturing business may present a wonderful opportunity to follow your passion and become your own boss. This is a good business to begin relatively low-key and build up as you become more confident in your skill and have pinpointed your target market.