How to Start a Chocolate Business

Last Updated on

Quick Reference

Who doesn’t love chocolate?  If you have a passion for making chocolates as well as eat them, you may have thought of turning your skills or hobby into a business. It would be a great way to do what you love, make money, and be your own boss.

Business Overview

A chocolate business can be a brick-and-mortar store or an online business. The business will produce, package, and sell various types of chocolates. Some chocolate businesses, particularly franchises, get their chocolates from a manufacturer, but a chocolate business that makes its own products is more unique and often more desirable to customers.

Industry Summary

According to Statista, the chocolate industry has been growing modestly, and that growth is expected to continue. The market size was $17.6 billion in 2016 and is expected to grow to $20.7 billion in 2025. Chocolates are always in demand, so the chocolate industry is not generally vulnerable to economic fluctuations. They are considered an affordable luxury.

Related Industries

Candy Store
Ice Cream Shop

Industry Trends

Chocolates are becoming even more popular, in part because certain types of chocolates have been found to have health benefits. People are seeking new and trendy types of chocolates, such as salty chocolates, and dark chocolates are more in demand because of their antioxidant composition.

Target Market

The target market for a chocolate business is individuals who like chocolate and can vary based on the types of chocolates that you make. Entertainment venues or caterers are also potential customers, as well as flower shops and retailers.

Skills, Experience, and Education Useful in Running a Chocolate Business

There are several specific skills that you will need to run a chocolate business.

  • Chocolate making. Your chocolates need to be great to stand out, so perfect your recipes by testing them with friends and family.
  • An eye for design. Your packaging and even your chocolate products should be visually appealing.
  • Good taste. Creating new flavors and styles that your customers want is important to keep them coming back.
  • Business knowledge and experience. You will need to have some basic knowledge of marketing, finance/accounting, and human resources.
  • Networking with potential business customers such as caterers can help you to grow your business.
  • Customer service. You’ll need to be able to build rapport with your customers so that you retain them as customers and gain repeat business and referrals.

Costs to Start a Chocolate Business

Here are the typical costs you will face when you open a chocolate business.

  • Setting up a business name and corporation costs approximately $200.
  • Business cards, brochures, postcards for marketing $200 – $300
  • Website setup $100 –$200 for a basic, do it yourself website, $1,000 – $2,000 for a professional site
  • Kitchen equipment such as refrigeration, freezers, cold tables, etc. $1,000 – $5,000
  • Supplies like mixing bowls, spoons, cups, scale, baking sheet, candy thermometers, molds, etc. – $200 – $500
  • Ingredients, wax papers, and packaging $2000 – $5000 to start
  • Brick and mortar location if you choose to have one $1,500 – $3,000 monthly for a lease
  • Liability insurance $100 – $200
  • Initial marketing such as Facebook ads or search engine optimization for your website, $500 -$1,000

Steps to Starting a Chocolate Business

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your chocolate business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.

Related:
How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect chocolate business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Related: Tips and ideas for naming a chocolate business

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a 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.

RelatedComparison of Business Entities

Step 4: Select your Location

If you choose to have a physical location for your chocolate business, you need to be in a high foot traffic area. Chocolates can be an impulse purchase, so the more people you have walking by, the better.

Depending on the state and volume of production, a chocolate business may be able to operate out of the home under cottage food laws.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

Food establishments are required to get approval from the local health department. They will be looking for things like production equipment, cleanliness, and sanitation practices. While some states will allow home-based production, depending on the volume of sales, more regulations may force you to a commercial facility. The health department will conduct inspections on a regular basis to ensure the facility is up to code.

In addition, there are general business registrations that a chocolate business may need. A few of these may include a sales tax permit and an Employer Identification Number if you plan to have employees.

Related: What licenses do chocolate businesses need?

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 chocolate business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs. Some entrepreneurs use their own funds, a home equity loan, or credit cards, but you are putting your funds at risk and will have payments that may or may not be more than those of a business loan.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 8: Get your Marketing Plan in Place

The type of marketing a chocolate business will need to do will largely depend on who their target customer is and product line.

A smaller, home-based operation may focus on farmer’s markets or at events, while a retail location may focus more on individuals. A chocolate business focusing on making mass quantities and selling through retail stores will need to work with a distributor and market through other channels.

Common marketing techniques can include social media marketing, online advertising, and networking. Photographing gourmet chocolates is also a great way to market your products, and regularly using photo-sharing sites like Instagram and Pinterest can create a loyal following. Developing a website can be a significant expense, but it can also give your chocolate business greater visibility online. However, if you have a physical location, your foot traffic will be key, so you need to have great signage and appealing window displays.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

A chocolate business needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Property and casualty insurance protects you if your equipment is damaged.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You will probably need employees to run your chocolate business, particularly if you have a brick-and-mortar store.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your chocolate business is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning a Chocolate Business?

As a boutique chocolate business, you can charge anywhere from $7 – $10 per pound, or even up to $30 per pound for fine chocolates. Your margins should be around 55 – 75%. If you have a successful chocolate business in a great location, you could make 6 figures or more.

Things to Consider Before Starting a Chocolate Business

Running a chocolate business or any business will have its challenges. You need to be prepared and make sure that you know what you’re getting into.

You will also need help making your chocolates as your business grows, so you will need employees with chocolate-making skills or invest time training them.

You will face competition, so you will have to make your business stand out and provide a high-quality product. Learn what your competitors create to see if there is anything missing in your markets, such as caramels, hard candies, or truffles. Your location is also critical, and a great location can be expensive.

You can also talk to other entrepreneurs for tips on starting a business and do your homework to determine costs.  Check out other chocolate stores (not only in the local market but in other places) to see what they are offering, and talk to potential business customers to see what they might be looking for from your chocolate business.

Subscribe Now to the 60-day Startup Challenge!

Subscribe Now to the 60-day Startup Challenge!