How to Start a Cookie Business
Cookies make the world go round!
Are you able to whip up a batch of the most amazing, perfectly formed homemade cookies in no time at all? Are you happiest experimenting with flavor combinations surrounded by your cookie recipe collection, spatulas, bags of flour, choc chips, and rolling pins? Are you always asked to bring your baked goods to a party because yours is just the best?
If that sounds a bit like you and you answered ‘Yes’ to most of these questions, then why not turn your passion into a money earner and start a cookie business? This is a great home-based opportunity to become your own boss and test the waters without the burden of high start-up costs.
Your cookie business will be in the market of producing and selling baked goods, primarily cookies, biscuits, cookie sandwiches, wafers, and ice cream cones.
This may be a home-based operation from which you bake and distribute your baked goods directly to local markets, businesses, and customers, or simply a digital storefront.
Perhaps, you opt for a bigger business model working out of a commercial bakery, allowing you to produce and distribute more significant quantities of baked goods to hospitality and supermarket chains, for example. Another alternative is joining a franchise, such as a cookie dough franchise.
Cookie businesses sit within the cookie and wafer manufacturing industry. And that is described as “primarily producing bakery goods with higher fat and moisture content, such as cookies, wafers and ice cream cones.” According to IBISWorld, this is a $6 billion industry in the US, with cookie manufacturing commanding 70% of the market.
The four biggest players in this industry are Campbell Soup Co, Kellogg Company, Ferrero Group, and Mondelez International, Inc., making up almost 50% of the entire market.
A recent Mordor Intelligence report states that the US cookie market is forecasted to experience a CAGR (compound annual growth rate) of 3.38% by 2027.
Other research suggests that an emphasis on healthy diets has lowered the demand for sweet snacks. But, according to IBISWorld, the industry is also battling with higher competition from overseas and an increase in costs for key ingredients.
The opportunity to grow a cookie business presents itself in organic and gluten-free cookies, along with baked goods having lower sugar and fat content to cater to the growing demand for healthy snacks.
Who doesn’t like a cookie? Of course, you could say that anyone with a sweet tooth will be your target market.
But there are a few main points to consider when developing your business plan and identifying your customer base.
- What does your competition look like? Is there a niche opportunity, a demand that needs to be filled?
- Do you want to cater to a specific market – with organic ingredients, gluten-free baking, or perhaps kids’ parties and birthday creations, for example?
- Think about whether you want to start small, create a following out of your own kitchen, sell your goods at local markets or hotels, and directly to customers.
- Are you a fantastic baker, but marketing is not your forte? Then maybe a franchise option with a strong marketing and communications presence is your best option.
- Or are you looking to sell your goods at large stores and chains?
Checklist for Starting a Cookie Business
Are you thinking about starting a cookie business? Here’s a checklist to help you get started.
Step 1: Write a Business Plan
If you’re starting a cookie business, you’ll want to write a business plan. This will help you define your business goals, choose the right business structure, and secure funding.
There is no one single way to write a business plan for a cookie business. However, there are some key elements that should be included in any business plan. These elements include a description of the business, the market analysis, the company’s financials, and the management team.
Related: How to write a business plan
Step 2: Name the Business
There are a few things to consider when coming up with a name for a cookie business. To start with, the name is typically reflective of the inspiration or your signature kind of cookies being sold, as well as the overall tone and feel of the business. It’s also important to make sure the name is unique and easy to remember.
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 cookie 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
There is no one perfect location for a cookie business, as some will sell at farmer’s markets, cater events, or have a retail store.
If going with a retail store, location will play a role in the success of the business. One important factor is foot traffic. A location with high foot traffic is more likely to generate customers for your business. Another important factor is the demographics of the area. If the area around your potential location has a high concentration of people in your target market, that is also a good sign. Another thing to consider is the competition. If there are already a lot of cookie businesses in the area, you may have a tougher time making a name for yourself.
Regardless of the location, local health codes will need to be followed. Before signing a lease or purchasing, be sure the facility complies (or will comply after renovations) with all regulations.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Like any business, a cookie business owner will likely need to obtain a variety of business licenses and permits in order to operate.
Some of the most common ones include a food permit, local business license, and sales tax license.
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 cookie business is another. If you plan to move into a retail location, the cost to start can be very high to complete renovations.
Obtaining funding to start a cookie business can be difficult as 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. Banks will often use loan programs from the Small Business Administration (SBA) to finance startups.
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
There are many ways to market a cookie business, but the most important will be word-of-mouth, so be sure your recipes are delicious.
Some common ways for advertising a cookie business include social media platforms like Facebook, or Instagram, print advertisements, online ads, and handing out free samples. Whatever marketing strategy you choose, make sure it is creative and will reach your target audience.
Step 9: Get Business Insurance
There are a few different types of business insurance that a cookie business might need, depending on the size and scope of the operation. A couple of common types include:
General liability insurance would protect the business in the event of a lawsuit stemming from injuries on the property or if a customer becomes sick after eating your product. If the business had employees, workers’ compensation insurance would be necessary to cover on-the-job injuries. And finally, business property insurance would protect the business’s physical assets in the event of a fire, theft, or other damage.
Be sure to review your homeowner’s or renter’s insurance if you have a home-based cookie business, as residential policies won’t typically cover business-related losses.
Step 10: Set up an Accounting System
Setting up an accounting system for your cookie business is critical to your business’s long-term success.
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.
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 cookie business?
Although starting a cookie business does not need to come with a huge upfront investment, there is still a considerable outlay. Therefore, a solid business plan and serious budgeting are key here.
Start by nailing down your concept and business model – which will determine a few of your fixed and variable expenses.
Common expenses may include:
Baking equipment ($5000 – $20,000): This goes without saying; you’ll need to purchase an oven, cooling racks, mixers, mixing bowls, storage and refrigeration, and all the tools of the trade. If you are working from home, you may be able to use what’s already there, and you might only need to upgrade and extend. It’s also worthwhile to research used bakery equipment.
Licencing, permits, and legal compliance – up to $2,000, depending on location and whether you are setting up a bakery or opt for a home-based business.
Insurance – $1,000 to $3,000 per year
Start-up inventory such as ingredients, packaging, and labeling – anything between $1,500 – $ 6,000, depending on the scale of your business and its concept. For example, ingredients for organic or gluten-free baking will be more expensive.
Online presence /marketing and branding – $1,000 to $5,000. Your online presence allows you to highlight the daily specials, the weekly menu, or upcoming events where your food stall will be. In addition, a website with an online quoting, booking, and payment function is essential if you want to cater for parties or sell goods to grocery stores, for example.
Location: If you opt for a brick-and-mortar bakery and store to sell your cookies, your budget will need to include lease expenses, additional furniture, POS equipment, and additional staff.
How much money can you make with a cookie business?
Although cookies are the ultimate comfort food for many of us, the demand for these sweet treats has slowed down in the US. As a result, IBISWorld sees growth opportunities predominantly in the specialty, personalized goods and healthy eating segment.
Business planning and understanding your target market is the first step toward a successful cookie business. The second important step is keeping your direct and indirect costs under control and pricing your baked goods correctly. The industry average is a 30% profit margin, which is relatively high.
Starting your cookie business from home can be a fantastic way to test the waters, run your test batches, develop your brand and build your customer base. All this without the burden of considerable starting costs.
Are there grants to start a cookie business?
It’s extremely rare to find a grant to start a cookie 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 cookie business?
Baking and food safety requirements. A passion for baking, understanding your ingredients, creativity, and a drive to try new things will also help you make your cookie business a success. But it is also essential to understand food safety, and being able to bake goods to consistent quality, and know how to price them.
We highly recommend you develop all those skills before you commit to setting up your cookie business.
Your kitchen or bakery must be certified by the local health authority (cottage food law) before you can start making tasty treats. You will also need to complete a basic food handling and safety course.
If you decide to start a baking business from home, check in with your local zoning board to ensure you can do this legally in a residential area. In some states, there is a limit to who home-bakers can sell to. For example, if you are in Florida, you are not allowed to sell to grocery stores or restaurants.
Outstanding people and customer service skills. You can argue that you can let your cookies do all the talking. Still, a smile, outstanding customer service, and a can-do, positive attitude will go a very long way in this industry and will ensure you attract customers through word-of-mouth and can count on repeat business.
Being a good networker will also help secure larger party and event contracts.
Solid Marketing and Tech Skills. How are you going to tell the world that they really need YOUR cookies? How will they know where to order them from? What is your point of difference?
29% of customers ordered their cookies online in 2021. So, an online and social media presence is a must, regardless of your business model. But especially if you decide to sell cookies online, understanding how you make your brand stand out from the crowd will be essential.
But consider also going to fairs and events, local markets, and – law permitting – local boutique hotels and delicatessens, for example.
If marketing and communication is not your strongest point, consider taking an introductory course to set up your campaign for success from the get-go.
What is the NAICS code for a cookie business?
The NAICS code for a cookie business is 311821, which is classified as cookie and cracker manufacturing.
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?
We reckon you don’t have to be a tough cookie to start your own cookie business. Baking and selling your sweet treats can easily begin as a side hustle and grow into something bigger. It’s a fantastic opportunity to turn your passion and creativity into a thriving business.
Best of all, your place of work will always smell delicious!