After coming up with the idea, the next step in starting your dog treat bakery 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 to think through all the aspects of the business and then serves as a guide as you begin.

Related: How to write a business plan

Finding the perfect dog treat 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.

A business entity refers to how a business is legally organized to operate. There are four primary business entities 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 dog treat 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 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 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
 

Many dog treat bakery businesses operate out of their home and sell directly to consumers on their website or to dog-related businesses such as kennels, vets, etc. In some areas, there are restrictions to making pet treats for sale in the home, however, investing in a commercial kitchen may be too expensive. In this case, look for a shared community kitchen or look to partner with a restaurant during off-hours or a church with a kitchen to rent space as needed.

Others pet treat businesses will open a retail storefront, which comes with higher rent costs as a location with high foot traffic is beneficial.

Related: Choosing a business location

There are specific regulations when making homemade dog treats.

At the federal level, the Federal Drug Administration (FDA) requires that all animal foods, like human foods, be safe to eat, produced under sanitary conditions, contain no harmful substances, and be truthfully labeled. Learn more about the FDA’s pet food regulations. Additionally, many states require a business selling pet foods to register with the state’s Department of Agriculture, while other states may require that your company be licensed to sell in that state. Last, your local health department may have local regulations and rules to follow as well.

The Association of American Feed Control Officials (AAFCO) has more information and a checklist for Model Pet Food Regulations and the Pet Food Labeling Checklist.

In addition to food regulations and labeling, there is also general business licensing that may be needed. A few of these may include a sales tax permit and an Employer Identification Number if you plan to have employees.  

Related: Common business licenses, permits, and registrations by state

Many home-based pet treat businesses won’t need funding since the startup costs are low, however, if you are opening a retail storefront, a loan or investment may be necessary.

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

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.

A pet treat business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a dog treat business include social media marketing or flyers at the local dog parks.  Signage and window displays will be important if you have a brick-and-mortar store.

Related: Low-cost ideas to market a new business

There are several types of insurance to consider when starting a dog treat business. A couple of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– 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.

The cost to insure a dog treat business will vary depending on several factors. 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

You may need employees to help run your dog treat business.

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

Setting up an accounting system for your dog treat 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 the accounting for your business