How to start a bakery business

Whether you’re crazy about cronuts or passionate about pavlovas, launching your own bakery is a big step. It can feel overwhelming, but our practical how-to-guide is here to help you start strong.

Reasons for starting a bakery

Turn passion into profit
Many people start a bakery because they love baking and want to turn their hobby into a business. It’s a great opportunity to be creative and make a profit doing something you’re passionate about!

A growing industry
The UK bakery market is expected to grow steadily in the coming years, driven by increased demand for convenient, ready-to-eat baked goods, a rising interest in healthier ‘home-baked’ options, and the growing popularity of artisanal breads and baked goods.

Creative freedom
Running your own bakery is a great way to showcase your creativity. From trying out new recipes, to getting crafty with bakes and decorating - it’s a perfect career for someone who loves to experiment and try new things!

Community ties
Bakeries and cafes often become a regular part of people’s daily routines, whether it’s catching up with friends or grabbing their daily treat. Having repeat customers that you’re able to build good relationships can give your business a real boost, as satisfied customers are likely to recommend you to their family and friends!

Flexibility
Because of the type of business you’ll be in, you’re able to open early mornings, afternoons, or even later in the evening. That way you’re able to balance work and personal life, while pursuing your passion.

What is the startup cost of running a bakery?

There is no ‘one size fits all’, as costs depend on your location, business model, local licensing, and your own vision for the bakery. However, the good news is that starting a bakery tends to be more affordable than other food industry ventures, like opening a restaurant.

Budget and planning

Although the costs may vary, you should budget for the following areas you’ll need to invest in:

Licenses and fees

You should budget up to around £1,000 in this area, as there are a few legally required licenses you’ll need to obtain before you can get going. License and registration fees tend to vary depending on your location and any local authority rules, so it’s worthwhile checking out which ones apply to you.

Startup equipment

To get started you’ll need to invest in the basics like ovens, mixing equipment, and fridge space etc. Although this can be a bit of a hefty cost upfront, your equipment is an investment into your future. Costs for equipment generally depend on the type and brand you go for, so it’s a good idea to shop about for prices before accounting for equipment in your start up budget.

Initial stock and ingredients

In the beginning it’s important to stock up on standard ingredients like flour, sugar, eggs and butter to make sure you have a steady supply to kick off orders. You should initially budget around £1,000 for this, but depending on how ambitious your bakes are, you may also have to account for more expensive or niche ingredients.

Premises/location

You’ll want a location that attracts your target customers, such as high foot traffic areas, town centres, or busy shopping centres! The costs for this vary depending on location and size. Another factor to consider is whether you’ll be paying rent, deposits or mortgage payments for your location.

What salary does a UK bakery owner make?

According to global salary date provided by Salary.com, the average salary for a bakery owner in the UK ranges from £23,743 to £34,188, impacted by factors like location and education.

Planning for success

Create a strong marketing plan

When you’re starting up, a business marketing plan can really help you to navigate your small business. There’s a lot that goes into running your business, and having a plan can help keep you accountable. And setting clear objectives and goals keeps you on track and helps you to monitor your growth/progress.

A business marketing plan can help you:

Marketing plan step-by-step

Not sure where to start? Our handy guide can help.

Legal requirements

Legal structure for your bakery business

Deciding on your business structure is a big decision, as it affects everything from wages to tax. But which is right for you?

Sole-trader/self-employed

A person who’s the only owner of their business. There’s no legal separation between you as the business owner and the business itself.

Limited company

A business which is a distinct legal entity from the business owner, formed whether you’re a one-person operation or have a few staff.

Which structure is right for your business?

Choosing the right legal structure for your business can be tricky, let us help break it down.

Registering your business

HMRC

If you’re starting a new business, you’ll need to register with HM Revenue & Customs (HMRC). This registration is essential for paying taxes, including Income Tax, VAT (if applicable), and National Insurance contributions. Depending on your business structure, registration may be required before you begin trading or shortly after. Registering with HMRC ensures you stay compliant with tax laws and helps you manage your finances effectively.

Registration and licenses

Any businesses that sell food and drinks need licenses and registrations to run. Your bakery must adhere to any local and legal laws, which typically include:

Food Business Registration: Mandatory registration with your local council’s environmental health department before opening.

Food Hygiene and Safety Certificate: Ensures you meet food safety laws—often part of the registration process.

Street Trading License: Required if you plan to sell on the street or outside your premises.

Planning Permission: Needed if you’re making structural changes or changing the use of your premises (more relevant for home bakers!).

FAQs

Can I run a bakery from home?

In short, yes. However, you must register your bakery business with all relevant authorities and local councils. You also need to comply with the appropriate food safety regulations. Please note, local planning laws may limit home-based bakeries.

What happens if a customer has a food allergy incident?

In the unfortunate scenario that a customer suffers from a food allergy incident, you should:

• Act quick to see if they need medical attention
• Record clear details of the incident
• Review your process to prevent any issues happening again
• Consult food safety laws to ensure you are compliant and up to date

Does insurance cover allergy incidents?

From an insurance perspective, if a customer experiences an allergic reaction from your baked goods, your public liability insurance may cover claims for injury or illness caused by your food.

It’s important to review your policy for specific coverage and that you follow proper allergen labelling and safety procedures to reduce risks.

How do I price my goods?

When deciding on pricing, you should consider the cost of your ingredients, your overheads, and the labour that went into it. Additionally, you should take into account who your target customer is, and the amount they’re likely to pay. Not sure where to start? It might be worthwhile checking out other local bakeries or competitor for a steer.

How do I promote my bakery business?

• Take your business online! Set up a social media account or website to showcase your bakes and goods.
• Don’t underestimate the power of word-of-mouth recommendations. If you want to become your customers go-to for baked goods, give them reasons to praise your business! Things like having loyalty schemes, rewards and great customer service can go a long way.

Do I need insurance as a bakery owner?

Like any other business, a bakery is vulnerable to illness, accidents, damage, and theft. These incidents can result in significant legal fees and compensation costs. Having the right insurance can help cover these expenses, allowing you to focus on running your business with peace of mind.

What types of insurance are available for bakeries?

Public Liability Insurance
Can help cover compensation and legal costs if someone is injured or their property is damaged as a result of dealings with your business.

Employers’ Liability Insurance
Protects your staff if they are injured or become ill due to their work. If you have employees, this is a legal requirement.

Contents Cover
Covers your stock and business premises. It can also protect against loss of money, stock deterioration, goods in transit, and products during delivery.