Starting a Cookie Business

Starting a Cookie Business

Have you been thinking about starting a cookie business? Do you have cookie creations which started as a hobby and then grew into people asking you to make them for their parties? Your love for making cookies which started as a hobby has now morphed into a cookie business. Or has it? Are you struggling to navigate past being a hobby baker to having a cookie business? Do you feel lost trying to figure out the laws?  Have you even defined if you truly want to own a business? My husband and I are going to help you jump through those hurdles in our blog series: Cookie Business 101. While I graduated with a Degree in Organizational Leadership in Business, I sadly threw much of what I knew out the window when I started my cookie business.  It wasn’t until my husband threatened to call the labor board for paying myself under minimum wage. He straight up said, “you have a hobby, you don’t have a business.” Businesses have to pay at least minimum wage, or they get fined by the labor board.  Take your degree and your knowledge and apply it. If not, I am shutting you down. Those who know our family, know my husband was not kidding.  My first response was “if I price my cookies appropriately, no one will buy them.” My husband’s response, “then you don’t have a business.”

farmhouse kitchen

I walked away aggravated, but I knew he was right. We live in a Pinterest world that often tells you to follow your dreams and be passionate. I quickly learned that passion and dreams are not enough to sustain a business over time. Opening a business, even if it is a home based business, is a serious venture. Are you willing to ask yourself the tough questions? Are you willing to let someone else ask them? Over the next couple of weeks you will get to know my brilliant, sarcastic, attorney husband, who happens to be one lab accident away from becoming a super villain. He is going to share his perspective on business and cookies.  Two years ago, I was ready to open a store front. As my husband and I were looking for property, he asked me some probing questions. Once again, I was aggravated and he was right. This happens often. I realized while my passion and dreams of a store front were great, I was not ready to take that leap after contemplating his questions.

My husband’s name is Dann. He is going to take over now. He has successfully started, run and sold three different companies.  He is now currently the Director of Legal and Compliance for a company in Phoenix. He is a wealth of knowledge. Feel free to ask questions. He loves to help.

Many times in business, one looks to the internet to see what other people in their industry are charging.  This is not uncommon if one opens a local hardware store and surveys Wal-Mart, Home Depot, and other supply shops to determine if their prices are in line with their competitors.  However, the small business owner is often left to bemoan that they cannot truly compete on an equal playing field with these businesses as they do not have the distribution lines to buy in the same bulk nor do they have the pull with distributors to actually negotiate their prices.  However, in the field of “home bakeries” we are left to compete not only with Costco, the local supermarket, the brick and mortar bakeries, but also hobbyists.

farmhouse kitchen

I guess the first question you have to ask yourself is “am I a hobbyist?”  Please note that I will not be addressing competing against “competitors” in this blog, but I will touch on this in the next one.  This blog is devoted to “the hobbyist.”  I have nothing against the “hobbyist,” but it is time to ask you to come out of the closet.  The closet is not a scary place, and many of the “hobbyists” don’t even know they are in the closet.  I pause a moment to laugh at this as the room is dark, the light is off, and you should be claustrophobic at this point; this is why I am snickering.  For most snickering is an insult, but don’t be alarmed as my wife states that I am laugh deficient and this is the best that I can do.

A hobbyist has no business plan, they have not determined the cost of goods, they don’t know who their target customer is, and they don’t even notice the creepy music playing next to the stale cookies at the market selling 12 per box for $.99.  If you have never heard the creepy music as the lights glisten off the plastic cookie casing, you are usually the first casualty in the horror movie.  Don’t be alarmed over ninety percent of the teenagers in the movie are killed, and if your contract does not contain a clause for a multi-picture arc, you most likely are one of the first casualties in the horror film titled “These Cookies will Kill You due to Chemicals as well as Pricing.”  Yes, I agree the name of the picture is not catchy but look how many people have fallen prey to this.

The plastic cookie casing is not your competitor.  However, you are not only letting the creepy plastic shell determine your pricing, but your customer as well.  You have priced yourself below market value not only in terms of the cost of goods, but you have not set a wage for your hourly work.  Your clients often ask you vague questions such as “I am throwing a “insert random theme” party here and I have no idea what type of cookies I want but they have to be “amazing, move around without a visible motor and be no more than the cost of the expire cookies found on the “Day-O Bread Rack.”  You are so determined to please said customer that may never use you again or recommend you, that it has not even occurred to you that you are now envying the wages of workers in third world countries.  You often are tucking not only your kids in bed, but your husband as well.  I would say that you would wake up from this nightmare in a cold sweat and realize it is only a dream, but alas, tomorrow starts a fresh new day losing money and working for less than what McDonalds’ cashiers were making in the 1980s.  I have good news for you my friend, you have a hobby.  There is good news, you have choices.  1) You can start treating this like a hobby and not let this consume your life; just think there is room next to your wooden tennis racket, your lace-up ice skates and the bowling ball in the closet as well, 2) You can focus on how to turn this hobby into a business, or 3) You can wait several years until you hit rock bottom and then join a support group.  For the rest of you who are running a business, in the next post I will address who your competition is and how you can react and adapt.

Cookie Business

 

Cookie Business 101 Topics to Come:

  • Why Business Plans are important even if you are a small home based business
  • How to define your mission
  • What is a SWOT Analysis and why it matters?
  • How to properly price your products?
  • How to determine if a “opportunity” is one you should go after or are you better to walk away?

25 comments on “Starting a Cookie Business

  1. Nelsone E. Coleman says:

    Really good information. Where can i find more?

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  3. ChelsyV says:

    Hi Melissa, I am based in sydney australia and i am starting my home based cookie business, It’s actually a Crinkles cookie, and maybe u can help me how do i calculate the ingredients prices and how do charge that to my crinkles I mean each piece? i am selling minimum 1 dozen per order but i want to know if i’m giving the right price for this, 1 dozen i charge $5 for medium sized crinkles, how do i know how much profit i get each cookie?

  4. Josh says:

    Melissa – Thank you so much for this series. It’s very insightful.

    Two of the biggest concerns that my wife and I have before taking the leap to open a store are these:

    1 – How much, on average, does it COST to make a cookie
    2 – How many cookies, in a typical town, should we expect to sell each day? 20, 50, 100, 300?

    We want to go down this path but want to make sure its a financial prudent decision. Do you have any idea how many cookies a start-up cookie shop should expect to sell each day and how much we can make per cookie?

    Thanks!

    1. Josh-

      Thank you so much for your comment. The hard part is…how much it costs me to make a cookie may be different than you. How I figured out my price point: it is a combo of ingredient cost, labor cost, decorating cost plus profit margin, and packaging costs. Second question. Areas across the country can vary widely. California has a higher cost of doing business than Arizona for example. How you would figure out how much you would have to sell is to see what is the average rent for a shop, expenses, labor costs….Then you will know how much you have to sell each day. If your fixed costs are $3000 a month and you average $50.00 a dozen for decorated cookies… You would have to sell 60 cookie sets each month to just break even.

  5. Jane Oswald says:

    Hi Melissa,
    This is Jane Oswald from our AZ Cookie Group. I am finally getting in gear and asking the hard questions. I too have put my Business Marketing Degree and shoved it in the closet. I’ve known what to do and how I should do things, but have I? No. I am a hobbyist and am now determined this year that I will turn it into a business. I often wonder if I can build a business on cookies alone. Many cookers are also cake and dessert bakers. Anyhow, I am working on a website and creating my content and I know I will be busy defining who I am. I also need to get all my proper licensing and could use the help in that direction. I was comfortable just hiding behind the shield of AZ cottage law but I really would like to pursue my options. LLC would provide protection for me and my family. Any direction and help would be appreciated. Maybe if you free I would love to come visit. We are only a few miles away.

    Thanks for your post.
    Jane

    1. I would love to talk with you Jane. Feel free to email me and we will set up a time. It’s funny while I offer cakes and cupcakes 98% of what we do is cookies. We book out so fast for cookies that I rarely can fit in a cake.

      Trust me. Treating your cookies business like a business will transform what you are doing. Defining who your customer is and then creating your game plan from there is wisest decision you can make.

      I look forward to talking with you.

      Even though you are under the Cottage Law it still advises you to set up your business license. I am an LLC. With the liability of food, and the tax benefits I chose this route.

  6. Sarah P says:

    Thank you for posting this series! Your cookies and your website are beautiful . . . you are an inspiration to home bakers like me! Thanks for taking the time to do this.

  7. Jodi says:

    I think this might really help me. It sure has sparked my thinking. I think I’m stuck between hobbyist and selling. I really want to sell (and do periodically) but I get stuck trying to think of unique creative ideas instead of just producing things that people will actually purchase! I’m going to follow this series closely and finally figure it out and STICK to it. 🙂

    Thanks for taking the time to put something like this together, Melissa and Dann!

    Jodi
    Sew La Ti Dough

  8. my home page says:

    Hi! I’m at work browsing your blog from my new iphone! Just wanted to say I love reading your blog and look forward to all your posts! Keep up the superb work!|

  9. Michele says:

    Great article! Thank you for posting. I’ve been doing cookies for many years now and would love to turn it into a profitable business but often feel lost and don’t know where to start. I look forward to reading your upcoming articles! Thank you for sharing your wonderful creations, great cookie artists like yourself inspire me to keep going!

  10. Barbara [Lov2Bake] says:

    Absolutely Brilliant Blog Post! What a great team you two are. I’m so glad you have joined forces to help us decide whether to get on or off this merry-go-round. My brain is weary of revisiting the pros and cons thousands of times and still wind up sitting on the fence. It’s hard to force yourself to think things through to a conclusion. I always heard in theory, you should not quit your day job until your new business has produced income equal to your day job for 6 consecutive months. I can’t imagine when that might ever happen. I’ve pulled my share of cookie all-nighters and don’t want to live like that.

    1. What a great comment! Thanks so much for reading the post. Here is the hard part about what the experts say… I don’t believe in reality that you can put enough hours in to make the money you are making at your full time job. Last January I took the leap from doing this part time to full time. It’s only when I went full time that I was able to start generating real money. It’s a risk, but for me it was a calculate one. We did the math. We took how many orders I was turning away a month and what that equated to in potential revenue. Quitting your day job is a big risk. But I would suggest writing a business plan for your cookie business. Do the research…then you might see if the risk is worth it for you. Best of Luck!

  11. Pamela says:

    I am looking forward to reading all your posts! I am currently in the “you have an expensive hobby” phase, according to my annoyingly correct spouse!! Thank you for providing some help and information!!
    Pam

  12. Hayley says:

    Thank you so much for helping us ask the questions we didn’t even know that we needed to ask!

  13. Danielle says:

    This is great, thank you so much! Can’t wait for the rest of the series!

  14. Christina says:

    Thank you so much for sharing this! I can’t wait for the rest of this series. I’ve taken the leap from hobbyist to business owner and have watched my business grown substantially when I valued my time and craft.

    1. Preach it! So many baking small businesses are so scared to charge enough. I am so glad that you are another example of someone who values their time and is reaping the rewards. 🙂

  15. Rosilind says:

    I was so excited to see this post on your IG. I’ve been having that reoccuring nightmare for a while that I was once a business then turned hobbist when I got into decorated cookies. Now I’m trying to because a business again. LOL, it’s a shame to have multiple degrees we don’t use then because all I want to do is be creative. Thanks again for this series and I hope to learn a lot I’ve already learned about that great software in your last reply. xoxo

  16. Gina says:

    Thank you so much for the blog! I realized I’m a hobbyist cookie maker! And at least I know now that other cookie bakers are going through the same struggle I’m going through right now…. I literally make just a few cents an hour

    1. Gina- You are worth way more than a few cents an hour. I can’t encourage you enough…Charge what they are worth, especially since it a hobby. Nothing is worse than giving your time away for free. 🙂

  17. Lorraine says:

    This series is perfectly timed! I am a cookie hobbyist looking to become a business!

    1. Yeah! Well we hope our series will help you with the basic building blocks of transforming your hobby into a business.

  18. Teresa says:

    Thanks for tackling this issue! It’s something I really needed a kick in the pants to do, and it couldn’t have come at a better time. P.S. do you have recommendations for certain “bakery” or restaurant software that can help track sales, orders, income, expenses, etc.?

    1. Teresa-Thank you so much for taking time out of your busy schedule to read the blog. Yes, I do have a recommendation. I started by building my own spreadsheet, but I love the one Josie produced for her mom’s bakery business. Here is the link. It is a great starting board. https://www.etsy.com/listing/185901747/cake-decorating-home-bakery-business

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