I decorate cakes as a hobby, and the thought of opening a bakery has crossed my mind a time or two, but I've never seriously considered it. People taste my cakes or see my work and they always tell me I need to open up my own shop (I'm sure many of you must have heard the same thing 100 times).

The thing is, I don't have the same knowhow or creative fortitude of members like IndyDebi, but I do know how to strategize and problem solve It seems like bakery profitability is largely driven by operating costs, but that's just my guess. So my question is: has anyone took a hard look at operating costs and figuring out ways to reduce them? I'm really interested in figuring out how to help small, independent bakers become more competitive (on the cost side, at least) with larger commercial bakeries.

Instead of opening a retail shop, many independent bakers will rent a commercial kitchen or build a second kitchen on their property that can pass inspection. The former requires very little in the way of startup costs but incurs greater ongoing operating costs (i.e. rent), while the latter is just the opposite. And in states with cottage food laws, you can legally sell food made from a home kitchen with little or no renovation, so that keeps overhead to a minimum.

I'm not even sure small batch, by-appointment-only independent bakers are even in the same market as large commercial bakeries. There is probably some overlap on the low end of the market but for the most part they tend to serve different customer bases.

Our business operates out of a rented commercial kitchen (in CA, where it is illegal to sell food made from your home kitchen). I looked into opening a retail shop, but in order to maintain the same level of profitability we would need to do 4x-6x the amount of business, and we would lose a lot of flexibility.