I am trying to analyze the possibility of starting a cake business (I've been doing it on the side for years), partially because my husband's job situation is not good.

My thought is, how the heck do I start a cake business to earn money to pay the bills, when I need money to start the business!?? I've never owned a business before and have no idea how to even go about getting a small business loan!

Any advice is very appreciated!

If you start in a rented commercial kitchen (or your home kitchen in states with cottage food laws) instead of a retail shop your startup costs will be very low. If you do well in the rented kitchen, you will eventually have enough money in the business to open a retail shop without the need for borrowing money.

Here is my advice: Don't come here to try and find out how you can start a business or get a loan. And this assuming you are thinking of doing something outside of the home. Inside the home is a different story. I am tired of trying to tell people you need to be legal. So I am not even going to go in the details of where you live to figure out if you can do this legally or illegally out of your home.

Rather than start a business, go find a job in the field. I can tell you from personal experience that if you do not have the money to start it now, you are better off getting a job rather than start a business. I can absolutely guarantee you that you have no idea how much you will nickel and dimed to death. And do not expect to make a profit soon either.

And this statement, giant red flag!!! If you have never started a business and your husband's job situation is not good, now is not the time to think of getting a loan or burdening yourself further financially.


If you are really serious, start making phone calls and visiting some banks locally in your area. Make up a business plan and then change it and change it. That process should take you about a month alone. Make phone calls and see what the rent is, what the taxes are, what the income and payroll taxes, business insurance, workman's comp, disibility insurance. And even then be prepared to be surprised. I have TWO terrorist fees on my Workman's Comp. I also have a NY state "assessment" fee of 18% DOUBLE DIGIT assessment fee. All in all it was another $300 above what we were quoted. I'm telling you, you have no idea.

S corp or LLC or sole proprietorship are other questions you need to ask and research.

You gotta invest money to make money. I am weeks away from opening my cake shop. We did it with no business loan. We have invested our own money. We made the business plan, the phone calls, the research, the financial numbers. There is no way I can share with you any of this because your situation will be different than mine. You have got to have some skin in the game and that part of that is the research of a business plan. IMO, if you don't you are going to become one of those business failure rate statistics. At least with a business plan, you have a fighting chance.

So get on the phone and start with your local DOH and then went from there. There are so many different laws, economies, regulations from county to county to state to state that unless you can go directly to a local competitor and ask them these questions, you are going to get nowhere. And even then, I can bet you they won't answer your questions. I know I wouldn't.

In the meantime, also check for jobs in your area. You will make more money right away doing that then you will starting a business. You don't start a business when a job situation is tough, unless you get a heap big money buyout at the same time. You start when the job is great and the money has been saved. Before that you get a job. I've been waiting 25 years to start my business. The time is right now because the job situation is good and the money was there to invest.

Sorry to be so straight forward, but I believe sometimes it is better to hear the truth than give a rah, rah, go-for-it message back. Especially since I have been neck deep in this process for months now.

You should start with a business plan.

Here are a few websites with samples to get you started:
Business Resource Software, Inc. (businessplans.org)
Entrepreneur.com
Palo Alto Software, Inc. (bplans.com)

Good luck.

SCORE is another good resource for business mentoring:
http://www.score.org/

Agreed with the above advice...even if you are starting your business from home (assuming it's legal in your state), you probably won't do better than making minimum wage for at least the first year or so. Most startup businesses end up losing money in the first few years.

LindaF - In my opinion, not that you asked for it but I'm going to give it anyways, your post is nothing but completely negative. Most of us realize its not all roses and sunshine to start a business, but to come right out and slam the OP for even suggesting it, and even going so far as to tell her to not ask those kind of questions on here ( here being a public forum ) is so discouraging its beyond words.

I have been watching this section of the forum for a long long time, and yes, this same question gets asked over and over, but at least every time it's asked, people generally go out of their way to offer help/advice/encouragement, or at least point them in the direction of previous post that might fit their situation. I have never seen anyone offer such a somber and negative outlook on the possibility of starting a small side cake business!

SCORE is a good place, and check with your local SBA on loans. But be warned, they will expect a full detailed business plan and a P&L (profit and loss) sheet that show you have a good head for numbers and a real plan in place before they will consider lending, and even then, they are going to be cautious, especially right now. Find a template for a P&L statement, and work on it--it will be an eye opener on the true expenses involved in running a business.

It's a hard economy, and everyone is trying to think of *any*thing else to do to help the budgets. We can't bash the spirit of that. Whether you make it or not will depend on you, your energy level and commitment, your area, your market, your available cash (or credit), your ability to sink or swim at learning business and numbers and customer service, and a million other things.

Check with your local health department, write down lots of questions. Find someone who can help you with biz numbers (gross profit, net profit, overhead, insurance, licensing, all of it). It's overwhelming sometimes and always hard at first, but if it's something you love and are willing to bust your ever-living a$$ (yes, truly), take lots of risks, work long hours, etc., then it can be rewarding. Hard, yes. Long and tiring, yes. Exhilirating, risky, challenging, tiring, fun, satisfying, exasperating roller coaster that it is.

Pay your everyday bills with it? Not to be a Debbie Downer, but I wouldn't count on that anytime soon at first. Like someone said, in the meantime, find a parttime job to help with *real life* bills, while you work on this. Starting a new business will cost you more than you can plan for: I couldn't have imagined what it cost us, even budgeting and planning for extra expenses, there will be MORE extra expenses that happen.

That being said, good luck, and of course, feel free to ask along the way here.

I just got a $100,000 line of credit to open my bakery. I am leasing a space that is already outfitted for bakery use and financing the equipment left by previous tenant. So, yes, it can be done.
If you are serious, get a notebook and just start writing down every thing you think will be required to get yourself going. Cake rounds, boxes, plastic wrap, everything! Then get a rough estimate of the costs of being legal and insured. My liability insurance is $1500. Yours may be more or less, depending where you live. If you plan to have employees, figure out their salaries, benefits and payroll taxes. You will need an accountant and a lawyer. If you plan to borrow money, you must also have a plan for repayment. What is your marketing plan? What is your demographic? What sets you apart from your competition? Why will you succeed where others have failed?Read "The E-Myth Mastery" then read it again.
Check out SCORE or your local Small Business Development Center. They should be able to point you in the direction of SBA loans.
NEVER, EVER, EVER let anyone crush your dream or your spirit. If someone pointing out the difficulties to you does that, it wasn't much of a dream to begin with. Best of luck to you,whatever you decide to do!

OP, start saving. If your husband's job situation is a little iffy right now, the last thing you want is a loan to worry about every month.

While you're saving money and waiting for the job situation to get better, there are LOTS of things you can do that will move you closer to having your own business.

Start researching...Talk to your health department and find out what the criteria is for opening a bakery and find out what you need to do to become legal. Talk to an attorney about starting a business. Talk to local bakers. Start getting an idea of how much space you will need, what area you want it in and how much it will cost. Star pricing equipment...make a list of all equipment you will need and all supplies you will need. Try your best to get an idea of how much money you will need upfront to get things going (will you have to build a kitchen yourself? or will you lease a place that already has a kitchen?)

Be realistic about it, ya know? Realize that this isn't going to happen over night but there are things you can do to prepare yourself (practice your skills, learn new techniques, gather info and save money)

It's definilty possible, don't let anyone discourage you or make you feel like crap. Anyone who has ever started their own business has been in your shoes, wondering what they need to do to get things done because no matter what kind of business you're starting it's overwhelming at first.

Good luck!

I'll go one harsher than Linda... 80% of all new businesses fail in the first year. And the number one reason is no business knowledge. If you get a loan, which you probably won't because of no experience, you will jeopardize your future income, your house, and your credit rating.

And please about the dream stuff. Business is not a dream. It is hard work and self-discipline to get a real education, get experience, and know the answer to your own question before you ever start a business plan or try to get a loan. Unfortunately, this is what leads to the 80% failure rate. This is like those people who's Grandma leaves them some money or they have a little home equity and their cheerleading squad tells them to follow their dream. The bank will not touch someone with no experience. Anyone can have someone write their business plan.

This is not stomping on someone's dream. This is real.

But... go to school. Get some real knowledge in accounting and economics. Know all aspects of employment law, insurance, P & L, COGS, a working accounting system, all requirements of your local health dept, construction costs, and codes. Then get a job and work yourself up to where you are responsible for the bottom line. Now you are ready to work on a business plan. Mammababytiger and Jason both know every bit of this. It doesn't matter if startup is $5k or $100k. The base of knowledge is the same. Only the amount of the risk is different.

SCP1127 your comment was not negative at all it was great advice.....Yes cakefication, she was very negative....

Thanks, in my business (marketing company), I saw this first hand. People lost everything... houses, self esteem, you name it. It's no fun having your business fail and your customers seeing you at your next job as a cashier at the grocery store.

When a new business would call about a marketing program (I catered to small, local businesses), we coul dpinpoint with great accuracy, just how long that business would be open... usually by how long the startup money would last.

Oh, I forgot the big NUMBER 1 ISSUE. When the business is in trouble, the power cut-off is today, payroll is due, and the oven broke. Where to get the money? Borrow from the IRS, after all you can make up the deficit next month. But next month never comes. WHEN the IRS knocks on your door, you will get into that web of interest and penalties for ten years. It will take everything you have and will have, because you can't hire a lawyer. That takes cash up front... and lots of it. There is no recovery from this... attachment of all your personal property, garnishment of your wages, ruined credit.

Interesting...My father was kicked out of his home when he was 9 years old...he dropped out of school in the 10th grade. Started his own business when I was in 2nd grade, ( i'm 27 now)...and my father died last month a multi millionaire. He worked very hard to get where he was, lots of 80 hour weeks, lots of being on call and taking business calls at 2, 3 and 4 am. But, you can totally say it was his "dream" to be his own boss and to start something that would provide for his family. Hell, he's been gone 2 months now and it will continue to provide for his children for many years to come.

He did get a business loan for his business when he first started out, however he had the money saved in case something went wrong. He didn't put all of his eggs in one basket.

I don't think anyone goes into a business thinking it will be a piece of cake (ha pun totally intended), I think where people fail is in the planning stages. Poor planning and completely doom a business along with the expectations of over night success. Don't count your chickens before they hatch and don't put all of your eggs in one basket. Be cautious and be smart.

I can't edit my post for whatever reason...But where it says "he died last month" It should be "he died in March."

Applause to ALL posters.... super "negative", super "blunt", super "rah-rah", super "positive".

It is a public forum, and you ALL make good and important points. The point it, "Hey consider _________". If it doesn't apply in my situation, ok... but maybe it does.

Life/ business is both good and bad, positive and negative, migraine days and blue sky days. It is important to consider it ALL when making plans that could impact you for years to come both in income/ debt and time/ stress.

It is plain dumb to call someone out for pointing out the bad stuff--- you are always free to post your version of the positive. But to ignore any one side (positive or negative) is irresponsible.

Go to school. Get some real knowledge in accounting and economics. Know all aspects of employment law, insurance, P & L, COGS, a working accounting system, all requirements of your local health dept, construction costs, and codes. Then get a job and work yourself up to where you are responsible for the bottom line. Now you are ready to work on a business plan. Mammababytiger and Jason both know every bit of this. It doesn't matter if startup is $5k or $100k. The base of knowledge is the same. Only the amount of the risk is different.

Thank you everyone for your advice and opinions.

I guess I should have clarified in the beginning--according to my local cottage laws, I cannot home bake in a kitchen in which I also allow animals (my cats). Not that they climb on counters or anything, but it's the law here. So, I was thinking about getting the loan to build a separate kitchen addition, to be used solely for my baking--not necessarily to start up an entire business from scratch (storefront)!

I think that might change some of these responses. While, yes, before officially starting up a business store front I would start making cakes "from home" or small scale, the fact is, I can't legally Also, as a full time mom of three kids (9, 7 and 10 months), this side business is something I do because I can do it at home. Much of the work I do is done during nap times, after dinner, or when they are asleep. Consequently, renting out commercial space somewhere (and the consequent childcare needs) isn't an option.

I am going to study all of these responses more and think about what the best course of action is!