Create a Home Based Business with Your Baked Goods

Looking for at-home business ideas? Try a home-based business using your kitchen and creating ‘farm fresh to you’ products.

Pickle stand

Liam and Lisa man the pickle stand at a recent farmers’ market.

Photo by John Ivanko

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Calling all jammers, bakers and canners. You could be part of a growing movement of people starting small food businesses in their homes. No capital needed, just good recipes, enthusiasm and commitment, plus enough know-how to turn ingredients into sought-after treats for your local community. Everything you require is probably already in your home kitchen – and you can start tomorrow.

Thanks to new laws on the books in 42 states, specific food businesses can now be launched from home kitchens. These state laws, often referred to as “cottage food laws,” allow you to sell certain food products to your neighbors and in your community. By certain foods, the laws mean various “non-hazardous” food items, often defined as those that are high-acid, like pickles and preserves, or low-moisture, like breads or cookies.

“After the Great Recession started in 2007, states started implementing cottage food laws to help boost their local economies,” says David Crabill, founder of Forrager.com, an online community where people can ask and answer questions, connect with each other, and add their cottage food operation to the directory. “Today, almost every state has some way to allow home cooks to start a food business with relative ease.”

What’s for sale?

States now make it possible for anyone to earn some income, follow a culinary passion or dream, and have some fun at the same time. From pies to pickles, wedding cakes to granola, preserves to decorated cookies, fledgling food entrepreneurs no longer need to sink thousands of dollars into a commercial kitchen or fork over $50 an hour to rent a licensed facility to turn Aunt Emma’s biscotti recipe into a money-making dream business. We now have the freedom to earn.

Cottage food laws vary a lot by state, so follow the one for your state. That said, there are four key questions answered in your state’s cottage food law:

What products can you sell?

Your state’s legislation will specifically outline the “non-hazardous” food items you can produce under cottage food law, generally grouped as high-acid canned food products (preserves, pickles and salsas) or low-moisture baked goods that don’t require refrigeration. Sometimes the legislation will itemize what you can or can’t sell, but they may also include candy or dry mixes. Focus on what you can legally make, and don’t waste time, energy and money spinning your wheels on what you can’t. Of course, you can always dedicate the time and energy needed to potentially change your state’s law to better meet your aspirations; many laws came about because of such active citizenship.

Where can you sell your products?

Each cottage food law will dictate where you can sell your product directly to the public. Farmers’ markets and special community events are among the most common venues. Even if your state’s law allows sales at a farmers’ market, that doesn’t mean this venue must allow you to sell there. Some farmers’ markets have bylaws or rules that exclude cottage food enterprises. The states with the greatest sales venue options often include direct orders, home pickup and mail order.

How are you allowed to sell your products?

All cottage food laws permit direct sales to the public. Some of the more restrictive states, however, only allow direct-to-customer sales, meaning no indirect sales to other businesses that could resell your product. But in more than a dozen states, products can be sold through indirect or wholesale channels, to restaurants, specialty food shops or the local food cooperative. However, under no circumstances are you ever “catering.” You’re welcome to produce certain foods in your home kitchen and have them consumed off premises – just don’t slice, plate or otherwise be involved in serving your product.

How much can you sell of your products?

Most states have a gross sales cap on the products you’re selling. This refers to the maximum gross sales your operation can reach per year, which can range from $5,000 to $45,000. Some states, however, have no sales cap at all, but those states may require more in terms of regulatory oversight and inspection.

Once you’ve answered these four questions and understand how the cottage food law operates in your state, you’ll then need to figure out whether what you love to make is worth selling. If people are clamoring for your artisan bread or strawberry jam, that’s an excellent sign. In the end, your ability to sell products is based on creating items your customers want, need, and are willing to purchase at a fair price that they, not you, determine. That’s where marketing comes in.

Selling your story

A wide range of different elements go into defining a great product, including the uniqueness of the recipe, the quality of the ingredients, the packaging, perhaps the specific small-batch production process, and even the messaging you’ve created to promote your product.

Marketing covers everything from developing your product, its packaging and label to sharing the story you create around it on a website. While the tendency is to focus on the product – say your family’s favorite salsa recipe – when you’re selling to the public, what you sell must ultimately satisfy the needs of your customers. Understanding your customers increases your likelihood of success.

As we write about in Homemade for Sale, there are seven Ps of Marketing (not just four such points covered in some marketing textbooks): Product, Price, Place (distribution), Promotion, People, Partnerships and Purpose. The most effective marketing efforts are those that combine all seven Ps into one cohesive, integrated and clear plan that can be effectively implemented. Making a great-tasting product is only the start.

Product

Most cottage food operators should start with their product, testing their recipes. Besides taste and flavor, you’ll want consistency. Often, the product is made in small batches, with specialized or unique recipes and with real ingredients. Added to this are the growing issues more Americans have with respect to what they eat; allergies or sensitivities to peanuts, soybeans, gluten and dairy products have exploded. Cottage food enterprises sometimes address these growing trends.

Determine what makes your product different – and better than others. In some cases, if your ingredients are from your apple orchard, you’re using a cherished ethnic recipe passed down several generations, or you have a unique product you’ve developed and perfected, these may be reason enough for a successful launch in your community.

Your target market is the audience or potential customers you want to reach, serve and satisfy with your products. They’re often defined by demographics, like age or geography, as well as psychographics, which are attitudes, beliefs and values. Your product will occupy a niche in the larger market, and you’ll need to “position” your product – the expression of differentiation. For example, a gift-oriented jar of jam attractively packaged is quite different than the same product sold as a staple for the pantry when it comes to the price you can charge.

The cottage food law for your state will dictate exactly what must be on the label of any canned products. In addition to a list of ingredients in order of greatest to least used and by weight, along with a processing date, most states require a sentence with your name and contact information, plus a statement like “Manufactured in a home kitchen” or “Not prepared in a state-approved commercial food facility”; the exact wording is usually specified by your state. Exceptions exist, of course, like if you make any health claim. So keep it simple and avoid making health claims. For any product, packaging should be chosen to ensure the product’s safety, quality and compelling presentation. Remember, we eat with our eyes first.

Price

Price can appeal to a customer on a limited budget, or deter an upscale clientele that might happily pay a premium for an item made with organic ingredients or one fresh from the oven. For many impulse purchases, convenience, comfort or hunger may drive the exchange; customers may pay a premium for any of these qualities.

Setting a price for your product can involve comparing it to your competition, establishing a market value for it, or calculating a cost-input value that captures your ingredients and time. It can also be a combination of these approaches.

Place

Clearly defined by your state’s cottage food law, where you can sell your product often includes farmers’ markets, community events, and other venues that allow you to sell directly to customers. Only certain states permit indirect sales or wholesale distribution.

Promotion

You need not empty the bank to promote your product to let potential customers know your product exists. Depending on your skill set, comfort with a computer, time and budget, there are many free or nearly free promotional opportunities. Promotion includes both advertising and public relations (PR). Advertising is purchased, perhaps in the form of promotional posters or flyers, while PR, whether solicited or unsolicited, is free, but it will take time and effort.

Most cottage food operations quickly set up an attractive website; you can set up one for free on Wix, Weebly or Wordpress. Everything you do is about sharing your story. Don’t overlook ways to let your customers do this for you as well. To build awareness around your product, you’ll need to get people to try it, love it, and share what they like about it with others in your community. Social media, including Facebook and Twitter, provides free options to build relationships and reach out to potential customers.

People, Partnership and Purpose

One way or another, your food product must satisfy some need of your customers in a delicious way. Customer referrals and word-of-mouth endorsements remain the most powerful form of promotion, which is why many food entrepreneurs follow the 80-20 rule, recognizing that 80 percent of their business comes from 20 percent of their customers. Go out of your way to keep them happy and engaged; throw a private “tasting party” for them.

Partnerships can be magnified by cottage food operators, especially if you’re able to connect with like-minded organizations. If you sell fresh bread, connect with a jam and jelly maker at the market – or vice versa. Collaboration can go a long way in boosting sales and taking better care of customers.

Finally, let your passion for your products sing through everything you say and do. Your sense of purpose is a part of your inspiring story and helps you put a face to the food item that your customers then savor, one bite at a time.

Organize your kitchen

You already know your way around a kitchen, but now it’s time to operate an efficient production facility where you pump out your pickles and pound cake like nobody’s business.

Take your kitchen setup seriously and take the time to organize systems that ensure food safety. As much as you can, separate personal use from business use; in some states, this separation is required by law. Items that are definitely business-only – such as product ingredients – need to be stored, labeled clearly, and tracked separately. You don’t have to go out and buy a bunch of new equipment, though. Under cottage food laws, you can use what you already own.

When starting out, get a handle on your equipment and ingredients. Determine how you will use your kitchen space most effectively to access these items when you’re in production flow. Next, focus on efficiency, cleanliness, ease of use, and food safety when determining your layout. Clear clutter, set aside business-only storage areas, and set family boundaries for times when you’re in production. Most laws need the cook to keep children out of the kitchen when food items are being made; some laws have stringent regulations related to pets in the home. Again, consult with the laws in your state for specific requirements.

Most important of all is food safety. You wouldn’t poison your own family, so why would feeding the public be any different? State food safety requirements may be as simple as practicing basic food handling procedures, like sanitizing counters, washing hands, and keeping a thermometer in your refrigerator. In some states, there may be a specific requirement list and a mandatory on-site inspection; in these states, however, such regulation is balanced by a greater opportunity for sales.

Business and bookkeeping basics

Just as with any business, you’ll need to keep track of what you sell and the expenses associated with doing so. Income minus expenses equals profit, and it’s this profit that the Internal Revenue Service wants to see at least three of every five years for your business to be legit. Some basic registrations you’ll need to complete to legally operate as such a business include getting licensed by your state’s Department of Agriculture or a similar agency handling cottage food enterprises, and securing a business license.

Setting up your business can be as simple as a sole proprietorship. Look at adding some liability protection as a limited liability company (LLC) or corporation, both of which are more involved and costly. Additional insurance, while not required, should seriously be considered, if what you do is not already covered under your homeowners’ insurance policy – some cottage food enterprises could be covered as “incidental to the home.” Keep in mind that, in nearly all cases, cottage food laws by their very definition apply only to non-hazardous food products.

Recognize that the cottage food movement represents more than an enjoyable way to secure a new income source. You’re helping to grow the local food movement in your community by providing “direct-to-the-food-artisan” connections.

“Home cooks often start these businesses to make more money, but many ultimately find that it’s the personal connections they make that matter most,” Crabill says. “Cottage food businesses have the opportunity to positively impact their communities in so many different ways.”

Best of all, thanks to cottage food laws, “fresh from the farm” and “homemade” on the label means exactly what’s written.


Peppermint Biscotti Recipe

From Farmstead Chef, by Lisa Kivirist and John Ivanko

Yields 3 dozen biscotti.

One winter we realized we had accumulated a large plastic bag filled with various candy canes and peppermint candies. We hate to throw things out – yet we realized we’d never eat the candies. So we developed this “repurposing” recipe to transform those candy canes and mints into something new and improved.

Ingredients

• 3⁄4 cup (11⁄2 sticks) butter, softened
• 3⁄4 cup sugar
• 3 eggs
• 2 teaspoons peppermint extract
• 3-1⁄4 cups flour
• 1 teaspoon baking powder
• 1⁄4 teaspoon salt
• 1-1⁄2 cups crushed peppermint candy, divided
• White chocolate bark, melted, for frosting

Instructions

1. Preheat oven to 350 F.

2. In large mixing bowl, cream butter and sugar. Add eggs, one at a time, beating well after each addition. Beat in peppermint extract.

3. In separate bowl, combine flour, baking powder and salt. Stir in 1 cup crushed candy. Gradually add to creamed mixture, beating until blended (dough will be stiff).

4. Divide dough in half. On baking sheet, roll each portion into 12-by-21⁄2-inch rectangle, about 1 inch thick, then roll dough from long side into long, thin roll, similar to jellyroll or baguette. Place seam-side down on baking sheet.

5. Bake for 25 to 30 minutes, or until golden brown. Carefully remove to wire rack, and cool for 15 minutes.

6. On cutting board, cut at angle into 1⁄2-inch-thick slices. Place cut-side down on baking sheets. Bake for an additional 12 to 15 minutes, or until firm.

7. Drizzle melted chocolate over cookies in swirled designs and sprinkle with remaining crushed candy.


Inn Serendipity’s Cottage Food Enterprise: Year 1

On our small homestead, where we also operate Inn Serendipity Bed & Breakfast, we’ve embraced our state’s cottage food law by turning our cucumbers into pickles, cabbage into sauerkraut, rhubarb into shrub, and pumpkin into pickled pumpkin.

We’ve already boosted our bottom line by more than $200 in our first year out, with zero investment, no regulatory headaches or even much marketing effort. We’ve sold products at a holiday farmers’ market and on-farm events. To boost sales further, we’re working on getting our state’s cottage food law changed to permit the sale of baked goods as well, plus raise our sales cap.


Pros and Cons for Cottage Food Operators (from Homemade for Sale)

PROS

• Little to no capital needed; you probably have everything you need in your kitchen already.
• Fast start-up. Most states have a simple, low-cost registration process.
• May already have a recipe and be experienced in what you want to make.
• Sell directly to the customer and keep more profit.
• There’s nothing like the flexibility and freedom of being your own boss – you get to call your own shots.
• You’re helping build a stronger local economy and community connections.
• Defining success on your own terms.
• Opportunity to grow and expand after you prove a successful market.

CONS

• State regulations limit what products you can make, some more than others.
• States may also have limitations on where you can sell; some do not allow special orders and restrict sales to farmers’ markets or public events.
• With any food product, you’re liable for what you make and need to insure yourself for the risk you take.
• Baking, canning and other food preparation is hard work on your feet, especially if you have to make multiple fresh items at once.
• Bookkeeping is a must since you’re required to keep track of sales, expenses and inventory. A real chore, if you don’t like crunching numbers.
• May stir up some negative vibes when viewed as competition by local businesses, such as an established commercial bakery.


Lisa Kivirist and John Ivanko are co-authors of Homemade for Sale, Farmstead Chef, Rural Renaissance and ECOpreneuring. They operate a cottage food enterprise from their home kitchen as well as the award-winning Inn Serendipity Bed & Breakfast in Browntown, Wisconsin, which is completely powered by the wind and sun.