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How to Open a Bakery in Pennsylvania: Business Startup Guide

Tags: business

If you’re looking to start a baking Business in Pennsylvania, this post will give you the tools and information that you need. We’ll cover everything from how to get started to what permits and licenses are required by the state of Pennsylvania so that your small business is ready for success!

Pennsylvania Small Business Economic Profile

Pennsylvania’s small businesses are key to the state’s well-being. They account for a significant share of Pennsylvania’s economic production and hiring, employing 2.5 million workers in 2019! Below are some recent data on these important economic indicators:

  • A total of 999,591 firms operate out this area accounting for 98% of all employers 
  • Small business owners make up 47.3 percent labor force which equals 24%.

Pennsylvania is a state known for its strong economy.

The number of small businesses in Pennsylvania was higher than ever this year, with 1 out every 12 jobs being operated by an independent entrepreneur or freelancer!

In 2017 there were only 997K such business owners- today that number has grown to reach over 1.2 thousand people running their own show (1% more).

These numbers are nothing short of impressive considering how many other states’ businesses continue to struggle just trying to make ends meet due to largely financial issues brought on by the recent recession and COVID pandemic.

Source

Read more about the strength of the State of Pennsylvania economy for your small business from the SBA economic profile report here

Baking Industry Statistics & Trends

Looking at the Bakery Industry: its average growth in the United States over the past five years has been 1.9%. The market for baked goods is expected to continue to grow. Bakery products make up 2.1% of the gross domestic product of the United States.

There are approximately 7,000 retail bakeries in the USA, which have combined revenue of over $3 billion. Thus the average income per bakery is about $450,000.

The global baking industry is valued at $455.921 billion in 2019 and will reach a value of more than 584 billion dollars by 2026 with the growth rate anticipated to be 3.62%.

The top trends in the baking industry according to a report by Brandessence:

  • Increasingly Health-conscious consumers
  • Use of Alternative Flours and plant-based substitutes
  • Interest in Middle Eastern Ingredients & Fermented Flavours

Step 1: Research Your Bakery Business Idea

All great businesses start with good ideas.

One of the best ways to get profitable business ideas is to review my lists of new business ideas such as small-town business ideas or home-based – lots of which are in your chosen industry and niche.

Another way to find your next startup business idea is to experiment with my fun tool –  Business Idea Generator.  Creative ideas are a great way to stimulate your entrepreneur’s brain and get your creative juices flowing. The button on this tool will provide you with new concepts for products, services, or side hustle businesses that can help do just that!  

Test Your Business Idea

Now that you have researched your idea, it is time to test its viability. It’s important not to invest in an idea until we know for sure whether or not it will be profitable!

Serial entrepreneurs should always test their ideas before investing too much time and money.

As a serial entrepreneur, I have done tons of business idea testing. Some ideas passed, but lots failed. But I am sure glad that the ones who didn’t were only small investments while my newfound confidence in myself was more valuable than anything else!

Below are the best ways I have found to test new product ideas. Get the full list of my 10 best ways to field test your business ideas here.

  • Visit Trade Shows with Your New Products
  • Ask Others for Constructive Feedback
  • Run A Short Testing Ad Campaign
  • Stage a Focus Group Session

Market Research  – Your Business Ideas

All successful businesses MUST provide a service or product that is needed by the customer in order to thrive.

The adage, “The customer is always right,” has never been truer than in today’s economic climate. To thrive amidst the competition of cutthroat industries and an ever-changing market landscape, your business needs to be able to meet its customers’ demands

Find out if your new business idea will solve problems that customers are willing to pay for by thoroughly researching the marketplace.

Begin by asking the following questions to study the market, competition, location, and target customers’ needs and wants.

Learn if the Market NEED & WANTS Your New Product or Service

  • What problem, need or desire is being solved by your product?
  • Who are the people, or companies, that have this problem? Why do they have the problem? What are they trying to achieve?
  • How are they answering this problem now, without your new startup? What products and services are they using?
  • What are other companies offering for this need – similar or dissimilar products to your business ideas?
  • Where does your new firm fit into the marketplace?
  • What is your point of difference, competitive edge, over established companies? Why should people buy your product instead of what they are using now?

Step 2: Name Your Bakery Business

Bakery Name Ideas – That are Available! Not Taken!

Are you opening a new bakery and need cute bakery name ideas? Well then, check out my big list of hundreds of catchy bakery names complete with inspiring logo examples to name your baking business.

Get inspired by this ultimate list of memorable bakery names that is filled with hundreds of creative, cute, unique, edgy, funny, and cute bakehouse name ideas!

Now selecting a good bakery company name is a piece of cake! Sweet!

Examples of great bakery names

Tart Bakery – Check Availability
You’re Sweet As Pie – Check Availability
Sugar Lips – Check Availability
Honeybuns Bakery – Check Availability
Flourishes Custom Cakes – Check Availability
Pound Your Dough – Check Availability
Sugary Sweet Bakery – Check Availability
Hazelnut Bakery – Check Availability
Spiraling Caramel Dessert Shop – Check Availability
Sugardrop – Check Availability
Biscuit’s Corner Homestyle Baked Goods – Check Availability

Pennsylvania Business Name Requirements

In order to run a successful business, you need the right name. Pennsylvania requires any company that seeks to operate under an assumed or fictitious name within its jurisdiction must contact the Department of State and request publication prerequisites.

Filing a fictitious or assumed business name is necessary in order for you, as an individual who wants to establish your own company and brand identity with it.

Not only does registering this type of entity help distinguish your services from others but there are many benefits that come along with registering one too!

These include: Avoiding any issues when establishing yourself through legal channels; obtaining assets like trademarks (which helps protect against a competitor brand theft); giving customers more confidence by projecting a more professional company image than using your personal name as your business name.

Considering using your personal name for your business brand? First, read my list of pros and cons here

The prerequisites for a fictitious business name in Pennsylvania can be strict, but this doesn’t mean you shouldn’t apply. All businesses that seek to operate under an assumed or fictitious name within its jurisdiction are required by law to join with the Department of State’s registry and must follow publication requirements before they’re assigned one!

Registering a Fictitious or Assumed Business Name (Trade Name)

Review these state guidelines regarding business names as stated by the State officials:

Fictitious names must be distinguishable upon the records of the State Department from any association registered with them. The removal or addition of a designator such as Incorporated, Ltd., LLC, etc.; does not make your business name distinguishable for fictitious company registration purposes since these types can still end up sounding similar to other companies’ associations in different industries which may cause confusion on behalfs both parties involved during transactions especially if there’s overlap between certain terms used within each respective industry (ex: finance/banking).

Learn how to apply here on the Pennsylvania Department of site

How to Name Your New Business

How to Name Your Business so Customers Remember Your Brand

A company’s name is one of the most important parts of a business but picking out an appropriate and catchy company name can be tough. Here are my best tips for coming up with names that will stick in people’s minds!

Make a List of Keywords

The words and phrases that your prospective customers type into internet search engines to find companies like yours.  Add other towns, states, and countries to your search to find similar firms, outside of your marketing area for inspiration.  

Don’t use another firm’s exact name, just use those names to brainstorm your own unique brand name.

  • Use market level words such as industry names (ie catering, plumbing) and see what comes up
  • Brainstorm a list of related keywords (example for Bakery – sugar, sweet, dough, icing, fluffy, etc)
  • Try your competitive advantage term (ie faster, cheaper, cooler, closer) to find interesting concepts
  • Your value proposition, innovation, or special feature is a good source to build memorable names (example – Evernote – Remember Everything)
  • Outside of Your Industry – Step back and look for an interesting combination of words from outside the industry such as Apple (a fruit) for electronics.

Play with Words for a Great Brand Name

It can be difficult to think up a catchy name for your brand-new business venture. Here are my best tips on coming up with company names that will get people talking about how amazing your products are:

Take that list of keywords and you created using my tips above and then play around until you find that perfect new startup name.  

Combine Two Words – Blend real names of two or more owners into an interesting compound business name. Learn the many ways to combine names in my article here. 

Acronyms – An acronym is different from a name made up of initials and creates a new word. An example of an acronym name is LEGO (short for Leg Godt – danish for “play well”) pronounced as one word.

Use this online tool to brainstorm some creative acronym business names.

Wordplay and Puns – Puns are jokes that exploit the different meanings of words – a play on words. They can make funny and catchy business names.

Some examples of business name puns; Cake my Day, Live Free or Pie, and Food Mood. Have fun and get business name inspiration with this free Pun Generator tool.

More Business Naming Tips: How to Come Up with a Catchy Business Name

Get Inspired with List of Business Names

To help inspire you I have written lists of catchy business names for lots of types of companies and different industries. Check out these unique business name ideas that are not taken and available!

My Favorite Business Naming Tools

To help you name your business memorably, I recommend that you use these branding tools that I do for my marketing clients. They are top-rated and affordably priced even for the leanest startup budgets.

Entrepreneurs, let’s get busy naming YOUR next successful company…

Reserve Your Domain Name – Your website address is a critical part of your company branding success. Having your site listed at the top of search results so that customers can easily find you will fuel your success.

Reserve your custom domain name for FREE! with any Bluehost plan

PS You don’t even need to have your company name finalized – Bluehost will give you the FREE domain name as a credit to your account.

Design Your Logo Brand – I loved using 99designs to create my logo for this blog. Running a logo design contest was fun, economical and resulted in so many great logos design I found it hard to choose the final look!

PLUS I have this exclusive discount for my readers to save $99 if you use this link, it will be automatically added to your account.
Get a great logo design and save $99 discount/coupon

Get a great logo design at 99designs and save $99 with this link

Launch a Naming Contest – A smart and fast way to name your company. Launch a naming contest to engage hundreds of naming experts as you’re guided through the agency-level naming process. Or explore the hand-picked collection of premium names available for immediate purchase at Squadhelp.com

Hire naming experts to brand your company at Squadhelp

Step 3: Meet Pennsylvania Legal Requirements: Government Registration, Licenses & Taxes

Choose Your Business Structure

Before starting a new business, entrepreneurs should make sure they’re following all the legal regulations of starting and operating a small company. It’s important to stay on top of government paperwork as well as taxes in order to avoid any setbacks or penalties later down the line.

Next, we will cover the legal requirements for business registration with your State and tax regulations. There are IRS rules to take into consideration as well when you’re starting a new venture that needs to be determined before getting the right business licenses or permits in place.

Establishing legal compliance with your new company will allow you to focus on growing the business.

Legal Business Entity Types – Explained

Your business is considered an entity or an organization in the eyes of the law and government, this means that you need to have a structure such as Sole Proprietor DBA, Corporation, LLC a limited liability company in which you run your business from.

The entity you choose to operate your business will dictate the legal protection afforded to it, which in turn dictates how much personal liability you face.

Here is how to determine the best legal structure for your new startup business such as sole proprietorship, partnerships, corporations, or trusts.  

There are many types and variations to business structure.  Depending on which kind of business you intend to run, how the day-to-day operations will be carried out, and various other factors, a particular business structure may be of more value to you than another.

Legal Business Formation Entity Types

  • Sole Proprietor
  • DBA – Doing Business As
  • Partnership
  • Corporation
  • S Corporation
  • Limited Liability Company (LLC)
  • Non-Profit (Not for Profit)  Corporation

Sole Proprietor

A sole proprietorship is the business formation most adopted by individuals.  It is also the form of business that carries the most liability for the owner—a single owner, personally responsible for the sole proprietorship.  

For sole proprietors to be legally allowed by law, they can either use their legal personal name or take the optional route of obtaining permission from local authorities first in order for a DBA.  

A sole proprietorship is a legal structure like LLC or Corporation, and a DBA isn’t. A DBA means you can operate your business with a trading name different from your registered, legally registered personal name.

DBA – Doing Business As

The “doing business as” or DBA is a legal requirement for businesses operating under different names than their legal name.

In order to operate legally, you need to register with the proper state agency and file an assumed name certificate that states who owns your company. The only time this may not be required is if both owners are using their actual last name on any products they sell – in which case no one needs approval from anyone else!

Sole proprietorships and general partnerships are legally required to file DBAs, but almost any business entity type could benefit from having one. This is because a DBA can serve as an important form of protection when conducting business; for example, if someone becomes liable for damages that occurred during the course of their company’s operations, they may be able to claim that liability was due solely to personal actions or decisions which were not related in any way with the corporation.

Partnership

A business partnership is a legal relationship that can be formed by any written agreement between two or more individuals.

The partners and investors invest their money in the business, with each partner benefiting from any profits, taking responsibility for losses sustained.

One of the best ways to do start a business is with a partnership. It can reduce costs and help you reach your financial goals faster. The advantages of this are that it builds trust among the partners, and allows them to handle tasks more efficiently while sharing in profits.

Business partnership resources:

How to find a good partner

Business partnership types – advantages & disadvantages

How to split profits in a small business partnership

Limited Liability Company (LLC)

A popular form of business structure is the limited liability company referred to as an LLC. Each state has its regulations regarding the LLC, to clarify how it differs from the other previously mentioned business formation types, let’s start by defining the LLC.

An LLC can be thought of as a hybrid structure.  It is sort of a mix between a corporation and a partnership.  One might think of it as a partnership that insulates the owner’s liability to some limited degree but is similar to the corporation’s structure.

Read my advice about whether an LLC would be a good legal business entity for you here

Incorporation

Some businesses should incorporate, most notably those seeking venture capital and manufacturers. Other firms should not incorporate such as small one-person companies, often referred to as solopreneurs and those with low capital do not deal in products or services that could be dangerous to your customers. 

Next, we will discuss incorporation as a business entity and the different types of corporations’ options.

S Corporation

An S Corporation differs from a regular corporation in that it chooses to pass credits, deductions, income, and losses through to the shareholders.  These shareholders would add these to their income tax.  It enables the business to simply pass along the numbers to the owners (shareholders) and act as intermediaries.  

C Corporation

A corporation is a quite different creature from a sole proprietorship.  In the United States, a corporation is a sort of virtual entity.  A corporation takes on rights and abilities like a person – that’s why it uses the word “corp” as in the corporal body.  The difference is that it features the ability to exist perpetually, quickly transfer interests, and provide limited liability for the corporation’s shareholders (owners).

Read my advice about whether a corporation would be a good legal business entity for you linked below:

Business incorporation resources

Differences Between LLC and Corporations Compared (S-Corp and C-Corp)

FAQ: How are Corporations Taxed?

LLC vs Corporations: Which is Best for Your Business?

Non Profit Corporation (Not for Profit)

A nonprofit organization is one that meets the IRS requirements for tax-exempt status because they provide a public benefit and have social missions.  Nonprofit organizations include hospitals, universities, national charities, and charitable foundations that give back to the community for the common good.  

Nonprofits must serve the public good in some way. They do not distribute profit to anything other than advancing their own organization’s efforts for an even better future–one of which will be more abundant and prosperous.

Nonprofit organizations exist solely as tools with one goal: to provide a meaningful service or product that benefits society at large while also benefiting themselves by providing them with opportunities such as personal development, education, networking, etc., all aimed towards creating a world without poverty.

A not-for-profit organization is one that does not earn profit for its owners. All money earned through pursuing business activities or donations goes right back into running the charity.

Not-for-profits are not required to operate for the benefit of the public good according to law. A not-for-profit can simply serve its own goals without benefiting anyone else’s interests, this is often done by ‘selfless’ people who don’t want any compensation whatsoever and believe they’re doing what’s best in their communities

When a business becomes a partner, it should register with all states where the partnership does business to be in compliance.

If you are interested in setting up a non-profit, or not-for-profit, check out my expert tips here.

Learn more in my guide: How to Start Your Small Business Legally – Important Legal Requirements

Register Your Business with Government and IRS

Get Your Federal and State Tax IDs Number

The State where your business headquarters are located AND your chosen business structure determine how you will need to register your business.

While not every business must be registered with the government, I recommend that you do so to take advantage of the legal and tax benefits – plus get personal liability protection from business debts and lawsuits.

Once you properly register your company you will be issued an employer identification number or EIN for short. You need this number – even if you are working alone, self-employed, or hiring only subcontractors and no employees.

An EIN number is the business equivalent of your personal social security number and is used in various steps like opening up an account at a bank or paying taxes. Not all states require that you get one, but it might be worth getting if there’ll likely be more tax-related things coming ahead of time.

Registering your business with state and local governments is usually as simple as registering your company name.  Here’s how to do register our business in your state:

My Favorite Business Startup Tools


To help you start your business right, I recommend that you use the tools I use every time I launch a successful new venture.

They are all top-rated and affordably priced even for the leanest startup budgets. Some are even FREE during promotions! And I share exclusive discount coupons with you also!

Entrepreneurs, let’s get busy launching YOUR next successful company…

Set Up Your Legal Company – I highly recommend Incfile.com as the best way to set up your LLC, INC, or DBA. They are fast, professional, and today the service is FREE! Yes, you pay $0 plus required fees in your State.

Start Your Company for $0 Plus State Filing Fees with Incfile.com!

Reserve Your Domain Name – Your website address is a critical part of your branding success. Having your site listed at the top of search results so that customers can easily find you will fuel your success.

Reserve your custom domain name for FREE! with any Bluehost plan

PS You don’t even need to have your company name finalized – Bluehost will give you the FREE domain name as a credit to your account.

Design Your Logo Brand – I loved using 99designs to create my logo for this blog. Running a logo design contest was fun, economical and resulted in so many great logos design I found it hard to choose the final look!

PLUS I have this exclusive discount for my readers to save $99 if you use this link, it will be automatically added to your account.
Get a great logo design and save $99 discount/coupon

Get a great logo design at 99designs and save $99 with this link

Apply for Your Business Licenses and Permits

You are responsible for making sure your business has the proper federal, state, and local licenses and permits to operate legally. A pivotal part of this process for many entrepreneurs is determining what type of licensing they’ll need.  Here are two ways to research which business licenses and permits you will need in your State and for your specific industry startup:

  1. FREE online business license lookup tool
  2. Low-cost business license research service

Online Business Lookup Tool – FREE

Business licensing is something that people often overlook when setting out on the entrepreneurial path–particularly those who have never started any kind of company before. 

At Incfile they take the guesswork out of how to obtain a business license and the necessary permits which their easy-to-use business license look up tool here Yes it is free.

Simply select your State and niche industry and in a second you will know precisely which licenses you to require. Plus you will get links to permit applications and helpful guides.

FREE Business License Tool Lookup by State and Industry

Business License Research Package – LOW COST

You must understand how important it is for complying with local laws can be even if you’re not physically located within city limits! One example is meeting all requirements related to commercial zoning regulations like getting approved by your town council (as well as municipal planners).

Furthermore, don’t be fooled; your corporation or LLC may need more than one license to operate fully at the state level.

Here you can get the most up-to-date, state-specific information about exactly which business licenses you must obtain based upon certain factors such as industry type or whether it’s an online endeavor rather than brick and mortar shop.

LOW COST Business License Research Package from Incfile (Done for You)

Protect Your Company’s Intellectual Property Assets

If your new business develops new inventions, manufacturing processes or products you will want to protect your intellectual property with patents, trademarks, and copyrights issued by the US patent and trademark office.

Learn more in my article – What is Intellectual Property and Why it’s Important to Your Business

Business Licenses & Permits Required In Pennsylvania

A business license in PA is required to legally do business and operate within the state. The type of service or product you provide will determine what kind of registration is necessary, so make sure that all legal requirements are met before opening your doors!

There are so many different types of business licenses required from industry-specific to local municipalities that I recommend that you use a professional business license search at Incfile.

Operating a business in Pennsylvania may require some of the following licenses or permits:

Building Permit, Health Permit (depending on what you sell), Occupational permit for employees who work at your place of employment.

There’s also Signage which designates certain words only to those with permission–such as signage permitting alcohol consumption and tobacco use; ZoningPermits if there are special rules about how far away from homes/properties one can locate their location(ies).

Lastly, there is City Business License depending upon where that particular establishment falls under classification such liquor license would be required by law

Plus, if you operate a business that requires a professional license such as nursing, real estate, engineering, psychology, you will need to apply for licensing at this Pennsylvania State website.

Let the experts at Incfile quickly determine precisely which licenses are required and help you apply online. Check out the low-cost (time and hassle saving) service here

Business Taxes – Sales & Income

As a new business owner, you must pay two types of taxes: sales tax and income tax.

Income Taxes for Businesses

Taxes are unavoidable in your business, but luckily this handy resource can help guide you.

The first thing you need to know is what kind of business tax system your company falls under. Your firm’s legal entity type (LLC, Corporation, or Sole Proprietorship) will determine your tax bill and payment due date.

Sales Taxes

There are two types of taxes that you need to collect from your customers in the US.

·       Sales Tax – This sales tax applies to certain kinds of tangible products as well as services.

·       Use Tax – Use tax applies to products or services purchased out of state for use in the state.

Sales taxes are charged on most products, and also levied on services.

Pennsylvania Business Sales Tax Requirements

If you want to operate a business in Pennsylvania, you must acquire an appropriate merchant tax license. Businesses that deal with retail and services must have a sales tax license, which is required by law for all companies doing physical transactions within our state’s borders at any level – this includes big or small businesses as well!

It is important to be compliant with Pennsylvania’s Sales Tax laws. If your business sells products or services subject to the tax, apply for an official license by completing and submitting PA-100 Enterprise Registration Form

The first step in sales tax compliance is to determine whether or not the items or services your company sells are taxable in Pennsylvania.

Taxable Goods

Physical items, such as furniture and home appliances, and motor vehicles are taxable in Pennsylvania.

Digital Products

Pennsylvania requires businesses to collect sales tax on the sale of digital goods such as photos, books games, and other downloads.

Act 84 of 2016, specifically applies the commonwealth’s 6 % sales and use tax to the purchase of digital products delivered to a customer electronically, digitally, or by streaming.

Learn more about State tax on digital products in this government publication.

Tax-Exempt Goods

Medicine, food, petrol, and clothing are all tax-free.

Taxable Services

Following is a list of taxable services in Pennsylvania.

1. Printing or imprinting of tangible personal property of another.

2. Washing, cleaning, waxing, polishing, or lubricating motor vehicles.

3. Inspecting motor vehicles as required by law.

4. Repairing, altering, mending, pressing, fitting, dyeing, laundering, dry-cleaning, or cleaning tangible personal property other than wearing apparel or shoes.

5. Applying or installing tangible personal property as a repair or replacement part of

other tangible personal property.

6. Lobbying services.

7. Adjustment services, collection services, or credit reporting services.

8. Secretarial or editing services.

9. Disinfecting or pest control services.

10. Building maintenance or cleaning services.

11. Employment agency services or help supply services.

12. Lawn care services.

13. Self-storage services.

14. Mobile telecommunications services.

15. Premium cable and video programming services including streaming of videos.

16. Non-residential electric, steam, and gas services.

17. Intrastate and interstate telecommunications services billed to PA service addresses except for subscriber line charges and basic local residential phone service for residential use and payphone service.

The Retailers’ Information Guide (REV-717) has all the information you need about tax law, including how it applies to your business.

Get a Pennsylvania Sales Tax Permit

The next step is to register for a seller’s permit. This allows your business the opportunity to collect sales tax on behalf of local and state governments so you can stay in compliance with all applicable regulations!

The Online PA-100 can be used to register a new business entity, add additional taxes or services, and is an essential tool if you’re looking to acquire all of the assets from another company.

Step 4: Write Your Bakery Business Plan

No doubt you’ve heard the old saying of one of my heroes Winston Churchill, “if you don’t plan – you are planning to fail”. 

Nowhere is this truer than when starting a business.

Starting a business without any planning is one of the most common mistakes entrepreneurs make. Spare yourself the substantial loss of money, time, and much heartache by taking the time to write a business plan. A well-written business plan is one way you can invest in your future success!

The importance of writing the plan is not entirely in its finished product, but what you discover about your business as you prepare it. During the process of writing your business plan, you will uncover aspects of your business strategy that will not work.

Far better for your startup success and survival that you discover these weaknesses on paper – NOW – then adjust your business model accordingly- than to encounter these problems in your company costing time, money – and quite possibility your company survival.

Think of your business plan as a map for your entrepreneurial journey. You would not set out on a long hike across unknown territory without a field guide and a detailed map.

So, don’t dive into a new business and spend money, time, and emotional energy without a map – your business plan.

Your business plan must answer these 9 critical questions:

1. What is the purpose of your business?

2. Who are your target customers?

3. What are the benefits of doing business with you?

4. How do you plan to reach these customers?

5. Where will your company be located and what type of facilities will it need?

6. What kind of employees will you need, and how many people should work for your company at first?

7. Do you have any competitors in this market space, and if so, who are they and what differentiates them from each other and from yourself?

8. What does success look like for this business in one year, five years, and ten years from now?

9. What are the most important tasks that need to be completed before launching a new product or service?

Read my review of business plan software and learn about some great free options here

More helpful resources to write your business plan

Business Plan Musts – For Loan Approval

Questions Winning Business Plans Must Answer

10 Critical Items Your Business Plan May be Missing

Step 5: Calculate Your Finances and Fund Your Bakery Business

This is an important stage where you will calculate financial projections to determine if your business idea is profitable and determine your pricing strategy. Also, you will need to ascertain the amount of capital you will need for both your startup costs and ongoing working capital.

Calculate Your Startup Costs

Two Types of Startup Costs – Setup and Operational

First, you need to know that there are two distinct types of costs, those you will incur as you set up your company (Set up Costs or Startup Costs) and those that will continue to be expensed as you operate (Operational Costs, Expenses, and Working Capital).

Set-Up Costs

One-time investment to open your store or launch your website includes such items as legal business formation, building renovations, and manufacturing equipment.

These are easier to calculate. You will research each item and simply add up the list for your total set up costs.

Operational Costs

Ongoing expenses to continue business operations including rent, supplies, employee salaries – and most importantly working capital. These costs are more difficult to calculate because they have many more variables. As your sales increase so will your labor and material and inventory needs.

Read my article about how to correctly calculate your startup and operational costs here.

Forecast Sales & Expenses

The next step is to forecast your sales and expenses and generate a business budget.

I have a that I say that is funny but also true.  I tell all new entrepreneurs to take their financial projections and cut their sales in half and double their expenses.

Then, if the numbers show that they will make money they should go forward to launch their business.  Certainly, simplistic, but it illustrates that most entrepreneurs overestimate their sales and underestimate their expenses to their own detriment. 

Here is the right way to create a business budget.

Define Working Capital Requirements

From one entrepreneur to another, you need to get wise about working capital, today, if you plan to keep your business doors open. Because the #1 reason for business failure is lack of working capital. Don’t become a business failure statistic.

Working capital refers to the funds that help you meet the daily expenses and needs of running your business, such as payroll or paying for software, tools, and supplies.

From a business management perspective here’s all that you need to know about working capital in my article about what it is, the amount you need, how to manage it like a pro, and if you are short on working capital how to either get financing and how to reduce your working capital needs without a loan.

Determine Your Prices

Begin your financial planning by determining your best pricing.  Pricing your product and service is a bit of art-science.  There are multiple ways to determine your best price, cost plus, and market demand & supply.

There are different methods to calculate your prices for your new startup business based on multiple factors such as market demand, competitive prices, and costs expenses.

These are the most often used pricing strategies for small businesses with recommendations for which methods fit different types of businesses. 

Premium Pricing

This method is when you price your product higher than your competitors. This technique is often used at product launches to create a high-value perception in your customer’s minds.

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Market Penetration Pricing

This concept is to gain buyers by offering the lowest prices on goods and services to enter a crowded marketplace. It is common for entrepreneurs to use this technique initially. If not planned and executed carefully this is the most dangerous type of pricing strategy for your bottom line and business survival.

Psychology Pricing

By utilizing the power of people’s emotions to buy is the key to success with this pricing strategy. Many consumers consider the price of a particular item a major purchasing factor.  Use this to your advantage by reducing your price a little and changing your buyer’s minds a lot. You have all seen the $199 specials, which are only $1 less than two hundred but seem to be a better bargain.

Read my full article about how to best price your products and services here.   

Fund Your Business

Now that you have a great business idea, you will need money to get started in your new venture.

While there are some businesses that you can start with almost no money some are even free.  Most startups require some form of a business loan or capital investment.

Startup Funding Resource List

Here are some good ways to fund your startup launch. Personal savings

  • Loans  – Personal and business
  • Credit Cards (Read my entrepreneur tips here first)
  • Crowdfunding
  • Partners & Investors (Read my article Business Partnerships 101)
  • SBA Loans  
  • Small business grants – (Read my list of startup grants with applications here)
  • Product Licensing – (Read my article about how to sell your business idea here)

Read my full list of 17 Proven Sources For Startup Capital

TIP: If you need to finance your small business consider top recommendation for small business startup loans – Kabbage.com. Read my review of Kabbage loans with verified customer reviews and experience

Read my detailed bakery startup cost list with expert tips on how to get started with a lean budget here

Step 6: Pick Your Best Business Location in Pennsylvania

Choosing the right location for your firm is one of the most important decisions you will make at the onset of your business launch.

Take your time and do your homework of research and planning, before committing to a lease on retail, restaurant, or office space. Study the demographics of the area and surrounding towns, your competition nearby, and much more. Here are the questions you need to ask before signing a lease:

7 Questions to Determine if Location is Good for your Business

  1. Image – Does this spot project the brand image you desire?
  2. Competition – Are neighboring businesses competition or complementary?
  3. Labor – Will you be able to find employees easily, or is it too far to commute?
  4. Growth – Is there room for future expansions?
  5. Vendors – Are vendors able to deliver here efficiently and at a reasonable cost?
  6. Security – What is the crime rate?
  7. Zoning – Is this location zoned for your type of business activity?

Helpful resources:

Leasing your first office? Negotiation pointers

Step 7: Buy an Bakery Insurance Policy

Get Business Insurance Policy

Running a business is risky. Injury, natural disaster, or lawsuit can force you out of business and leave your family without income! Business insurance protects against these unforeseen risks to keep things running smoothly so the company doesn’t have to close its doors due to an accident or major incident.

Think about it. If your business gets sued, you will lose money that could have easily been prevented by purchasing the right insurance policy!

Insurance Regulations: Federal IRS, State, and City

The protections you get from choosing a business structure like an LLC or corporation typically only protect your personal property and even that protection is limited.

In today’s world, it is impossible to protect everything. Even with the most comprehensive coverage in place, there are still many gaps that can leave your business exposed if you don’t have adequate insurance protection for both personal and business assets as well!

There are a number of aspects to consider when determining the right type and level of business insurance. For example, you will need different coverage if your company employs other people than just yourself or is within certain industries.

The federal government requires every business with employees to have workers’ compensation, unemployment, and disability insurance; however, there are many additional types available depending on fact



This post first appeared on Small Business Blog For Entrepreneurs And Startups, please read the originial post: here

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How to Open a Bakery in Pennsylvania: Business Startup Guide

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