Two and a half years ago I decided to start a business. Burnout had set in after many years as a chef so I quit cooking entirely and started working as a custodian. Working for the state as a custodian was a very comfortable job, but not always the most pleasant. The pay was good and the benefits were amazing. Unfortunately the work was heartless. There was no passion there, and the kitchen called me home to be a baker. The Sisquoc Baking Company was born.
It has been really difficult starting and running a business. 2022 had been especially challenging. Costs have gone up, some have even doubled. The labor is long, hard, the products are perishable and the returns are moderate. Whether it’s a side-hustle, part-time job or a full-time lifestyle, it has to be a labor of love.
People SEE you doing well and think that you are actually DOING well. Often, that’s just not the case. I have done way more things wrong than right in the past two and a half years. There is a constant battle going on inside of you. A battle to balance personal and business life and to maintain a facade of strength in the midst of struggle. Here are a few resources that have helped me in my cottage business journey along with some personal opinions based on experience. This is by no means an exhaustive list of information and ideas. I strongly recommend you do your own homework and get the facts for yourself. This is just a quick start to get the juices flowing.
Our Cottage business is based in California, so many of these resources are relevant to our location but some can be used regardless of where you set up shop. Cottage business rules are set by the state and are enforced at the county level. Your county may have specific rules in place that differ from ours so it is always best to check the laws specific to your area.
Here enters the typical disclaimer about how these are just opinions and I’m not a professional anything.
This post contains the opinions of the author. Any legal questions about your business should be directed to an accountant or an attorney.
WHERE DO I START?
So where to get started? My advice is to start with fulfillment. How are you going to get your product to the customer? Making your product is only half the battle. The other half is how you get it to them, typically referred to as FULILLMENT. In California a licensed Cottage business can sell statewide through the mail. That is a great option for canned or dry products like granola, seasonings and dry baking mixes that don’t require the high costs of urgent shipping. The ability to ship your product also opens up a much larger market. More perishable products like baked goods require higher maintenance with regards to shipping and rotating stock at a store. If you live in a rural area with few people around then a product with a long shelf-life may be the best item for the core of your sales.
Our cottage bakery is in a small town situated in a rural area so there is not a lot of foot traffic. We make most of our money through farmer’s markets, pop-up events and a few wholesale customers. If you’re selling baked goods with no preservatives then your shelf-life is probably about five days or so when sold in a plastic bag. If baked goods are your thing then you need to sell a LOT, all the time in order to be profitable and grow.
WHAT TO SELL?
Well, what can you make? More importantly, what can you make that a large group of people will spend money on and those people are easy to find? This was one of my earliest mistakes in starting a Cottage business. I made what I liked to make. I turned a hobby into a business and honestly, that was the wrong move because the markets in our area don’t get a lot of visitors and there were several other cottage bakers in the area. You don’t have to sell the best, most amazing product out there, you just need access to a large group of people willing to spend money on what you’re selling.
One of the problems that I have noticed at farmer’s markets is that people who sell non-perishables like coffee or vinegars aren’t getting frequently returning customers to their stands. Not because their product isn’t good. It’s mainly that the product they sell lasts a long time and customers don’t need to buy it that often. That’s great for the customer but not so great for the Cottage businessperson that needs to get a return on the time and money they spent on attending that market. Here are a few ideas that can help:
-Sell perishable items that complement your non-perishables. Products with a shorter shelf-life require more visits to your market stand and create more opportunities for sales. For example, if you’re selling vinegar then sell small loaves of bread for dipping or small packages of biscotti or cookies with your coffee.
-Offer free resources. Offer customers a free recipe card for a bread dipping sauce that features your vinegar and the bread you sell with it. Give out a branded bottle opener for your artisan soda or a grilling rub recipe featuring the ground coffee you’re selling.
-You don’t have to make it yourself. Farmer’s market managers regulate the vendors so there are not a lot of the same items. So you may not be able to sell baked goods if there are already bakers at your market. Connect with other vendors at your market and try to work out a wholesale deal with them to sell their product with your label on it. This is called PRIVATE LABELING. Your market manager may not allow you to sell your own product that someone else already sells but they will likely let you sell another vendor’s product with your label.
-Use social media, email and text message lists to keep customers informed about special offers, new products and pop up sales.
WHAT MARKETS DO I SELL AT?
You may not have much of a choice on this one. In our area there just aren’t a lot of farmer’s markets to sell at without travelling a long distance. Here are a few things to look out for when choosing a market.
-Foot traffic, This is not always the case but generally speaking more people walking by your stand means more people trying and buying your products. I always shoot for markets with a lot of attendees.
-Time of day, Markets that occur on weekdays tend to draw more customers if they are scheduled in the late afternoon or evening. Weekend markets tend to draw more customers in the morning and early afternoon.
-Length of the market, In my experience the majority of sales occur in the first ninety minutes to two hours. Regulars know to come early before you sell out and those people will most likely make up the majority of your income (see the 80/20 rule). Some markets will go on for four to five hours and these are the ones we tend to avoid especially in a midday market. If you hire an employee to work a four hour market then that’s probably five hours of labor including the set up and breakdown. If you[re doing a five hour market you’ll probably be paying someone to just sit there for three hours.
-Saturation, are there already a lot of vendors in your area selling the same things that you would like to make?
LEGAL STUFF YOU MAY NEED
Cottage Permit These are obtained from you local Health Department and every state has their own specific laws for Cottage food businesses. There are two categories found in California, Class A and Class B. Class A is for sale directly to the consumer and Class B allows you to sell to a third-party like a grocery store or restaurant who can resell your product to the general public. In Santa Barbara county the Class A permit just requires you to submit an online form and is free. A Class B permit requires an annual inspection from the local Health Department. You also have to submit a menu of all the items you would like to make and an operations plan that describes the production processes of your menu. The annual cost of a Class B license in Santa Barbara county is about $350.00. Here is a link to the Santa Barbara county Home Kitchen Operations webpage for CFOs (Cottage Food Operators) and a link to the California Department of Public Health’s Cottage Food Operations webpage
Fictitious Business Name (DBA) Unless you plan to call your business your own name like Jane Doe (which isn’t very descriptive), you’ll need to file for a Fictitious Business name with your County Clerk-Recorder.
A Limited Liability Entity. If you have valuable assets then you’ll want to separate them from your business so they can’t be touched in a lawsuit. Think of an LLC as an insurance policy for your personal assets. These can be expensive depending on what state you live in. Here is a link to the California Secretary of State Website where you can find info about forming an LLC and other business entities. Do a lot of research on this and find out exactly what you need. If you can afford to speak to an attorney and/or accountant about this then that might be the best route depending on the complexity of your finances.
EIN (Employer Identification Number) If you are starting out as a Sole Proprietor then you don’t need one of these. We got an EIN early on because it looks more professional and many of the people you do business with will ask for one. Even if you don’t have employees you can still get one. If you don’t have an EIN then you will have to give out you Social Security Number instead which is something I don’t recommend for privacy’s sake. Don’t pay for one! They are issued free from the IRS EIN Webpage
California Seller’s Permit from the CDTFA This permit is for used for the collection of California state sales tax on the taxable items you sell. Many of the items sold in a Cottage business aren’t taxable. Businesses that you do business with will often ask for your Seller’s Permit Number when starting out. Do your homework on this and find out if you must collect and pay sales tax to the state. Even if you aren’t required to collect and pay sales tax on the items you sell you still have to file an annual return with the CDTFA. It’s free to file.
Business Bank Account A separate business bank account isn’t required for all businesses. The type of business entity you choose will dictate whether or not you need a bank account specifically for your business. Having a bank account just for your business will help you keep track of your finances. Business banking can be expensive. Look into opening a business bank account with a local Credit Union if possible. Credit Unions typically have very favorable but limited options for their customers as opposed to private banks. We use a local Credit Union dedicated to current and former school district employees for our business banking and it has worked out very well.
General Liability Insurance This typically covers the products you make and you when attending an event like a farmer’s market. Policies and prices differ depending on your business. Other businesses that buy your products to resell and event holders will often require you to carry a General Liability Insurance Policy.
Overall you may not need all of these in place to get started but it’s a good idea to research them before you get too far into your business.
Accounting Software We use Quickbooks for bookkeeping and accounting. I tried using Quickbooks on my own to do my own bookkeeping without any assistance and totally screwed it up. I definitely lean towards the creative side and not the numbers side. Eventually we hired a bookkeeper and accountant and gave them access to our Quickbooks online software. Quickbooks isn’t the only game in town though. Check out this article from Forbes on small business accounting software. Getting help with bookkeeping and taxes took a huge burden off my shoulders and freed up a lot of time to do other things. It can get expensive to hire that kind of help though. You don’t need a fancy CPA firm to do your annual taxes. Look for an Enrolled Agent that focuses on business taxes and reach out to them about pricing.
Online Ordering Website A simple website can help you get set up for online ordering pretty quickly. Letting customers order online takes the burden off of you from having to constantly answer phone calls and DMs. Make sure you have a good FAQ section setup so customers can easily find answers to commonly asked questions. We use a website called Cococart. The prices are reasonable and you are charged based on income generated through the site and not a flat monthly fee. Here is our Sisquoc Baking Company website on Cococart.
Google Voice Google Voice allows you to set up a phone number that is automatically forwarded to a different number. This way you don’t have to give out a personal number to potentially thousands of total strangers. With Google Voice you can easily send text messages and make phone calls through a laptop or desktop computer and see transcriptions of voicemails. You can also send text messages as emails
WHAT EQUIPMENT DO I NEED FOR A FARMER’S MARKET?
We only do baked goods so I can’t comment on equipment related to other products. Here are some items that seem universal for farmer’s market setup.
- Pop-up Canopy and weights, the typical market space is 10 x 10 feet. Caravan is a top brand
- Folding tables, most likely two or three heavy duty folding tables 6 to 8 feet long.
- Tablecloths or blankets for covering your tables. I like spandex tablecloths for our setup. They look nice, come in a variety of colors and the textured surface keeps thing in place on the table.
- Cash box with spring loaded hinges to keep money in place on windy days.
- Banner with logo and bungee cords to attach them to your canopy. Get a banner designed for the outdoors and has sturdy grommets
- Signage for individual products.
- Milk crate style box for small items like signage, first aid kit, towels, calculator and paperwork.
- Boxes and racks for storing and transporting products. For bread we use bread racks and dollies from Webstaurant.
HOW MUCH DOES IT COST TO SELL AT A MARKET? HOW DO I GET IN?
The answer to that can vary depending on the market. Some farmer’s markets will charge a percentage of your gross sales and an annual fee. Others will charge you a flat monthly or weekly fee. The lowest fee I’ve seen in six percent of gross sales and a two dollar agriculture fee. Other markets will charge $200.00 per month flat fee. $200.00 per month is on the high side but if that market is bringing in thousands of people then it may be worth it to attend.
The difficulty of getting into a market is dictated by a lot of things. If there is only space for one of each type of vendor, like a bakery for example, then spots fill up quickly and are rarely vacated. Some markets that take place in cities with a high concentration of certain kinds of brick and mortar businesses often won’t allow similar vendors to participate in their market. Some markets have an individual manager that may be easy to deal with and admission is a simple nod of approval, as others may have an extensive application process and review by a committee. Farmer’s markets typically have multiple locations that fall into the same network so getting access to one may get you access to many.
I hope this information has been helpful to you. There are a lot of things about operating a home-based business that I didn’t touch on, like production, packaging and payments. Maybe this will plant some seeds in your mind and help you along the way. Cottage businesses can make substantial contributions to our lifestyles and communities and are good opportunities to start a business. It’s a tough path to take but I hope you take it and change the world.
Please comment below if you have anything to add or even just disagree with me. I like to hear the opinions of others about these types of businesses. You can also reach out to me directly at firstname.lastname@example.org.