5 Of The Biggest Mistakes To Avoid As A Hobby Baker In 2023
Do you consider yourself to be a ‘hobby’ baker?
Let’s just be very clear here from the off. A hobby is something you do because you enjoy it, rather than doing it for any financial gain.
As a ‘hobby’ baker, you might make the odd cake for friends and family as a gift every once in a while. You don’t charge any money for the cakes you make as they are just a bit of fun to do. Perhaps the person you gift the cakes to, paid for the ingredients for you as they were so happy you made the cake for them. But….
Truth Bomb!
Once money starts to change hands from your ‘hobby’ and/or the cake making transactions become a regular thing, it is no longer a hobby. You are running a business!
Double Truth Bomb!
Just saying you are a ‘hobby baker’ because you don’t want the faff of working out your prices properly, or the inconvenience of making yourself known to HMRC, or the palaver of registering with your local environmental health office does not make you a hobby baker. You are actually running a business! And you should do that properly or you are damaging your own chance of success and the success of every other cake making professional around you.
Has that given you a bit of a shake up? Have you realised you need to move to becoming an actual business? Let’s discuss the mistakes you need to avoid along the way:
Mistake Number 1 - Not registering with your local environmental health office
This is not something you have a choice in whether to do or not. You may be fined, imprisoned for up to 2 years or both if you run a food business (this includes making cakes regularly for other people) without registering.
Once you have decided to take money for your cakes and bakes, you need to register your premises. You have a legal obligation to ensure you are completely up to date with, and that you fully understand all food hygiene practices. You also have a legal obligation to ensure that the place you work from properly meets UK food hygiene standards for the health and safety of anyone who eats your cakes and bakes.
Registering your business with your local authority’s environmental health service is free but you must do it at least 28 days before you start trading. Already trading? STOP! Register your business now and then 28 days later you can trade.
An environmental health officer will then pay your home or your workplace a visit to check that it is appropriate to make cakes from and to make sure you are following all of the necessary hygiene procedures. You will need to download the ‘Safer Food, Better Business’ pack and fill it all in prior to a visit. You will also need to make sure that you take any necessary food hygiene qualifications. Food hygiene level 2 is sufficient for most baking businesses. High Speed Training is an online site you can take this training on.
Sometimes it can be over a year from registering until you get an inspection, but you can still start trading before you have one. Once an inspector comes, you will receive a rating out of 5 for your premises. Each inspector can be different depending where you live in the country (yes this is actually true - they don’t sing from the same hymn sheet), so do check in advance what they are going to be looking for from you on your inspection.
Yes, an inspection can be a bit scary, but the environmental health inspector is there to help and guide you. If you’re not sure about anything - ask them. They are not there to trip you up, they are there to help ensure you are doing things the right way.
Mistake Number 2 - Not getting proper insurance
By not getting adequate (or sometimes - any) business insurance you are setting yourself up for potential problems.
Working from home?
Then your home insurance must include business use. It is best to call your insurance company and discuss your specific requirements so they can make sure they provide you with the correct insurance. Failure to declare this, can make your home insurance policy invalid!
As a side note to this, you also need to tell your mortgage company or your landlord (if renting) that you are going to be running a business from home. It is usually unlikely, but they can say, and do have the right to say no, so check this out before jumping in feet first.
Delivering cakes in your car or driving to pick up ingredients for your cakes from the supermarket?
You will also need to add ‘business use’ to your car insurance. And, if you have branded decals on your car – even magnetic ones – you need to declare that as a ‘modification to the vehicle’. Failure to do so can invalidate your insurance so make sure you are correctly insured.
You will also need business insurance. This needs to be both public liability insurance and product liability insurance. If you make cakes for markets, sometimes they require a higher level of public liability so just make sure you are sufficiently covered for your needs with your policy.
If you do not insure yourself properly and there was ever a claim against you relating to something you have baked, you could find yourself faced with a HUGE legal bill and you could potentially lose things of great value to you e.g. your house.
Insurance is not even that expensive. When you first start out, or as long as your turnover is under £8,500 you can get ‘umbrella’ cover via The British Sugarcraft Guild. Or it is also worth speaking to someone like Simply Business who will put together the best insurance policy for your needs. Not being insured, could be a very costly mistake further down the line so protect yourself and your business.
Mistake Number 3 - Not registering with HMRC
You will need to register your business with HMRC so that you pay any associated taxes from your earnings. You must do this once your yearly income from cakes reaches £1000. That is £1000 in turnover NOT £1000 in profit and it is illegal not to declare your earnings from a self-employed business and pay tax if necessary.
£1000 is not a lot to turnover. It is 10 x £100 cakes in one year. So, it is almost certain you will need to do this. There are plenty of free resources online to help guide you with your tax or you may want to consider employing an accountant.
You need to register with HMRC six months after the end of the tax year that you started to trade. E.g. if you start trading after April 6th 2023, you fall into the 2023/2024 tax year and you would have to register by October 2024 with HMRC. Your first self assessment tax return would have to be filed and any tax due paid in January 2025.
But don’t leave it that long to get your head around it . You should be reconciling your accounts monthly and there are plenty of digital tax software applications available online. You will more than likely start off trading as a ‘sole trader’ and not a ‘limited company’.
Mistake Number 4 - Not charging properly
I see so many cake makers and bakers massively undercharging for their work. Like, MASSIVELY!
Sometimes I wonder if they are even covering the cost of their ingredients and materials, the price quoted is so low.
The reason I think this happens, is four fold:
1) basic costs of ingredients and materials have not been calculated - they cost more than you think!
2) the cost of ‘time’ has not been taken into account - YES - you should be charging for all of your time - and not just minimum wage
3) there has been no thought given to profit for the business - YES - you need to add on profit for your business to be able to grow or for you to be able to invest in training or new equipment
4) there has been no thought given to calculating the costs of actually running the business e.g. utilities, website, phone, insurance etc - these cost money and should be charged for in the cost of your cakes.
What happens instead in most cases, is a price is just ‘plucked’ from thin air.
“That sounds about right”
“I don’t think anyone would pay more than that”
“I saw someone else charging x, so I am going to charge y”
“I’m new to this, so I’m just going to charge x”
But, what happens by doing this, is that you become known as ‘the cheap cake person’. People come to you because you are low cost. Not because they value your work or only want YOU to make their cake.
And the sad thing in many of these cases is…the cake makers in question are VERY talented. People would absolutely pay A LOT more for their work.
But, because they have started out ‘cheap’ it is going to be VERY difficult for them to ever charge properly. To charge what they need to charge to run a viable and successful business.
What will happen instead…is that when they come to file their first tax return, and they have worked 50 hours a week solidly for the last year with little time off, they will have made absolutely no profit for their hard work. Zero! In fact, they may even have made a loss.
Now, I’m not saying you can start out charging premium prices - because you can’t - you need to work up to that. But what you do need to do, is calculate your costs carefully taking into account : basic costs + business costs + time + profit - only then, can you calculate a price you are happy with for your cake.
If you are a cake maker who does not calculate these things and simply make up a price based on a best guess - STOP! You are setting yourself up for failure and you will not be a successful or profitable business until you change that.
If you need some tools to help you get to grips with pricing. Check out what I have on offer here.
Mistake Number 5 - Not properly researching your business name
Yes, you might REALLY like the name you have picked for your business. You chose it because it means something to you, or just because it’s cute, or because it’s named after your childhood pet, or your first born, or it’s your pet name for your partner…but…is anyone else already using that name or anything similar?
If the answer to that is yes, think VERY carefully before you use it.
You need to try and choose a company name that is unique to you to avoid any confusion or any legal issues further down the line.
Check Google, social media platforms and the trademark register for anyone else using a name you like before making a final choice. If someone is and they are already a well established business, pick another name. Particularly if they are geographically close to you.
That business will have every right to come after you to ask you to cease using the name as there could be confusion between you. You could be piggybacking on their success. You could be confused for them - getting enquiries not meant for you. And, if they have trademarked their business name, they can legally ask you to stop using it if it is the same or very similar.
So far, I have had to ask over 6 companies to cease using a name similar to my wedding cake business ‘Little Button Bakery’. I’ve had ‘The Little Button Bakery’, ‘Little Buttons Bakery’ and even an exact match ‘Little Button Bakery’. I have protected myself with a trademark and I have a legal email to send out to any company who tries to set up with a similar name to mine - and I check regularly!
Once you have decided on a unique name, you too, may wish to consider trademarking it so no one else would be able to use that name in the future. In the UK, a trademark lasts for 10 years but is only valid in the UK and it costs just a few hundred pounds. It is well worth doing. You can register your trademark here and you can check for existing trademarks here.
Be unique in your name and choose wisely - even though you might be new to your cake making journey - you don’t know where that journey will take you or where your final destination will be. Pick a name that reflects your end - not your beginning. And double check it’s not already being used - it is bad form to choose a name that someone else already has and is using.
Final thoughts…
If you are still calling yourself a ‘hobby baker’ and after reading this, you have realised you are in fact - not. Please put the necessary steps in place to run your business properly.
There is no point in spending hours of your precious time, making beautiful cakes to just give them away for free or very little return. Why don’t you want to earn money from your talent? Why don’t you want to be appreciated for your hard work? Even if you don’t need the money - you should be charging properly!
The entire cake community would be a much better one if everyone sang from the same hymn sheet.
If everyone charged properly for their cakes.
If no one was ‘the cheap cake person’.
Not only would we feel more valued for our edible art, customers would have a much better understanding of the REAL cost of a cake too. When some cake makers price cakes very cheaply - that’s what customers think they should cost. So when other cake makers try to charge properly and accurately, they are faced with a negative response:
“You are ripping people off!”
“It’s just a cake!”
“It’s just flour, sugar, butter and eggs!”
“I’m not paying that!”
Don’t be the ‘cheap cake person’.
Don’t be the ‘hobby baker’ when you are simply not.
Be the one to help lift the cake community up by educating yourself in how to price properly.
YOU deserve it and so do ALL of your fellow cake designers.
Food for thought?
Let me know. You can email me here.
Do you need a bit of help?
Have you joined my FREE Facebook group for cake business owners : A Bigger Slice - The Cake Collective? I’d love to see you there.