Have you ever wondered how to start a cupcake business?

Making and selling cupcakes can be a rewarding and profitable career. We interviewed Mignon Francois to find out how to start a cupcake business with just $5 and sell more than $10 million worth of cupcakes.

First, we’ll give you some background information about the cupcake industry to help you decide whether it’s profitable enough for you. Then we’ll provide more information about Mignon’s business, The Cupcake Collection. 

After that, we’ll discuss how to start a cupcake business and answer some frequently asked questions. You can either keep reading or click on any of the links below to jump to the section that interests you:

Learn About the Cupcake Industry

Is a cupcake business profitable?

Yes, a cupcake business is profitable. According to market research done for the UpFlip Academy, the average cupcake business makes $1.9M annually with a 5.4% profit margin. 

That means that the average cupcake business should expect to make approximately $102,600 in profit. However, it will normally take several years for a successful cupcake business to make this much.

How much does it cost to start a cupcake business?

The cost to start a cupcake business is normally around $30,000. That includes the costs to get a food truck or retail location along with the business licenses, equipment, and ingredients you’ll need to start a cupcake business.

For those of you who are wondering how to start a cupcake business with no money, we’re about to tell you. In fact, our featured cake business only cost $5 to start.

Perform market research

You’ll need to know more about the industry than the questions we answered, but selling cupcakes is a highly segmented local business. You’ll need to research the competitors and pricing in your area to fully understand the business model.

Mignon told us:

Food Business Case Study: The Cupcake Collection

Mignon Francois started The Cupcake Collection with just $5 during the 2008 recession. She had sold everything she owned and moved to Nashville but was struggling to pay the bills. She told us:

Mignon kept reinvesting the money and eventually got to the point where she could expand to start taking online orders that she ships to other locations. After her success in Nashville, she opened a second location in New Orleans. Check out our interview with her below:

Step #1. Choose a Cupcake Business Format

There are several different ways to structure your cupcake business. You may decide to change your business model as you expand and grow.

Cupcake Counter

Some cupcake shops rent a small retail space with a counter and a display case. This type of location is cost effective for a retail space because you need less square footage than a shop with a dining area.

Cupcake Café

The most expensive cupcake businesses have a retail store with tables for customers to eat. This structure is more expensive because you need a larger retail space. The extra costs can be offset by selling other food and drinks to earn more revenue.

Cupcake Food Truck

A cupcake food truck can sell to people in more places because it’s mobile. You can go to busy office buildings, carnivals, and street fairs.

Buying a food truck is less expensive than renting retail space, but it doesn’t have as much space for you to work. You may want to rent a kitchen as well and just sell completed baked goods from your truck. Learn more about how to start a food truck.

Home-Based Cupcake Business

A home bakery is the least expensive way to start a cupcake store. You won’t need to buy retail space or a food truck, but you’ll be limited by the capacity of your oven.

This is how many small businesses start. Then they invest in a food truck or retail space once the business is thriving.

You can offer pickup and delivery options with a home business, but be careful about having too much traffic. Many neighborhoods and apartment buildings will object if you have too many visitors.

You can also make deals with coffee shops and farmers markets to sell your cupcakes there. Check out our blog about home-based businesses for more tips.

Step #2. Master Your Recipes

You’ll need to master at least one good cupcake recipe to start selling cupcakes. You can figure out other recipes later, but it’s easiest to start a business when you’re focused on one product.

Step #3. Set Up Your Business

When you’re thinking about how to start a cupcake business, there are a few tasks that are either very helpful or required by law. Let’s discuss each in greater detail.

Write a Business Plan

You’ll want to create a cupcake business plan to help guide your decision-making about how to start your cupcake business. Make sure to include the following sections in your business plan:

• Executive summary: This is a summary of your overall food business plan.
• Company overview: Create an elevator pitch that explains what makes your company different from the rest of the industry.
• Market analysis: Share your market research and save the data in the appendix. This helps people see that you know how to start a cupcake business and what the market looks like.
• Business organization: Provide an organizational chart and related information to help people understand how you will operate your food business.
• Products and services: Explain the types of cupcakes, other food items, and services you’ll provide. Use pictures to really capture attention in a presentation to potential investors.
• Marketing plan: Walk through the step-by-step marketing strategies you’ll use to help people discover your food business and become loyal customers.
• Financial projections: Create financial projections for three to five years and create tables to read to help people understand how your food business will be profitable. Make sure to document all your assumptions.
• Appendix: Provide all the documentation you have from your research about how to start a cupcake business. This helps people verify your assumptions if you’re getting a loan.

You don’t need to have a business plan to get started. Mignon didn’t. However, it will help you stay on track and pursue loans if necessary.

Choose a Business Name

You’re going to have to come up with a bakery name for your cupcake business. When registering your business name, research it by checking: 

• Your state’s business records 
• Federal and state trademark records 
• Social media platforms

Try our business name generator for more inspiration.

Choose a Business Entity

You should establish your cupcake business as a legal entity apart from you. The most common business structures are as follows: 

• Sole proprietorship: With this structure, you and the business are the same legal entity. You’ll pay taxes on profits on your personal income taxes.
• Partnership: A partnership is when you and another person operate the business together. You’ll each pay taxes for the business as part of your personal income taxes.
• Limited liability company (LLC): An LLC is a separate legal entity. This means that your personal assets are protected if your company gets sued. 
• Corporation: A corporation is another type of separate legal entity where you can sell stock. You’ll need to file articles of incorporation to start this type of business. 

When deciding on how to legally structure your cupcake business, you need to look at how complex it is, how many owners it will have, and your business goals. Be careful when considering whether to take on a business partner. Craig Watson, the founder of Baked Cravings, had this to say:

Get the Appropriate Licenses and Permits

You need to get business licenses and permits to start your cupcake business. Check with your local county to understand what requirements they have for a new business in the food industry. Then follow the licensing requirements set by the state you live in. 

Each state has a dedicated website that outlines the business registration process. You could end up paying massive fines or even have your business shut down if you run a business without a license.

One thing you’ll need to do is get your cupcake business inspected by your local health department. You’ll also have to get a certificate of occupancy if you’re planning to sell your cupcakes in a brick-and-mortar store. An occupancy certificate verifies that a space conforms to all zoning laws, building codes, and government regulations.

It’s normally the landlord’s responsibility to get this document when you’re leasing a space. Make sure your landlord secures a valid certificate for a food business before signing a lease. Most legal experts recommend including language in your lease agreement stating that rent starts after receiving the certificate of occupancy.

Get an Employer Identification Number

You’ll need to register for a variety of state and federal taxes before you can open your cupcake bakery. To register your business for taxes, you’ll have to apply for an employer identification number (EIN), which is free to do.

You can get your EIN through the Internal Revenue Service website. 

Open a Business Bank Account

The next step is to open a business bank account. Using a dedicated banking and credit card account will protect your personal assets.

Learning how to build business credit can help you get credit cards in your business’s name (instead of yours) and secure better interest rates with higher lines of credit. It also makes accounting and tax filing for your business so much easier.

Good companies to get a business account with include Wells Fargo, Capital One, and Chase.

Get Business Insurance

To operate your cupcake business safely, you’ll need to get insurance. Insurance protects your business when coverable losses occur.

If you’re not sure of the types of risks you might face as a seller of cupcakes, ask an expert like an attorney. If you don’t want to do that, get general business liability insurance. This is the most common type of coverage that small businesses need.

We suggest using Simply Business to find the best rate across multiple providers.

Step #4. Find the Right Location

Next, you’ll need to choose a location for your cupcake business. We’ve already discussed each of these options in more detail, but you can choose from:

• A home business
• Brick-and-mortar stores
• Delivery trucks 
• Food trucks 

Learn more about choosing a business location. Mignon decided to start with the home route, then added a food truck and other locations over time.

Step #5. Brand Your Cupcake Business

You should brand your cupcake business to help it stand out. Consider how the name, logo, colors, font, and communication work together to present the story of how you created your business.

Branding needs to stay the same across the following areas:

• Website
• Social media
• Packaging
• Product names
• Decor
• Flyers
• Store signage

You want the branding to work for you so that people instantly recognize the name or logo.

Step #6. Secure Business Funding

You’ll need some money to start a cupcake business. The costs vary based on whether you want to start a retail business, a food truck, or a home-based business.

• Home food businesses: This option is the least expensive. It’s how Mignon started The Cupcake Collection with only $5. 
• Food trucks: It will normally cost between $20,000 and $100,000 to start a cupcake business as a food truck. The main costs are the equipment and the truck itself. 
• Full brick-and-mortar store: A retail business will likely cost over $100,000.

You can get the startup costs from savings, friends and family, or business partners. If none of those work out, you’ll need to look into financing. Learn how to get a $100K loan.

Step #7. Start Marketing Your Own Cupcake Business

Marketing will help you spread the word about your cupcake business. Some of the best ways of marketing a cupcake business include:

• Giving free samples: Free samples are a great way to introduce potential customers to your cupcake business.
• Social media: Sharing information about your cupcakes on social media is another excellent strategy to spread awareness. This is especially helpful if you offer specialty decorating.
• Creating a website: You’ll need a website to help people discover your food business. Learn about creating a website.
• Google Ads: Any local business owner should consider including Google Ads in their marketing strategy. 
• Business cards: You can hand these out to people in your community.

If you need help with Google Ads, sign up for our Google Ads for Beginners course in the UpFlip Academy.

Cupcake Business FAQ

How to start a cupcake business from home

To start a cupcake business from home, you’ll need to make sure local laws and your homeowners association allow home businesses. Assuming they have no regulations against home-based businesses, you’ll want to follow the process below:

1. Master your recipes.
2. Start your business legally.
3. Get supplies you don’t have.
4. Set up your home kitchen.
5. Brand your cupcake business.
6. Start marketing your cupcake company.
7. Serve customers.
8. Get a food truck or commercial location as demand and revenue grow.                                                                          

What equipment do I need to cook cupcakes?

If you want to operate a cupcake bakery, you must first purchase equipment and cupcake business supplies. You can get terrific deals on this stuff at Aaron Equipment Company and WebstaurantStore. 

Here’s some of what you’ll need:

• Commercial mixers
• Wooden spoons 
• Rubber spatulas 
• Baking pans 
• Cupcake molds 
• Decorating bags and tips
• Mixing bowls
• Nonstick cupcake trays 
• Digital scales 
• Cupcake cooling racks
• Measuring spoons 
• Cupcake display cases 
• Cupcake stands 
• Carryout boxes
• Containers

Final Thoughts

Starting a cupcake business isn’t that hard. However, making six figures with a cupcake business requires the ability to make tasty creations and creative designs.

You’ll also need to offer impeccable customer service and have the perseverance to stick it out in a competitive market. Mignon’s story shows that it can be done, and you can do it too!

If you’re planning to start a cupcake business, are you going to have a storefront, a food truck, or something else? Let us know in the comments!