Many people dream of starting a baking business, but once they look into it, they find that the costs of opening a traditional bakery can be prohibitive. The solution could be to start a home-based bakery. Though you may have delicious recipes and expansive baking knowledge, there are many things you need to consider before trying to start a baking business from home.

Step 1.

Make sure you live in a state or county that allows the operation of home-baking and food businesses. The 11 states that currently allow this are Utah, Iowa, Tennessee, Virginia, Ohio, Kentucky, North Carolina, Maine, Pennsylvania, Vermont and New Hampshire.

Step 2.

Call your state's department of health to see exactly what renovations you need to begin using your kitchen as a commercial bakery. In most areas, you must separate your kitchen from all living areas with a solid door, and cannot use the kitchen for both commercial and personal use--you'll have to cook food for your family in another area.

Step 3.

Decide exactly what your baking business niche will be. For instance, you can make and sell artisan breads, bagels, ethnic pastries, wedding cakes or gourmet cupcakes.

Step 4.

Obtain the permits your area requires to operate a food business. Depending on where you live, this may include an employer identification number from the IRS, a state tax identification number, an assumed name certificate, a food enterprise permit, food handler permits and food manager certification.

Step 5.

Decide where you want to sell your baked goods; most areas won't allow you to retail it from your home. Consider selling at local farmers markets, online artisan markets such as Foodzie or Etsy, events and festivals, flea markets, wholesale to independent grocery stores, gift shops or restaurants.

Step 6.

Develop a menu of offerings for your baking business that includes unique or custom flavors--this will differentiate you from your competitors. For example, if you plan to sell gourmet cupcakes, you can offer uncommon flavors such as champagne and mojito in addition to the standard flavors like chocolate and vanilla.

Step 7.

Purchase FDA-approved food packaging for your baked goods and wholesale baking equipment.

Step 8.

Promote your home-based bakery business by launching an informational website or blog that lists your contact information, the venues where you sell your baked goods, wholesale order information, a price list and other information about your company. You can also hand out samples at local events and list your bakery business in online and print company directories.