In 2010, Liz Kovacs made a big business decision. She opened her own storefront in downtown Bellingham. And while opening a shop devoted entirely to cupcakes may sound risky to some, Kovacs felt confident that opening a shop was right for her business.

That confidence grew from experience. Kovacs didn’t just jump blindly into a store of her own. Before opening the Icing on the Cake, she tested her product, gained exposure, built a customer base and determined demand, all while earning a profit. Kovacs got her start selling cupcakes at the Bellingham Farmers Market beginning in 2006.

“It was the safest way to start a business, to see if Bellingham wanted cupcakes,” Kovacs said. “If it didn’t work out, people didn’t like it, then I didn’t have to take it further.”

But it did work out, and after four years of selling at the market, Kovacs realized it was time to open her own cupcake shop.

“We got to a point where you either grow, or you stay the same,” Kovacs said.

To grow, Kovacs needed to give customers access to her product six days a week, rather than just one, she said.

Kovacs isn’t the only Bellingham Farmers Market vendor to reach that conclusion. In the past few years, at least three other businesses that started out at the farmers market have moved into their own storefronts: Texture Clothing, Bellingham Pasta Company and, most recently, Brandywine Kitchen.

All of those businesses got a good boost at the farmers market, which attracts thousands of people most Saturdays.

“It was safe, low overhead. It’s a good little trial,” Kovacs said. “And you had the largest audience there.”

Serving startups

In the high season, an average of 2,500 people visit the Bellingham Farmers Market each Saturday, said Caprice Teske, Bellingham Farmers Market director, and the market takes care of the advertising.

That kind of exposure is especially helpful to small startups, which have limited, if any, advertising dollars.

“To get that kind of base, you would have to use a whole lot more advertising,” Kovacs said.

And the cost to vendors is relatively low. Saturday market vendors pay yearly fees of between $125 and $145 and fees each day they set up of either $30 or a percentage of their sales.

“It is probably the least expensive piece of real estate in Whatcom County or Bellingham that any small business person could get access to,” said Marv Fast, co-owner of Red Barn Lavender and president of the Bellingham Farmers Market board of directors.

It also attracts a wide range of people, from tourists to locals purchasing their weekly produce, grabbing a bite to eat or perusing local wares.

“It gives a small business a chance to be in a hub of exposure,” Fast said. “And where are you going to find that all in one place? It’s a really powerful location.”

Farmers markets serve as a sort of incubator for startup businesses, said Tom Dorr, director for the Center for Economic Vitality, an organization that supports local entrepreneurs.

One of the keys to starting a business is validating assumptions, Dorr said. At the market, entrepreneurs can determine whether there is demand for their products and what customers are willing to pay. They can also gain an understanding of their competition and learn how to separate their products from others.

“You can also play with different marketing strategies,” Dorr said, explaining that the market is a great place to test different types of packaging to see what sells and what doesn’t, and to test perks, such as frequent buyers’ cards.

“The farmers market is a great place to get feedback from a lot of people in a short, concentrated way,” Dorr said.

At the same time, entrepreneurs can determine whether their products can earn them a profit and whether it is possible to expand their businesses. But most can’t expand their businesses to the point of making a living if they stay within the safety of the farmers market walls.

An evolving business model

Someone who produces bread and wants to make a living selling bread won’t just make a living selling at the market, Dorr said. Farmers markets are a natural first step for producers, but entrepreneurs need to have a plan for the future, he said.

Producers who want to make a living, depending on their target markets, would be more successful selling at the farmers market and opening their own shops, Dorr said.

When Kovacs moved into her shop, her business more than doubled, she said, a fact she attributes to having a storefront. But opening a shop isn’t right for everyone.

Teresa Remple, owner of Texture Clothing, began selling clothes at the market in 2002, a year after starting her business. The inexpensive marketing and the market manager at the time helped Remple build her business and her confidence, she said.

Starting out at the farmers market was one of the best things Remple could have done for her business — if she hadn’t started there, she would probably be out of business, she said.

Remple was the top-selling crafter at the market for three years and saw her highest sales in 2008. In 2009 she opened her own shop downtown on North State Street. She manufactures and stores clothing downstairs and has a retail space upstairs.

It would seem like an ideal set up for Remple, but the move wasn’t as fruitful as she had hoped. Two years after opening, the retail store is just starting to break even, she said.

“People are starting to know that we are here,” Remple said.

But Remple hadn’t put all of her eggs in one retail basket. She continued selling at the Bellingham Farmers Market until 2010, and she continues to sell at festivals. Her online sales and wholesales have increased over the years and carried her business though its two-year slump.

Remple said the retail space’s shortcomings may be attributable to a few factors. First off, she doesn’t do much in the way of advertising — she markets through blogs, word of mouth, Facebook and an email list. Secondly, the recession has been rough on clothing stores. Lastly, the 1,600-square-foot retail space she chose is too large for just her clothing business. When she moved in, she had intended to share the space with another business, which didn’t happen.

It doesn’t make sense to have such a big retail space with relatively little foot traffic, Remple said.

“The rent is so high,” she said. “I am just working, working all the time just to pay for it.”

When her lease is up in the spring, Remple will probably either move to a facility with a smaller retail space and lower rent or sell the retail portion of the business, she said.

Remple’s experience isn’t unusual. Once a farmers market vendor decides to take the plunge and move into a storefront, they could be challenged to get the same number of people in the store that they had at the market, Dorr said.

Market vendors see a lot of wanderers who visit the market for the experience, not necessarily to buy from a specific vendor. When producers move away from the cluster of vendors and into their own shops, they don’t get as many happenstance customers, Dorr said.

There are resources, such as the Center for Economic Vitality and the Small Business Development Center, that will help businesses determine whether moving to a storefront is right for them.

In most cases, though, even if vendors take the plunge and open a storefront of their own, Dorr said they should continue to use the market to test products and marketing strategies and to reach a customer base they may otherwise never see.