Many people find pricing their cakes hard.....really hard!! It's actually one of the things I see queried the most in cake business industry. It really doesn't have to be though. With a few boundaries in place, and knowing your costs you'll soon be quoting cake prices with confidence.
It's not just your costs with a bit extra. It's YOU!
Many people, when preparing their cake prices add up their costs, and bung a bit on top for themselves. Whilst this will make you a little bit of cash, it won't set you up to run a sustainable business.
Running a sustainable business means you have to be happy within it. If you're not being valued and paid enough you'll soon get tired and frustrated.
What you need to remember is that you are preparing, baking and decorating a handmade, bespoke product. It's a one of a kind! If you were to buy a one of a kind piece of gold jewellery would you expect to pay the cost of the gold plus a little bit? Absolutely not! You expect to pay for the expertise, talent and reputation of the goldsmith.
What you are selling is an exclusive item, that only you can make. Sure there are other cake makers, but they're not you. Only you make cakes with your style and flair. By pricing your cakes to reflect the value you bring to the product, you are setting the level of quality you will be known for.
If you want to be known as the cheap cake maker, then sure go ahead and price low. But if you want to be known for the value you bring, set that in your pricing.
But don't forget your fixed costs
Another big problem I see often is only costing the direct ingredients and components - for accounting purposes known as 'Cost of Sales'. These items are the costs you directly incur by making the cake - ingredients, boards, boxes etc.
But what about your other costs? Your petrol, utility bills, phone, broadband etc - known as Overheads. These all have to be factored into your cake prices.
I understand this sounds complicated. However it doesn't have to be.
What I personally do is add up my monthly costs (or percentages of the costs if it's my phone and utilities etc) and divide by the amount of hours I work in an average month. That will give me an hourly overhead charge.
Then when working out the time I'll take to make a cake I add the hourly overhead charge to each hour I'm quoting for.
For example, if my overheads are £150 per month and I'm working 75 hours a month, I'll divide £150 by 75, which equals £2 per hour. Then if a cake is going to take 10 hours, I add 10 x £2 = £20 to the cake price to cover these overheads.
It's not a completely accurate calculation, but it's closer than not doing it at all!
Calculate your time accurately
This comes with practice and experience. Initially this is one of the hardest things to calculate, but with experience it will get easier and easier to calculate your time for your cake prices.
Wherever you are on your cake business journey why not try making a note of all the time you spend making each cake. From the second you put on your pinny, to the moment you put your feet up with a cuppa. Jot down ever single minute.
Even if you have been making cakes for a while it is a great exercise to double check your timings. You may be surprised. I have in the past estimated a cake will take me 5 hours, but in fact it has taken me 7. I was convinced 5 would be enough, but even working efficiently and quickly I would not have done it in less than 7. Had I not actually jotted down all the time throughout the process I would have always believed it had would take 5 hours. And next time a similar cake came my way I would again charge for just 5 hours. Sometimes, you need it in black and white to believe the facts.
The more you time check your work, the more accurate you will be when quoting cake prices.
Add a bit for Profit
I've said this in other posts, and I'll say it again. Your time is not your profit. You time is your wages. Profit is the extra on top.
Profit is what you can reinvest into your business. It can pay for courses, training, a new oven, equipment etc. Maybe even at the end of the year a little bonus for yourself. Profit is above and beyond you costs and wages.
Think about it like this - if you were working for a big business they would pay you a wage. They also pay all their costs. And then on top of that they declare their profit - the extra they've made. This is then either paid as dividends (bonuses) to their share holders (owners) or re-invested into the business to make it better.
If you are to run a successful business, you have to think in the same way as a big business.
Always add a percentage for profit on top of each cake price. There is no right or wrong amount to add, it's whatever you feel comfortable with - even if it's just 1%. Put that profit to one side, every single time you receive a payment, and then use it for making your business better.
Consider a minimum order amount - set boundaries
Setting a minimum order amount on my cake prices revolutionised my business. One day I realised that my bespoke cakes took not only time to make and decorate, but hours on admin before I even turned my oven on.
Therefore, I decided that Bespoke Cakes would come with a minimum order value of £150. I state this all over my website, and on my first replies back to any prospective clients. If a client doesn't want to pay £150 the enquiry goes no further and no more of my time is spent on admin.
I now know that all my cakes will be worth the time of the emails and messages going back and forth.
It also set boundaries in my own head. No longer am I wondering if a cake should be £55 or £60. Those extra few pounds make a difference at that price and used to go round in my head for ages. I would then wonder 'did the extra £5 put the potential customer off?' or 'was I being too greedy asking for a little bit more?'.
No I wasn't being greedy, I was setting boundaries and respecting myself enough to only work when I'm being paid enough.
Of course you don't have to jump in at £150. But try putting in a minimum that is slightly more than you would usually charge for your least expensive cake. It really is quite liberating!
Or listen to the Podcast Episode on Pricing.
If you want to learn more about running a cake business read my Essential Guide to Starting a Cake Business and 5 Ways to work ON your Cake Business and not IN it