So you’ve decided you want have your own cake business. You have your company name. You've thought about writing a business plan (my advise, do that first). But you're stuck on how much do cake bakers earn? You start to question if you will you be able to ‘give up the day job’ and do this for a living? The answer is YES, you can do it for a living, but you must learn to value your time and price you cakes right.
Now pricing, it isn’t glamourous or interesting. And to a cake artist who wants to be creative and run their own business it is often difficult and frustrating. But to make a living you need to do this! You need to go through a process of costing everything out or you will end up either working for free, or worst still paying the customer to make their cake! You may think ‘cheap’ will get you more orders, but as the saying goes, you’ll just be a ‘busy fool’.
I’m writing this blog post after getting into a discussion on a Facebook group earlier today. There was a question by a relatively new cake maker who asked if charging £15 above the cost of ingredients was going to be ok? So many people answered, some with good advise, amazing advise in fact, but some were getting their profits mixed up with their costs, and giving advise that quite frankly scared me a little – because they just weren’t valuing themselves properly, and ultimately undervaluing the professional service of making hand-baked, bespoke cakes. To earn a professional cake decorators salary, you have to act like a professional. You have to arm yourself with all the information to work out your average wage, your hourly rate, and how much profit you want to earn.
Where do you even start?
Firstly, Cost of Sales or variable costs. Put simply, this is the components and ingredients you need to make your cake – ingredient costs, cake boards, packaging costs etc. This is the first and most basic thing you need to look at before pricing a cake.
Regularly, I do it at least once a month, look at the cost of the things you buy. Divide it into the amount you need for the cake, add all the components up, and there you have your cost of sales.
As an example, if you pay £1.50 for a 250gm block of butter and use 50gms, you have spent 30p on butter (£1.50 divided by 250gms = 0.006p per gram multiplied by 50gms equals 30p).
Don’t forget, if you are buying online and have delivery costs, these need to be split between the goods too. You really need to add all the costs in, no matter how hidden you think they may be.
You can either do this will a good old notebook and calculator, or maybe if you’re a bit more tech savvy get a spread sheet going. I personally use Cake Boss which is an online app that has this as part of the package. I simply put in the cost of my ingredients, and my recipes, and it sorts it all out for me.
However you work it out, make sure you do. Never miss this stage!!
Secondly, there are your overhead costs
Overhead costs are ALL the things you need to run your baking business but don’t actually get put in the cake – mobile phone, website, marketing and advertising, insurance, etc etc etc. These can also include any monthly subscriptions you have to training or magazines etc. As home bakers we must also include power and utilities to ensure everything is covered. I’ll explain how to charge for these in a moment, but for now write all your overhead costs down and how much they cost you every year.
A customer has to pay for you! And this is often where everything falls apart.
Rarely do cake makers value themselves properly. They see their time either as incidental or as profit. It is neither. It is a cost!!
Let me explain. If you were employed as a cake designer at a cake shop you would earn an average hourly wage or at least minimum wage. In the UK there is a legal minimum hourly wage of £10.42*. This wage is a cost to the business owner.
For some inexplicable reason, when we work for ourselves we think it’s ok to either not pay ourselves, or accept being paid below minimum wage – why? I have heard so many reasons over the 10 years I’ve been doing this from ‘I’m just starting out’, ‘I’m not experienced enough’, 'other local bakers are cheaper then that', to ‘people in my area just won’t pay that’…..more on that last excuse later!
The fact is, you must be paid for your time or you are just being busy for busy sake. If you want to go further and earn a living, you HAVE to pay yourself!!
But how do you work out how much to pay yourself?
Another mistake I see a lot of cake makers making is charging JUST for the time they spend with their hands on the cake. In a cake business you do much more than just make cakes, you go shopping for ingredients, you reply to emails, you post on social media, you spend time educating yourself, you spend time delivering cakes. All this hard work should also be billable.
Here’s how I work it out.
Caveat; I’m not an accountant, I’m a cake maker. But this is how I work out my hourly rate to ensure all my time and overheads are covered. There are other ways of doing it, by putting your overheads as a separate cost and that works just fine! However you do it, just make sure you charge for everything!
Firstly, work out how hours of work you want to do in a year.
I consider that I work full time around 35 hours a week. I have decided I will take 4 weeks holiday a year, leaving 48 weeks to work. So that’s 35 hours a week x 48 weeks a year = 1680 hours worked per year.
I decide (to make it easier for this blog post) I want to earn minimum wage of £10.42 hourly pay.
1680 hours worked x £10.42 = £17,505 annual salary
(Remember you won’t take all this home, as you’ll need to pay tax and national insurance, so if you need to earn more you will have to adjust your initial hourly rate.)
But, I estimate I will only be baking and decorating for 20 hours a week. The rest of the time I’m doing admin, learning new skills, posting on social media, sorting out my marketing, shopping for ingredients etc. Actual baking time of 20 hours a week x 48 weeks per year = 960 hours per year, that are directly billable to a customer/cake.
Which means we need to adjust the hourly rate because I have 720 hours a year that I can’t directly ‘bill’ to a customer, but I still need to be paid for.
Are you still with me?
On top of that I have to cover all those overheads I was working out earlier – insurance, phone, website etc which I am going to round up to £4000 per year for this blog post……and here we come to the final calculation.
£17,505 (my annual salary) + £4000 (my overhead costs) divided by 960 hours (billable time) = £22.40 per hour
My hourly rate, that I add to the cost of a cake is £22.40.
Note: You can come at it from a slightly different angle, but it will need you to be confident in who you are and know how much money you want to earn. Instead of multiplying an hourly rate by the hours you work. How about setting out what you want your annual salary to be and dividing by the hours you'll work? Personally I favour this way of working, but I have 13 years experience. I have been in the baking industry for a long time and I am confident in what I am doing. If you have the confidence, then set your annual salary according to the experience you have. That's how it works in the 'employed world'.
Now, I know this sounds scary. I know you are probably sitting there thinking ‘I’m not worth that’, but if you want to earn a living, you are and must be!
You may decide that you are worth more than minimum wage – I do. I have been doing this for over 10 years, I am skilled at what I do, I am educated at what I do. I make unique cakes. I have spent hours and hours practising to get to where I am today. I am definitely worth more, and I hope that you think you are too.
Read this post for more information about Paying yourself a regular Cake Maker Salary.
How do you price a cake?
For each and every cake you need to work out how many hours its going to take you to make – you won’t always get this right but this becomes easier as you get more experienced.
Multiply those hours by your new Hourly Rate and add the Cost of Sales.
A cake takes 2 hours to make, and the cost of ingredients are £10.
2 x £22.40 + £10 = £54.80
All your overheads are included as a proportion of your time, all you time is covered and all your costs are covered.
How do I make a profit?
If you want to make a profit, you can add a percentage. Remember profit is not your wages, profit is not a cost, profit is extra. I put an extra 10% profit margin on top of all my cakes, and then when I get a payment I move that 10% to somewhere and save it.
Why do I do this? Say for example my oven blew up tomorrow, or I needed a new mixer, or I saw a book I really wanted. That little stash of ‘profit’ is there to pay for those things. I don’t have to dip into my wages for something that is business related, I make my business pay for it out of my profit margin.
But people in my area won’t pay that
Let’s get back to that excuse. Firstly, if they won’t pay it then you’re marketing to the wrong customer, and I recommend you go and read our blog post on Ideal Client.
Secondly, other people won't ever value you if you don't value yourself. If you continually undercharge your customers they will think that is how much a custom cake, made for their special events costs. And quite frankly why shouldn’t they if they’re never told anything different.
I believe there are many cultural and social reasons that cake makers, who are predominantly women, feel they can’t charge their worth. You wouldn’t find as many plumbers or mechanics (predominantly men) worrying about what they’re worth. But then I guess that is a WHOLE other subject.
If, as cake makers, we continue to undercharge, we continue to perpetuate the value of what we do in our customers minds. If we start to value ourselves and act like a professional cake baker, our clients will be educated in just what it takes to make specialty cakes, and they will start to value what we do! And that's how you can earn a living making cakes!!
*National minimum wage in 2023
For more information on Cake Pricing read:
Preparing and Sending Cake Quotes
5 Things to Remember when Quoting Cake Prices
5 Ways to Have a Successful Cake Business.
Advertising Your Cake Pricing
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