Hello everyone,

I am a very new user and I plan to start up a small business in baking cakes. I have NO IDEA how to price my cakes!

Does anyone out there have a step by step or general guideline as to how to put a cost on a cake.

I plan to sell cakes by slices but cannot get my head around the idea of costing!!!!

PLEASE HELP ME!! I’d be forever grateful!

xoxoxo

Well…it all depends.  This is a very complicated issue.  Are you opening a cake shop?  Are you baking from your home? Are you doing custom orders…or are you baking in bulk to have cakes ready for customers who walk in? 

You need to figure out your over head costs (ingredients, supplies, electricity, rent, etc).  and what you expect to earn for your time.  For most people baking with high quality ingredients, a custom made cake would cost much more than any one would be willing to pay…LOL…if they are being baked one at a time to order…except if they are very fancy and elaborately decorated special occasion cakes (wedding cakes etc). 

I know…this isn’t helpful…but you might want to check out cakecentral.com There are a lot of posts about this (if I remember correctly).

LadyRara - 13 October 2011 03:23 AM

Hello everyone,

I am a very new user and I plan to start up a small business in baking cakes. I have NO IDEA how to price my cakes!

Does anyone out there have a step by step or general guideline as to how to put a cost on a cake.

I plan to sell cakes by slices but cannot get my head around the idea of costing!!!!

PLEASE HELP ME!! I’d be forever grateful!

xoxoxo

I’d love to hear the amount you determine.

Good luck in your venture

It is really helpful to put together a spreadsheet that includes the cost of ingredients and how much you will need to make a particular cake.  It also needs to included decorating items such as dowels, wires, lustre dust, fondant, cake boards etc.  Cost out how much it will be for certain sizes of cakes on a cost per serving basis.  Different flavours and fillings will obviously have different amounts but you can come to an average amount.  This can then be your starting point of how much you want to charge per slice, adding on additional cost to cover your time (which won’t be very high if you want people to afford them). 

I hope that helps.  I have a spreadsheet that I have put together if you need help.

You mention selling cakes by the slice - in my experience there’s a lot of loss with this type of sale because once you cut a slice, it begins to dry out so packaging will be important and you need to factor that in.

There are different costing software programs out there but essentially it comes down to cost of ingredients, cost of labor, cost of overhead (including rent, utilities, insurance, packaging, marketing, etc).  You can’t be more expensive than your competition *unless you are doing something different that the customer considers worth the additional expense*, the market will self-correct after the initial honeymoon phase (people will buy from you because it’s a good product at a fair price and is easy to get; or they won’t buy from you because it’s too expensive for what you get, and it’s hard to get).  If you are doing retail versus farmers market or from your home selling wholesale, all of these factors will be part of your pricing model.

Write a business plan. 
This will help you because it forces you to think about your business from many different perspectives, not just the artistic one   Even if you don’t need financial backing from a bank, writing a business plan will help you organize your thoughts and help you prepare for or avoid the mistakes that many new businesses make.

Good luck!

LadyRara,

When I sold my cakes I spent a long time researching my startup and ongoing expenses, not just ingredients and hourly wage but also initial investments (pans, boards, tips etc) wear on pans, buying new tools as the old ones wear out, or perhaps a specialty design requires a new purchase etc. You need to start there. Done correctly, it should be painful and time consuming! That means you’re being thorough There are a ton of sites online that will help you find the number of servings per pan size, as I assume that is what you meant by selling “by the slice”. If I am mistaken kindly disregard my following suggestions! So, IF you are pricing your orders (entire cakes) by the serving you need a chart(s) and you need to stick with it. I use two, one for party cakes and one for very complicated cakes. Cakecentral is, as others have said, an awesome resource but remember, your local market dictates what you’ll be ultimately working with (or against) and also remember there are a wide array or talents there and everyone has an opinion on what is too little or too much some leaning one way or the other. You ahve to always do what is right for you in the end, and be able to take the suggestions you get and ultimately form your own opinion rather than just following to the “t” what anyone says is “right” to charge.

The next step is a market survey, what the other cake shops charge etc and how their product compares to your work. If you intend to stick around, you might want to avoid making enemies right off the bat by undercutting them especially ESPECIALLY if you are doing this out of your home and they have to charge more due to being legit. I personally don’t see anything wrong with “trying on” a business idea from home at first with friends, family and referrals from them, but if you decide to be a real business and compete with the locals for an extended more permanent amount of time you should consider applying for the applicable licenses/permits. Once again, only my opinion and I don’t know what your plans entail at this point, if that is already something you have done/planned to do but based on you being here asking about this I am going to guess you’re not to that point quite yet. You’ll get there!

Some other things to consider are mark ups/add ons. Consider the price point of a flavor change from vanilla with buttercream to fondant and the extra time it takes, or a buttercream filling to a blueberry filling or a design that requires a 4 layer 10’’ versus one that requires a carved cake which in the end cannot be easily priced by the traditional way when pricing by the serving amount of a particular pan size. What about hand modeling, gum paste/pastillage flowers (long hours and meticulous work if you’re like me and want each one perfect) hand painting, razor work and the like. Figure out how you feel about those tasks and how much extra you would want if they were added to a cake. Only you can decide that, or if you even want to have ad ons or just make inclusive prices. Trust me, cakes get complicated FAST especially when someone knows you’re good! Don’t sell yourself short and get burned out. I did, even though I learned my lesson quickly and corrected and eventually had a great booming cake business, I got so burned out I decided to stop. I was making good money too, but it is hard work, you know that of course. Just don’t sell yourself short.

Ok, enough ranting. I know not everyone will agree with everything I have said here and that is their right, but take it for what it’s worth from someone who had a successful business. This is just how I did it, in very basic rusty terms.

GOOD LUCK!

Jemoiselle
http://www.vanillaexpressions.com

Thank you so much for all of your suggestions and comments! I seriously appreciate it! It’s nice to know that there are people out there who are nice enough and willing to share their trading knowledge and experiences with others! :D

I have so much to do and learn! I’ve just realised I have still so far to go.

Thanks again everyone!

Warm regards,
Lady Rara

xxx

For me, pricing doesn’t have to be complicated. You just need to figure out your cost and establish your rate. I am concerned more on how to make the clients accept my price.
It calls for a knowledge on price presentation. :D

One thing most cake decorators do when starting out is VASTLY UNDERPRICING THEMSELVES, but this can create problems. Of course you want to get more business so you can get more experience. And if you are just starting out, obviously you won’t charge top dollar. But if your price is significantly lower than anyone else’s in your area, it will come back to bite you in the end. The first thing that will happen is that you will work so hard and then realize you aren’t really making any money in the end - maybe even losing money because you aren’t charging enough. And those people who got a fantastically low price will come back two years later and still expect you to have significantly lower-than-average prices. If you want to give a low price to get lots of business (until you gain experience), tell people that you are offering a discount to first-time customers to encourage business. Make it clear that they are getting a deal that they may not get every time.

When starting out, I once lost an order because my prices were too low! She thought my competitor must be better since her prices were higher. After I saw the finished cake (for which she paid almost double what I had quoted her), I realized that I could have done it better. So I should have charged more, because I could have delivered on that price point.  That was when I decided to stop undercharging.

There will always be people who can’t believe the price of high-quality, custom-made cakes. For those people, there is nothing wrong with going to the store to get a birthday cake, and I don’t pass judgement on that. But I would rather not have the orders than to bust my rump making custom desserts from top-notch ingredients and barely break even at it.