Guest Post by Pia Cato
Pricing! It can often be bane of many cake makers lives! But it doesn’t need to be. Honestly. Whether you have just started out or you have been making cakes for a while. Pricing a creation that you put your heart and soul into can often be a challenge.
You love creating cakes. If you had your way you would give them away for free forever and ever! But you have decided to turn your cake passion into a business and giving your creations away for free simply isn’t viable anymore. You need to be able to confidently price your cakes so that you can create the cake business you have dreamt of.
So how do you price your cakes and make money at the same time. By following these five steps below you will be well on the way to pricing your cakes for profit.
Step One: Work out the timing
In order to price your cakes effectively you need to know in detail how long each one takes to make from start to finish. Without completely understanding this aspect you will be literally plucking a price for your cakes out of the air! So make a note of everything. Do not guess! Record everything. From how long it takes you to mix, bake and decorating the cake, to washing up, invoicing for the order, shopping for the ingredients and more. Everything you do to create your cake, make sure you record the time it takes.
Step Two: Decide how much you want to pay yourself
Next decide how much you want your salary to be each week/month/year. Then work out an hourly wage. Do you want to work for minimum wage (currently at £7.20) or do you want to work for £30 per hour. There is no right or wrong answer. Each business, wants and needs are individual to the business owner.
Step Three: Ingredients, Supplies and Utilities
Record how much it costs to make each type of cake you create. How much do your ingredients and supplies cost? How much gas, water, electricity do you use when creating each cake? Again do not guess. Every penny counts. Go into detail and work out the exact costs for each recipe and for each of the different size cakes you create.
Step Four: Add a profit percentage
This is a vital step to add if you want to grow your business. Many cake businesses and small business owners miss out on this step. They often lump profit and wages in the same field. Then wonder why their business is not growing. You need a pure profit percentage in order to invest it back into your business and move it forward. The wage is the reward/earnings for creating the product. The profit is to help the business grow. What type of profit do you want your cakes to have? 2.5%, 5%, 10%, 40% or more? Again there is no right or wrong answer. I say start with a number that is comfortable for you and build it from there. The important thing is to have a profit percentage.
Step Five: Calculate Method
The final step is to calculate it all. Do this for each type of cake you create.
- Take the timings it takes to make this cake from start to finish (include everything!) then multiply this with your hourly wage.
- Calculate the cost of the ingredients, supplies and utilities. Add this number to the number above.
- Then work out your profit percentage.
- Add the profit percentage to your ingredients, supplies, utilities and labour total.
- You now have the price for this cake.
You may also find these articles helpful too;
- Simple steps for creating a business plan for your cake business.
- Legal check list for your cake business.