The Easy Guide to Cake Pricing
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Kirsty is a baker turned branding and website designer for small and home-based baking businesses. She’s also the guru behind Cake Pricing Plus, a baker’s dream tool for pricing cakes quickly and simply with an interactive cake pricing calculator! Check out her website at www.bakethishappen.com. Today, Kirsty’s sharing some of her best cake pricing tips with you. Over to Kirsty!
Cake pricing is often the trickiest part of running your baking business. Decorating skills can be mastered with YouTube videos, books can be bought to help you with your accounting but accessing resources about cake pricing is difficult.
The problem with pricing cakes, baking, or really anything that a business makes and sells, is that there are so many different factors to consider. You have to think about:
- The cost of ingredients
- Accounting for all of your time
- Putting a value on your skills
- Your competition
- Your target customer’s budget
Don’t panic and let that list freak you out though! What you need to get a handle on cake pricing is a strategy. So let’s take each item on the list and go through how to quantify and value it, step by step.
This is one of the simpler items on the list, so it’s a good place to start. Think about the complete process you go through when someone places an order with you and make a list of all of the things you buy to create the final product.
Look through your recipe and add up how much the ingredients cost, then think about everything you use to decorate the cake or package up and present the item for sale. Adding together all of the different pieces of the product will give you a cost price for the item.
Your Time & Value
You time is split into two elements – your hourly rate and the time it takes to complete one order. Start with adding up your time per order. Don’t forget to add up the time speaking with the customer, sketching and planning the item, shopping for ingredients, baking, packaging and delivering.
Giving your skills an hourly rate can seem like a challenging thing to do, but start by looking at minimum wage, then how much bakers and decorators are paid in your area. Don’t forget to consider any training you have and what level of skill the item takes to produce a certain product.
This is the cost of all of the other items you spend money on in your business, that aren’t specific to one particular order. Think of insurance, electricity bills, equipment. If you have a monthly figure for most of these costs you can divide it by 30 to get a figure for your daily overheads.
If you want your business to grow, it is important to think about adding a profit percentage on to your prices to allow you to generate money to put back into your business.
When your first starting out, adding an element of profit to your prices, on top of your own earnings, can seem daunting, but it’s a gradual process that you can start slowly by adding a small percentage as your business grows.
Whilst I don’t think you should let your competitors’ prices affect your pricing drastically, it is important to be aware of how much others are charging in your area so you are not vastly higher or lower in price. However, it may be that your product is of a much higher quality than your competitor and that your premium price is justified. As I said, don’t let competition dictate your pricing, just be aware.
Your Target Customer
This is really the key when it comes to pricing. You have to find that sweet spot where you are making enough money to pay your bills and grow your business, while still having a price that is attractive to your target customer.
This may take some trial and error when you first start, but once you hone in on exactly who you are targeting and how much they are willing to spend, you will be able to tweak your products and your cake pricing to suit.
Hopefully this quick overview of cake pricing for your baking business products helps give you an understanding of how to make a start, and gives you some confidence when pricing your own products.
I go into everything I have discussed above in much more detail in my Cake Pricing E-Guide, which is included in Cake Pricing Plus. There are also downloadable spreadsheets which you can use to track your time, cost your products and calculate your overheads. This can all then be used with my super nifty Cake Pricing Calculator, which will make pricing your products a total breeze.
Find out more about the epic Cake Pricing Calculator here!
Good luck with your cake pricing and remember, like everything, it takes practice. But with the tools found in Cake Pricing Plus, you should have a solid head start.
Want to find out more tips for what to charge for your cakes? Check out this easy-to-follow how to guide.
*Please note, I am not a financial or legal advisor and you agree that this is not financial or legal advice*