How to price your cakes
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How to price your cakes? This is by far the topic I see the most questions asked about day to day for cake businesses.
Let’s just think about that for a moment. Turning to others to help price your cakes means that, potentially for every order, you’re slowing the process down and which could have fitted in an extra order (and extra profit!) for the week. It also means you’re not valuing your own time and skills because you’re asking someone else to do that for you.
Whilst I can see the value in checking out what other bakers do when it comes to pricing and getting their suggestions, you don’t need to be asking how to price your cakes in Facebook groups for advice every time you get a new order enquiry.
You don’t need to spend hours doing the sums and agonising over what to charge on a cake by cake basis.
You need a strategy. A method that will apply to every cake order you take so your quotes take minutes not hours, so that you can focus on the baking and not be snowed under with pricing worries and admin tasks.
I spoke to a lot of cake biz owners before creating this post for you to get the fullest range of strategies for you to choose from. There’s no one size fits all approach – just because one baker charges per slice doesn’t mean you have to. You need to use the pricing strategy that works best for you and your unique cake business, so I’m going to run through two popular pricing strategies to give you a few options.
Whether it’s one of the following methods or something totally different, make sure you choose the one that feels most comfortable for you and allows you to run a profitable cake business. That’s what we’re all here for, after all!
When lots of bakers start their business, they don’t stop to work out the hourly rate they are paying themselves. Many undercharge and don’t value their time let alone their skills. Many people’s cake businesses fail as a result.
It’s so important to incorporate a wage for your time and skills when baking for business, whatever pricing strategy you ultimately choose.
So, how to price your cakes using an hourly rate? This is a simple formula to apply to each cake order. It involves the time taken for you to complete the order from start to finish + the cost of your ingredients and any special equipment bought + the cost of your over heads – think fuel, energy, rent for a premises etc. The combined total is the price you charge for the cake order.
Price per slice or serving
Other bakers use the same formula slightly differently to create a cost per serving for the regular cakes they offer. Work out your costs as above for a cake, taking into account your time, ingredients, and any extras and overheads, then divide it by the number of portions available to get your cost per serving.
This strategy works really well when you get lots of repeat orders for the same item, say if you supply a café with coffee cake or sell luxury brownies. It also means if you’re making a cake twice the size, you can easily scale up the price to match. For bespoke cake commissions you’ll still need to calculate a cost per serving each time, because you won’t have a serving that fits the order yet.
For more pricing advice, check out these seven steps for pricing for profit from Pia Cato of award-winning The Vanilla Pod Bakery – she knows her stuff, first hand!
With all strategies, you want to consider how much profit you are making for each cake to make sure it supports your lifestyle and creates the business you want.
It’s also important to see what your competitors are doing. Some areas will charge more than others, so by comparing your prices to someone else locally with a similar business will help you work out if you’re prices are in the right ball park. Some people will charge more than you and some will charge less – that’s okay. Remember, being new to business doesn’t mean you have to be cheap. Price your cakes and determine your wage based on your skill levels and the quality of the cake you can offer.
There are benefits and negatives to both strategies and many more approaches for you to choose from, but now you know a few ways of how to price your cakes that other cake businesses actually use. By choosing a pricing strategy that makes sure you are profitable, being paid for your time as well as your product and making pricing as automatic as possible, you are making your cake business more efficient and hopefully more profitable. It is also worth deciding whether you will charge a deposit for your cake orders and at what point the deposit and full balance become payable.
And once you’ve nailed your cake pricing, it’s time to start selling! Why not start on Facebook, with these 3 simple steps to sell cakes on your favourite social platform?
So tell me, how do you price your cakes? What will you do differently now?
*Please note, I am not a financial or legal advisor and you agree that this is not financial or legal advice*