The 7 step formula: Pricing Your Cakes for Profit

The Simple 7 Step Formula: Pricing Your Cakes For Profit


 

Pia Cato - Make Money With CakesPia Cato is a cake business mentor who is passionate about helping lovely cake
entrepreneurs build and grow their businesses so they can really enjoy the life they
want. Pia works mainly on a 1:1 bases but shares lots of great cake business tips
and advice on her weekly Make Money With Cakes blog. Keep reading this post for a very special Kneadtodought.net reader offer!

 

 

Pricing your celebration cakes, wedding cakes,
cupcakes and more for business can be a big challenge. Just the thought of all those
numbers and calculations sounds tricky! But honestly it is something you can master
and will help you move your business towards success.

Pricing your cakes, wedding cakes, cupcakes and more for business can be a big challenge - not anymore! Follow this 7 step formula to price for profit
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Back in 2009 I started my own cake business, The
Vanilla Pod Bakery and believe it or not it took me 5 long years to properly
understand how I could price for profit. During that time I developed many pricing
model and structures, some nearly worked and some were just overly complicated.
Eventually I narrowed it down to a simple 7 Step Formula. All my cakes are priced
using this method and I teach it in more detail from my mentoring business.

But I wanted to share the basics with you today so
you can make a start on pricing your cakes for profit.

The 7 Step Make Money With Cakes Pricing
Formula:

Mindset + (Labour + Ingredients Costs + Sundry Costs
+ Utility Costs) x Profit = Total Cake Price

Step 1: Mindset

Mindset is the starting point for the Make Money
With Cakes Pricing Formula as it is often the first hurdle us cake makers have to
overcome. We are very good at letting our own personal fear control our cake
business judgement. We are fearful of having no customers, we are scared of pricing
too high or too low, we are conscious of not having the right cake skills, and to
make it all worse we are actually fearful of pricing correctly!

Gaining control of our mindset is the key to
unlocking pricing struggle number one. To help with this process I suggest taking
time to understand yourself. Take a piece of paper and write down your fears. Next
to each fear write why you have this fear. Next to that write down how you will
overcome it. Then take action. Do this for the next 90 days and watch how your life
changes.

The Simple 7 Step Formula: Pricing Your Cakes For Profit

Step 2: Labour

Step two is labour, often a grossly undercharged
part of the cake pricing formula. As your business evolves this section of the
formula can be the make or break part. When you know you are being paid a decent
wage then cake creation is a pure joy. But if you aren’t then it can turn into hell
as you fight back the tears while working into the early hours of the morning on yet
another cake that is making you pittance.

To help you gain a control on the labour aspect,
make a note of what you honestly want your hourly rate to be. Then increase it by
20%. This will be your hourly rate. Next start to monitor how long each type of
cake takes to create. Record everything, from the initial enquiry, to the mixing,
baking, cooling, cleaning, decorating, shopping, delivery, set up, etc. As you do
this will you start to build up a spreadsheet of times for different size cakes. You
will see in black and white what really goes into a cake.

Step 3: Ingredients Costs

Now we get to the fairly straight forward but time
consuming part. I am happy to report most cake makers include the ingredient costs.
If you are making cupcakes or small individual cakes it is important to know the
price of one so make sure you calculate every batch. And remember to cost out every
single recipe and recipe variation you work with. At this stage I also recommend
shopping around so that you can make sure you are getting the best prices on your
ingredients.

Step 4: Sundry Costs

Similar to step 3 this is fairly simple to cost, and
again, I am happy to say most cake makers include this part. So what are the sundry
costs, think boards, boxes, ribbons, dowels. Anything of that nature. Again shop
around for the best prices that you can find.

Step 5: Utility Costs

Utility costs are a little trickier to calculate as
you have to look into your utility bills. Find your gas, water and electric then
calculate the total years costs. You then need to find the daily or ideally the
hourly costs.

Day Costs = Yearly total divided by 365 days

Hourly Costs = Yearly total divided by 8760 hours in
a year

The Simple 7 Step Formula: Pricing Your Cakes For ProfitStep 6: Profit

If you want to grow your business this is the most
important part. If you follow the process until this step you will be paying
yourself a wage, covering your costs and not losing money. If you add this part this
is where you will see your business flourish. The profit will allow your business to
grow without you sacrificing your wage.

The profit is money that you can invest into your
business. So that you can afford that shop you want, enhance your kitchen, buy new
tools, create a website, pay your tax bill, buy flyers, generally market your
business, and outsource your bookkeeping, admin, etc.

Profit is the by far the step that is overlooked the
most. How much profit you add to your cake pricing formula is your choice. But I
would say aim for at least somewhere between 30% – 60%.

Step 7: The Total Price

The final step is calculating steps 2 to 6

(Labour + Ingredients Costs + Sundry Costs + Utility
Costs) x Profit = Total Cake Price

For example,

Mary of Mary Cakes is creating a bespoke vanilla
fondant iced birthday cake with chocolate ganache undercoat, small piping detail and
a handmade sugar rose sat on an iced cake board and packaged in a box to feed 50
people.

Labour – £15 x 5 hours = £75.00

Ingredients Costs = £37.00

Sundry Costs = £6.00

Utility Costs = £4.00

Profit x 30%

The Formula (£75 + £37 + £6 + £4) x 30% = £158.60

Therefore the total price of Mary’s cake to the
customer is £158.60.

Summing Up

This is a starting point to help set you up for cake
business success. Once you have mastered the The 7 Step Make Money With Cakes
Pricing Formula it is important to tweak it regular. Look at where you can save
costs, think about increasing your profit percentage or your hourly rate. Your
prices are not set in stone and this formula will grow as your business grows. For
more help and advice pop over to my website and schedule a free discovery
call.

 

 

I hope you have found this post interesting and helpful, for more ideas on
how to boost your cake business take a look at this free guide 7 Steps To Starting Your
Cake Business.
If you are looking for more comprehensive 1:1 support then
schedule a Free
Discovery Call
to see how Pia can help. Mention Kneadtodough.net and receive 10%
off on any 1:1 mentoring package you sign up to.

The 7 step formula: Pricing Your Cakes for Profit
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