We surveyed a bunch of BakeCalc users and came up with 5 simple tips to help you figure out your own cake pricing system.
Photo credit Kat's Cakes
#1) Don't Short Change Yourself Just Because You Are Starting Out
We often hear and read of people who have just begun selling their cakes who say things like:
"I'm not looking to charge and arm and a leg like bakeries, but at the same time I would like to cover my ingredients and some of my time (if not all)"
"I’m new to the baking cakes and selling them scene, and I’m wondering what the average pricing should be.”
"All cakes cost about the same to produce don't they? Ingredients, location and skill, labor and overhead are equal for everyone right?"
"I am a beginner and really feel almost embarrassed to quote a price."
Price is determined by the market value of similar work. Just because you are just starting out, doesn’t mean that your cake is any less valuable than any other cake out there. However, there are still lots of cakes out there who don’t have a clue as to how much they should be charging. Therefore, as a frame of reference, it’s good to find storefront brick & mortar bakeries and see what their prices are for a similar cake.
One of our users, Ann, once made some cake pops for a holiday sale. She priced them at 3 for $1 even though she worked until 2 am to finish them. Family and friends found that unacceptable and repriced them at $1.50 for one, to match NORMAL Starbucks prices. And to her surprise, lots of people bought them at that price!
Do your research and know how much your neighborhood custom cake shops and bakeries are charging and use that information as a baseline. Cakes in NYC will cost much more than cakes in Montana. You may not yet realize it but there will be lots of people happy to pay you for your work. Remember, the cake is the CENTERPIECE of the party.
#2) Know The Costs of Your Cake
If you don’t sit down and figure out your costs then you will be under-pricing your cakes. Have you taken the time to consider the overhead that went into baking your cake? Or how about the delivery costs?
Calculate your direct cake cost. This includes on the the ingredients that you used to make the cake, i.e. flour, eggs, butter, chocolate, fondant, cinnamon, cocoa, milk, etc. It’s easiest to go through the recipe list and have assigned values for each ingredient that you are using.
Calculate the indirect cost of the cake. This includes baking supplies, i.e. cake stands, dowel rods, serving stands, cake boards, candles, boxes, cake circles, and overhead or fixed costs, i.e. electricity, water, and depreciation of your baking equipment.
Calculate your labor. This is time you spent designing, preparing, and baking the cake. You need to set an hourly rate for yourself and charge clients accordingly. Also, don’t forget about the delivery of the cake! You have to take into consideration the time you spent driving, the gas that it took, and the wear and tear of your car.
#3) Include The Hours You Worked On Your Cake!!!
This point cannot be emphasized ENOUGH. Your time is worth money! It's very important to consider the value of your time spent. It doesn’t matter how much you love doing it, you need to be compensated for all your work that goes into it.
Ingredients only make up for a portion of the costs of your cake. If you spent 5 hours working on your cake, you need to be charging for it. Think of it this way, if you worked in a bakery, you would get paid $10-$30 per hour. This is what you deserve to be paid even without the bakery.
#4) Don’t Compete with Walmart and Costco
Don't look at Walmart or Costco prices and think that your cake is ANYWHERE near comparable to their cakes. Walmart is producing cakes with the cheapest materials in bulk by workers won't simply don't care about their end product. Your cake is made with care and the finest ingredients while their cake has been flash frozen months ago and shipped to a store. $12.99 cake is not even CLOSE to comparable with the types of cakes you make.
#5) Please, please, please, Don't Undercut Your Competitors!
Have you even had anybody complain to that you charge TOO much? Well, have you? Or is it just a fear that you've had because you are underestimating your own abilities as a cake decorator?
When you undercut your competitors, you are doing 2 things.
#1 - You are selling yourself short! Didn't we go over this topic in the first paragraph already? You deserve to be paid for the effort and craftsmanship that you've put into your cake. $100+ cakes are NORMAL, call your local cake shops and verify this for yourself. If somebody wants to buy a cake $30 cake, let them go to Walmart / Costco. They aren't your customer!
#2 - You are affecting your local cake economy in a negative way. If you start charging significantly lower for your cakes, then all of a sudden, you run the risk of lowering the value of cake in your community. Just because you don't have to pay for rent, and other fixed costs that local cake shops have to, doesn't mean that you should. A custom cake is a custom cake and it should be sold to people who understand the value of a custom cake! Plus, you don't want to be known as the "cheap cake lady"... do you?
Remember, as a cake decorator, you need to take pride in what you do and what you offer :)
Frequently Asked Question
How Much Should I Charge Friends and Family for Custom Cakes?
Hmmm, that depends on a lot of factors. Does this happen frequently to you? Are you getting upset that friends and family come to you ALL the time to make birthday cakes? Well, there's a number of different options that are available to you as a cake decorator. You could:
1) Charge them how much you charge everybody else.
2) Use an easy discount system to charge them (i.e. friends and family discount is 50%).
3) Only charge them the raw ingredients and labor with no markup.
4) Don't charge them at all!