Covering Your Over Head Costs?

Business By prettycakes Updated 20 Apr 2008 , 2:21pm by vickster

prettycakes Posted 13 Apr 2008 , 6:27pm
post #1 of 11

As a business owner how many cakes do you need to produce in a week to cover your overhead expenses? I am talking insurance, utilities, rent of building space or mortgage, etc. Also, are you able to do this all on your own, or do you have any assistants to help out with the work load? So, logistically, how in the world can an independent cake decorator possible create enough revenue to support the business, let alone a family?

Any response is appreciated. Thanks

10 replies
littlecake Posted 13 Apr 2008 , 7:58pm
post #2 of 11

i do from 30-50....i don't make a lot of money, but i do ok.

Edit Posted 13 Apr 2008 , 8:08pm
post #3 of 11

This is a very good questions. I would like to read some answers too.

indydebi Posted 13 Apr 2008 , 11:01pm
post #4 of 11

A lot depends on what the expenses are and how much you sell your cakes for. Also, I think you should consider how many cake servings, rather than how many cakes, since we sell cake by the serving. That's how I figure my potential income. Plus if you say "10 cakes", there is a major income difference between ten birthday cakes and ten wedding cakes. And are the 10 cakes to serve 20 people or 50 people? (at my price rate, that can be $60 to $300 ... big difference).

I list all of this to give you something to think about .... I wouldn't want you to determine 100 cakes a month, book 100 birthday cakes and then realize 100 cakes that serve 20 will only pay half the rent. icon_smile.gif

prettycakes Posted 13 Apr 2008 , 11:27pm
post #5 of 11

Littlecake...Are you serious, do you make that amount by yourself, or do you have any help? Realisticly I figure I can produce 10 cakes a week that average about $30.00 each. ($300.00/week)

Anyway, my response is for indydebi...your point is well taken. Where I can make one wedding cake for $300 or more a week, it would take me 10 smaller cakes a week, and that is only if they averaged $30.00. I also agree with you on charging by the slice and not the cake. That being said, what is your ideal sales amount per week to cover over head costs?

I am thinking over head alone has got to be more than $300.00. If littlecake is producing 20-50 cakes a week alone she is doing great, but if I can only produce an average of say 150 servings at $2.00 /slice, then I see myself loosing money before my business even opened.

indydebi Posted 14 Apr 2008 , 12:25am
post #6 of 11

Sounds like you need to do your biz plan to help you see what your costs will be.

I need to do $5000 a month just to pay the bills. That does NOT include any salary for me. If I sold cake-only, at $3/serving, that would be 1667 servings/month, or an average of 420 servings a week. It really helps that I also do catering (bigger invoices!) so instead of worrying about booking 2 wedding cakes for 200 servings per weekend, I can book one catering for 200 people and be money ahead.

Are you thinking of getting a commercial kitchen? If so, you're doing what most of us do when we start thinking in this direction ..... you're using your current capacity as a guideline for future capacity. With a full comm'l kitchen (i.e. 20 qt mixer, 5-shelf convection oven), you can, for example, mix enough batter in one batch for a 3-tier wedding cake for 100, bake it all at once in the oven. You've got about 60-90 minutes invested in the cake that used to take you about 4-5 hours to mix and bake in a home oven. It's also all baked at once, so no waiting around to for cakes to cool. Faster production = more cakes you can do in the same amount of time. You would be able to do lots more than 10 cakes per week. All this time later, I still catch myself going thru the "wow!" factor when I accomplish more than I thought I could. Of course I still have those "where did the time go!?" days, too! icon_lol.gif

And I dont' do ANY cakes for only $30. It's not worth firing up the oven for it. It costs me the same in utility costs to run the oven for two 6" cake layers as it does for eight 10" cake layers. So it's not worth it for me to run the oven for just one small cake.

As we all learn, overhead is a very commanding Master ... we have to cover it or it eats us alive. That's why many of us have a minimum order requirement. Cost of ingredients is NOT the only cost of a cake.

If you want any help with biz plan info, try this thread .... it has an extensive list of questions of info that needs to be in a biz plan. It's not doing it just for doing it's sake ... it's a GREAT exercise to show you what you need to know and how much you need to raise and make.

Feel free to PM me with any specific questions. I'm more than happy to help.

beccakelly Posted 14 Apr 2008 , 12:37am
post #7 of 11

only you know what your operating costs are. i couldn't pay the bills on just $300 a week. my bills total to about $2000 a month (rent, car payment, commercial insurance, gas, advertising, ingredients, cardboards, other supplies, etc). i set myself a goal of doing $1000 in wedding cakes each week. my average cake serves 175 and sells for about $500, so thats just two wedding cakes. i can easily handle 4-500 servings by myself, i'm hoping that as i get better and faster i can increase that to 6-700 servings. right now i'm on track with 10-12 weddings each month through the summer. its enough to get by at this point, with a very modest profit. not enough to support a family yet, i need to increase my volume and speed so that next year i can actually pull in a moderate income.

littlecake Posted 14 Apr 2008 , 2:23am
post #8 of 11

it's not that hard once you get a system....the lions share of orders are always on you get everything baked and in the freezer by thursday...friday i do the friday orders, and ice all the saturday orders and do all sketches for any drawings there might be for the next day....depending on how many orders there are for the next day...i have gotten there as early as 3 in the morning to get a jump on the day...before people start calling and coming in interupting me...many saturdays at 6 in the evening...i'm so tuckered out i just walk off and leave the mess.

i worked at albertsons for a few years...they took as many cake orders as they could for saturday...never had a cut saturday i decorated by myself 58 cakes...and these were not just plain cakes...i had a full sheet with 53 roses on it(for the 53 years they were married)...shaped cakes and drawings...about half were kit cakes....after working at that labor camp...ha build speed or die ...ha ha

i hated my bakery manager then...but now i wouldn't take anything for the experiance.

i don't do fondant because for me it's too labor intensive for the money you can get for it around here.

dtmc Posted 18 Apr 2008 , 3:27pm
post #9 of 11

What about all the prep time. Like making your icing and what not? Do you guys use standand baking mixes by the bulk to get yourselves prepared to bake an entire wedding cake in one sitting? Great thread!!

beccakelly Posted 19 Apr 2008 , 4:35pm
post #10 of 11
Originally Posted by dtmc

What about all the prep time. Like making your icing and what not? Do you guys use standand baking mixes by the bulk to get yourselves prepared to bake an entire wedding cake in one sitting? Great thread!!

I take inventory of all my ingredients on Monday and go buy whatever ingredients I'll need for the week. I do bake from scratch, not a mix, and i buy all my ingredients in bulk. I make icing on Monday or Tuesday. I cover display boards on Tuesday as well. I'll make any decoraions that I can, like flowers or bows. I'll also make any fondant or pearl clay that I'll need early in the week. On Thursday I start baking at about 6 am then when I'm done doing all the baking I torte and crumb coat I do have the advantage of a 20 qrt mixer and large convection oven. I can bake two wedding cakes each to serve 200 people in about 4-5 hours.

vickster Posted 20 Apr 2008 , 2:21pm
post #11 of 11

You need to think from the other direction. You need to start out by figuring your overhead and then figure how many cakes (or servings as Deb said), you need to meet your overhead.
Having said that, I think the key is to get your overhead as low as possible. What helped me immensely is we bought a downtown building and put our living space in the building and sectioned off 600 feet for my bakery. (Hubby used to be a carpenter, so we're into doing wacky stuff like this) I do have a separate utility bill, but it is only about $50/mo as the heat and air is central to the whole building. We also pay only one water/sewer/garbage bill for the whole building. (don't you love small towns!) I bought my equipment slowly using cash instead of borrowing, which also cuts way down on overhead. Realistically, the remodel, plumbing electrical, for the bakery section was probably about $15K, but we did all the work on both the bakery and our "apartment" using the equity from the home we sold. I know this sounds really wild, but as a consequence of using savings and building up slowly, my overhead is only about $300/mo. So, it only takes me about five or six cakes to move into profit.
As far as number of cakes, you'll figure out pretty soon what your average cake price is. Mine vary a lot, but it averages 75 to 80. I think a mistake people make is putting too much stock in wedding cakes as a cash cow. To me, even though they generally are going to bring in a lot more per cake due to their size, they also take way more time. Plus, I find them more stressful. I don't worry if a birthday cake isn't exactly perfect, but I definitely stress when I'm making someone's wedding cake. And stress = time.
Also, don't forget to figure your ingredients into your overhead. You should be able to figure out what a serving of cake costs you in ingredients, then subtract that as a percentage from your receipts. Indy Deb probably does this by serving. I use boxed mixes so I do mine by how many mixes I will use. Wilton has a chart that tells you cups of frosting per cake size, so that can help you estimate your icing costs. But also don't forget stuff like cake boxes and boards, business cards, printer cartridges. Probably the easiest thing for you to do is figure your major costs, and then add 10 to 20 percent for all those little incidentals that would be a real pain to figure out.

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