If You Figure An Hourly Rate Into Your Final Price...

Business By chelley325 Updated 28 Aug 2009 , 3:33pm by indydebi

chelley325 Posted 21 Jun 2008 , 4:54pm
post #1 of 41

How did you come to determine what your hourly rate is for decorating work?

40 replies
JulieB Posted 21 Jun 2008 , 6:39pm
post #2 of 41

Do you think an hourly rate really comes into play.

I guess of course it would on a small cake, because you don't want to shortchange yourself. But it, for instance, you're making a one layer cake with buttercream, and you're charging $30 on a cake that costs $10 or less to make, and the cake takes an hour or so to make, that would be okay. But a lot of people think that $10 a hour is good money, and for some, they need at least $20 per hour, and up!

Of course, a bigger, $600-$700 cake would pay more than that, right?

Obviously, I've never thought this through. I've never done a big ole cake, hope to one day.

It's just so easy to shortchange yourself.

snarkybaker Posted 21 Jun 2008 , 6:43pm
post #3 of 41

I use $20 per hour plus four times the price of ingredients as my base for pricing.

MikeRowesHunny Posted 21 Jun 2008 , 7:01pm
post #4 of 41

I use the price of ingredients & sundries and then add on $10 per hour for the length of time I think it will take me to do (which I always add 25% to as I always underestimate!). Guess I don't value my time much, BUT I do account for shopping/mixing/baking/cleaning time on top of actual decorating time!

tonedna Posted 21 Jun 2008 , 7:07pm
post #5 of 41
Quote:
Originally Posted by txkat

I use $20 per hour plus four times the price of ingredients as my base for pricing.





I agree icon_biggrin.gif

kelleym Posted 21 Jun 2008 , 7:09pm
post #6 of 41
Quote:
Quote:

But it, for instance, you're making a one layer cake with buttercream, and you're charging $30 on a cake that costs $10 or less to make, and the cake takes an hour or so to make, that would be okay. But a lot of people think that $10 a hour is good money, and for some, they need at least $20 per hour, and up!

Of course, a bigger, $600-$700 cake would pay more than that, right?




The cost-ineffectiveness of smaller cakes is why a lot of people have a minimum order amount. It would be great if you could make a cake from start to finish in an hour, but ... heh... I can't do it. icon_wink.gif By the time I've taken the order, worked out design details with the customer, and shopped, I already have at least an hour sunk into it, and I haven't even set foot in the kitchen. Then bake, make icing/filling/fondant, cool, assemble, decorate, clean up and deliver. Whew. Easily a couple more hours right there.

Not everyone figures an hourly rate into their cake price, but it never hurts to think about it. That's the way we "measure" pay, so why shouldn't you also think about how much you're actually getting paid for your time?

Grocery stores around here pay $11-$12 hour for a decorator. I don't think anyone with our skills should work for less than that.

Mike1394 Posted 21 Jun 2008 , 7:16pm
post #7 of 41

I don't understnd the need to charge an hour rate. What someone is willing to pay for an hour of your time is certainly less than we think our time is worth. How do you figure that in to the cost of a cake? Plus some days I'm worth a buck an hour some days I'm worth $57,000 an hour.

Mike

Doug Posted 21 Jun 2008 , 7:57pm
post #8 of 41
Quote:
Originally Posted by Mike1394

I don't understnd the need to charge an hour rate. What someone is willing to pay for an hour of your time is certainly less than we think our time is worth. How do you figure that in to the cost of a cake? Plus some days I'm worth a buck an hour some days I'm worth $57,000 an hour.

Mike




had your car fixed lately?

I just had mine worked on this past week.

Total bill: $1,199,25 (! icon_surprised.gif -- 5-yr-old car -- need LOTS of work before a long trip this summer)

Parts: 366.04

LABOR: 783.50

and that labor is based on an $85/hour rate.

and to figure the labor amount they use a book that has the "standard" number of hours it should take to do the job -- the number of the hours it actually takes to do the job.

so if the book says 1 hour, I pay $85 even if it only took 45 min., which would be $63.75.

even as a teacher, who is normally payed a "flat salary," I have an hourly rate that is used to figure how much I should be paid for "extra" work like teaching Saturday Academy.

so-- dang tootin' I'm going to:

1) come up w/ some type of hourly rate to use in figuring how much to charge -- and in my case that has to equal or beat what I can get for teaching, which roughly translates to not turning on the oven for less than $150.

2) come up w/ some type of "standard" time for doing cakes -- just like they have for cars. I know it's always going to take at least:

1 hour and 10 miles (mileage, wear/tear) round trip to shop for ingredients
30 min. for mixing and another
1 hour baking which is also when there is 30 for clean-up, cooling and 30 min. for mixing a basic buttercream
1 hour for deco (or more if doing a squishy filling and have to wait for it to settle so its does have bulge)

so that's 3 hours for a basic cake -- any size 2 layer round based on being able to have to layers in the oven at the same time.

now, if its' a full size sheet -- add at leas another two hours as only one half fits in my oven at a time and I can't start deco until the second half is cool.

so a full size sheet -- 5 hours for a home based business.


like for ANY business -- the 3 basic costs:

1) materials (ingredients)
2) overhead (rent/mortgage, utilities, maintenance, etc.)
3) labor (ya gotta someone -- and for us that is US)

they add those up and then apply a % mark-up to create profit. Depending upon industry that could be as low as 1%-3% (grocery stores) to as high as 1000%+ (designer clothing) I worked in a pharmacy to pay for college; at that store the mark-up was 300%

now for an Independent contractor like a cake decorator, the profit is often see as the same as the labor cost. GREAT if only one person in the business -- bad business tho' as it doesn't represent how a real business is run.

we SHOULD, a part of good business practice, pay self an hourly rate.

we should figure all 3 basic costs and then do a mark-up to get PROFIT.

Profit that can be banked and used for future expenses to build the business

too often when done from home we only see the cost of the ingredients and overlook how many more costs there really are -- costs that would be all too apparent if we were actually running some type of store front.

even a home business has to be run as if a store front to be truly profitable.

------

a way to figure your hourly rate -- what other job could you be doing that would pay and be as easy or easier? how much does it pay? Pay self at least that or better -- more as you are doing CUSTOM work.

example: kelleym pointed out grocery store decorators get $12/hour. I could do that -- if I wanted the stress, the hours, etc. and since I'm going to be doing custom work, I'd set rate a minimum of $20/hour , not $24.

in actuality, my rate is $35, $5 more than I would make an hour doing Saturday Academy (after 32 years of teaching I'm worth $30/hour)

thus, during the school year, there is LITTLE incentive to do any cake selling as by I time figure in the PITA aspects, it is much easier to just do the Saturday Academy for 5.5 hours during which I can also do all that paper grading and lesson planning as an added bonus. Caking is pretty much a summer only thing for me.

----

as for overhead --- well I figure it this way.

Mortgage * 12 / 365 / 24 to get hourly amount.
Total of all electric and other utility bills for the year / 365 / 24 for that hourly rate.
Total of insurance for year / 365 / 24 for that hourly rate.
Total all costs of doing business (any licenses, permits, advertising, cleaning supplies, stationary, business cards, ink for printer, computer, bank fees, etc.) etc. / 365 / 24 for that hourly rate.

add all those up and there's the overhead cost/hour for the cake.

so if a cake costs $30 in ingredients
5 hours in labor at $20/hour = $100
and the overhead is $2/hour. =$10

so that's $140 to start for a cake that takes five hours.
thus my minimum order of $150 -- $10 profit

summernoelle Posted 21 Jun 2008 , 8:08pm
post #9 of 41

That seems really complicated. When someone calls in and want a quick quote, it would take me freakin forever to figure that out. But part of the problem is that I am terrible at figuring out supply cost. I also don't know how long 1 cake would take me. This makes me think that I need to start paying more attention to the details of my business...
I charge starting at $2.50 per serving. And $3 for wedding cakes. It would be hard to get more than that in my area....

Homemade-Goodies Posted 21 Jun 2008 , 8:14pm
post #10 of 41

To quote the great Gary Larson of "The Far Side" fame:

"Blah, blah, blah Ginger!"

Oh Doug...I know you are right somewhere in all that...maybe a bit extremely so, but I am sure I felt it lightly skim my hair as it flew over my head!

But thanks....I am going to review this better later so I can apply what I can.
LL

Mike1394 Posted 21 Jun 2008 , 8:27pm
post #11 of 41

Doug that had to hurt. icon_biggrin.gif. What I'm saying. Find the cost of your materials. Find what your target is willing to pay. Find the cost of your competitor. Decide whether, or not you want to beat your competitor. Hourly rate doesn't come into play. Some cakes you are going to make 5 bucks an hour, some your going to make 30.

Mike

playingwithsugar Posted 21 Jun 2008 , 8:32pm
post #12 of 41

I know two master decorators who charge a basic fee per serving (basic decorations - 2 borders, a couple of flowers here and there), then charge $25 per hour for any other detailed decorations. And it doesn't matter what it is - GP or fondant accents, RI work, general BC piping of intricate designs like basketweave or fleur de lis.

I know others who charge by the design only, sometimes with a minimum purchase.

I know others who charge ala carte by the detail involved - $4.00 for a medium gumpaste flower, $100 for a gumpaste rose garland, $1.00 more per serve for basketweave piping.

These decorators know their strengths, and how fast they can knock out those decorations, and then charge according to which they can make the most money in the least amount of time.

Theresa icon_smile.gif

Doug Posted 21 Jun 2008 , 9:06pm
post #13 of 41
Quote:
Originally Posted by summernoelle

That seems really complicated. When someone calls in and want a quick quote, it would take me freakin forever to figure that out. But part of the problem is that I am terrible at figuring out supply cost. I also don't know how long 1 cake would take me. This makes me think that I need to start paying more attention to the details of my business...
I charge starting at $2.50 per serving. And $3 for wedding cakes. It would be hard to get more than that in my area....




which is why you do that all once using a spread sheet.

then derive from it a per serving amount

and then it comes down to -- (with calculator in hand as you talk on phone -- tho' for me -- at computer using Excel)

how many servings??

150???

my per serving amount is $3

so that's $450.


it's figuring that $3/serving --

it has to include costs, overhead, LABOR, and profit!

---

or as KelleyM and others have repeatedly said --

just get CakeBoss -- pump in a few numbers and it will do all that MATH (ARGH!) for you.

(and no, I don't use CakeBoss nor am I associated w/ them in any way --- stubborn German here who still insists on doing it himself using Excel.)


this spreadsheet gives you an idea. play with it and see how your figures come out.

Doug Posted 21 Jun 2008 , 9:09pm
post #14 of 41
Quote:
Originally Posted by Mike1394

Doug that had to hurt. icon_biggrin.gif. What I'm saying. Find the cost of your materials. Find what your target is willing to pay. Find the cost of your competitor. Decide whether, or not you want to beat your competitor. Hourly rate doesn't come into play. Some cakes you are going to make 5 bucks an hour, some your going to make 30.

Mike




on car -- knew it was coming. ALL motor mounts broken and if not fixed NOW, it would also have been radiator (motor banging into it w/ each bump!) and the A/C compressor (tho the belt was shot)...and it needed it's second total major tune up in 110K miles -- so that's not THAT bad!

what really hurt -- got that bill same day dentist told me -- We'll see in a couple of weeks to put on a NEW CROWN on that tooth! OUCH! NOOOOOO!

tonedna Posted 21 Jun 2008 , 9:58pm
post #15 of 41
Quote:
Originally Posted by Doug

Quote:
Originally Posted by Mike1394

Doug that had to hurt. icon_biggrin.gif. What I'm saying. Find the cost of your materials. Find what your target is willing to pay. Find the cost of your competitor. Decide whether, or not you want to beat your competitor. Hourly rate doesn't come into play. Some cakes you are going to make 5 bucks an hour, some your going to make 30.

Mike



on car -- knew it was coming. ALL motor mounts broken and if not fixed NOW, it would also have been radiator (motor banging into it w/ each bump!) and the A/C compressor (tho the belt was shot)...and it needed it's second total major tune up in 110K miles -- so that's not THAT bad!

what really hurt -- got that bill same day dentist told me -- We'll see in a couple of weeks to put on a NEW CROWN on that tooth! OUCH! NOOOOOO!





ROFLMAO........ icon_lol.gificon_lol.gificon_lol.gif

CakeDiva73 Posted 21 Jun 2008 , 10:02pm
post #16 of 41

I charge a set price for tiered cakes and set prices for certain types of shapes and sizes of regular cakes....took me forever to get something down on paper that made sense but once I did, life was easier.

As for charging extras for more elaborate decoration, I like to have a little private chart to reference. .....small, medium and large gumpaste roses.....how many minutes/material for each one? How much is my time worth? How long does it take me to pipe a 6" length of basketweave?

If I have an idea, then I can sort of be more prepared when they want a 4 tiered basketweave cake with 60 gumpaste roses! icon_smile.gif

tonedna Posted 21 Jun 2008 , 10:17pm
post #17 of 41

I think you can have a chart for just flowers..per flower... Every flower is a different price and takes different amounts of time..So see how long it takes you per flower and make a chart and prize each flower on its own..
Edna

pinkbox Posted 21 Jun 2008 , 10:45pm
post #18 of 41

wooo hooo you go Doug!! haha..

I charge 3x the ingredients and $10 an hour... It breaks down to about $2.25 per serving... which to me is a great deal to some.

As my skills improve that hourly wage WILL go up.. It has already since last year... cost of living ya know.

I've not had anyone complain my prices are too high.

NOW... I do sometimes give "donation" cakes depending on who and what it is for.

Where someone will tell me their budget and I will work within that budget... and if they allow me creative liberty.. they get a better cake... so I can practice other skills I want to aquire

Eguie Posted 21 Jun 2008 , 11:08pm
post #19 of 41

The time you spend doing the cake from start to finish will always going to vary base on the size and type.
My suggestion to you and everybody else is this:
1 Charge by serving. Have a basic price for simple BC cakes.
2 Charge more for rolled fondant
3 Charge extra for gumpaste flowers and any other extra decorations.
4 Charge more for cakes make from scratch vs. box
5 Finally. How good are you? Is your work make people say WOW icon_surprised.gifthumbs_up.gif or nice icon_confused.gif If your doing a super job with your ckes people need to value that.
One last thought. NEVER, NEVER, NEVER let somebody compare your price with the local grocery store or chain store. Those cakes are frozen for moths. They also buy bulks of ingridients vs. you buying your basics needs. That's why their cakes are cheaper.

summernoelle Posted 21 Jun 2008 , 11:08pm
post #20 of 41

Thanks for the info Doug! I will look it over!

indydebi Posted 22 Jun 2008 , 2:12am
post #21 of 41

Hubby and I figured out my per-hour worth once, and it's over $100 per hour. (Total time spent on an event, from talking with the bride clear thru to final clean up after the event divided by invoice dollar).

If I tried the "times three" theory, I'd go bankrupt in a heartbeat.

I can't... and won't .... figure an hourly rate based on how long it takes me because over the years, I've gotten REALLY FAST at doing lots of cake skill techniques, (as have many CC'ers on here) so to figure an hourly rate would actually penalize me. There is a price to pay for someone who is SO skilled that they can do it good and they can do it fast. (sorry if that sounds so tooting-my-own-horn; it's not intended that way, but is intended to give some thought to other factors besides "ingredients plus ten bucks an hour" type of thinking).

I delivered two cakes on Friday .... a 12" 4 layer (torted) cake plus a 10" 2-layer cake. I had less than 4 hours invested in these two cakes, including baking time .... and I collected over $230 for these two cakes. Had I done the "times three plus $40", there's no way I could pay my shop rent, van insurance, utilities and all the other expenses (i.e. overhead) involved in a business.

A story I've posted before on here:
A lady walks down the street and sees PIcasso sitting at a cafe. She asks him if she could pay him to do a quick drawing for her. He whips something out on a piece of paper, hands it to her and says, "$5,000 please." She is in Shock! She said, "But it only took you 5 minutes." He said .........

"No, madam. It took me a lifetime."


Does he charge "by the hour"? No .... he charges "by the talent and the skill".

Some may think Doug's response is long, but he is head-on-right. "Expenses" is a list of things that is MORE than just flour and eggs. And I see too many pricing threads on here where folks are just figuring their raw material costs and not figuring ALL of their costs involved in making a cake.

JulieB Posted 22 Jun 2008 , 10:01pm
post #22 of 41

Yep, right, what Debi said.

Malakin Posted 22 Jun 2008 , 10:13pm
post #23 of 41

I just wish the people in this area appreciated all the time and effort cake artists put in their work. They look at you like you're crazy if you even suggest $2.50 per serving.....and I'm not just talking my work. I am talking about others who are way better.

costumeczar Posted 23 Jun 2008 , 1:22am
post #24 of 41

My best friend teaches economics at Brown University, and she said that she used me as an example of a small business and how you need to set your prices. She was describing some kind of economics theory that I of course don't understand, but her basic point was that an hourly wage was part of the expenses of producing something. Your hourly pay isn't your profit, it's your salary.

Look at it this way...If you pay someone else to do what you do, that's an expense, and what's left over after you pay your expenses is your profit. If you file taxes as a corporation you have to pay yourself a salary, and whatever's earned over that salary is your profit.

I basically look at how many hours in total I work a week, then make sure that I'm paying myself a fair wage based on time that I work and what my expenses are. What that is for different people will depend on personal factors, but think about whether you'd do the work for someone else for the wages that you're paying yourself!

Shakti Posted 23 Jun 2008 , 1:38am
post #25 of 41

Hey, that makes sense! I'm always annoyed when my boss cranes his neck over my shoulder and says 'how much time have you been working on this?' But I know it's pertinent information. More than pertinant, it's vital information!
Looking on this site, I'm really surprised at what some people say they charge for cakes if they're working out of their home or have a small, single person business.
Working in the bakery industry, we have a pretty good idea of what going rates for cakes are, and for all of you single-person cake artisans, let me just tell you that YOU ARE NOT COMPETING AGAINST GROCERY STORES! Don't try! If people want a grocery store cake, let them!
But thanks for the info!

Mamas Posted 23 Jun 2008 , 2:18am
post #26 of 41

I completely agree with indydeb. It was interesting to read your post because I approach it from a different angle but I mean the same thing- why penalize my customers because it took me several hours to complete a job due to my lack of experience?

I think of myself as a serious amateur in training. Unfortunately, learning to decorate is a very expensive hobby. I consider myself blessed to have people willing to pay me for my homework. I can make 36 cupcakes from scratch in 2 hours (cupcakes make up the bulk of my business because that is all anyone wants these days) and that includes measuring, mixing, frosting, packaging and cleanup. I have it down to a science. I can probably shave some more time off but I am comfortable with having it down to 2 hours for now.

When I started out it probably took about 5 hours to do the same thing. It probably took at least 1/2 hour just to measure out the ingredients because I was so slow and unnecessarily cautious. It would have been a crime to pay myself an hourly rate at that point because I was still learning and had no idea that it was taking me 3 hours too long.

I have a hard time thinking of things in terms of paying myself an hourly rate because I am kinda slow and feel that it would be a rip off to clients but I can't wait to have indydebs dilema of being too fast to even consider charging an hourly rate because I would be ripping myself off. icon_smile.gif

snarkybaker Posted 23 Jun 2008 , 2:55am
post #27 of 41
Quote:
Quote:

  
I know two master decorators who charge a basic fee per serving (basic decorations - 2 borders, a couple of flowers here and there), then charge $25 per hour for any other detailed decorations. And it doesn't matter what it is - GP or fondant accents, RI work, general BC piping of intricate designs like basketweave or fleur de lis.




This is exactly what we do. Only I charge $20, sometimes we make out, because I can have one of my $7.50 an hour art students do it. Sometimes we lose a little because one of my pastry chefs is slow and having an off day.

handymama Posted 23 Jun 2008 , 3:08am
post #28 of 41

txkat--I see on your website that you don't use shortening. How do you make BC?

snarkybaker Posted 23 Jun 2008 , 3:18am
post #29 of 41
Quote:
Originally Posted by handymama

txkat--I see on your website that you don't use shortening. How do you make BC?




Butter, eggs, sugar, vanilla & 40% heavy cream are the only ingredients in our "house" buttercream.

Shakti Posted 23 Jun 2008 , 6:40am
post #30 of 41

Okay, so I read the rest of the posts, including Doug's, and I guess I just feel like though we should know how long things take and take that into consideration when working out pricing, it's kind of inefficient to figure in the time it takes to bake or cool cakes, or to let cakes settle, and all that.
I mean, can't we make our fillings and frostings while the cake is baking (that combines two hours into one), bake several cakes at once, fill them all at once, make fondant accessories while they settle (combining even mroe hours), then finish them? When you're doing a high volume of cakes every weekend (I personally do about 50-75 cakes every weekend), it's kind of hard to calculate cumulitively what the deco times end up being. I know, I've tried.
I've written times down in logs, and it ends up being all fragmented with 15 minutes on this cake, 15 minutes on that cake, 15 min. break, 15 mins back on the other cake, etc.

So I don't know. I really don't know what the basic pricing in the industry is based off of (right now in Chicago going rates are $3 per serving to start on basic buttercream cakes, and $5 per serving on awesomely decorated cakes or fondant cakes).

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