After reading several posts here on CC I realize that I have been vastly undercharging for my cakes. When I first started out with cakes it was just a hobby I did for friends and family. I guess word spread and soon people started asking me if I could make a cake for their child's birthday, their wedding, etc. I worked at a grocery store bakery and I tried to price my cakes according to what we charged at work. But the more elaborate I got with my designs the more people expected of me. Soon I was making ridiculously detailed sculpture cakes and charging pennies for them. These cakes were taking me hours and hours to do! I now have a pretty decent circle of dedicated customers but the problem is I'm losing money. My husband and I have discussed opening a bakery but I think I really need to get this problem worked out before we do that. So, how do I raise my prices without running off all the customers I have? Also, is it best to charge by the slice or by flat rate? Also, how do I get away from my family and friends expecting me to give them free cakes or cut them a deal? I just cannot afford to do it anymore!
I too am learning how to charge family and friends, espicially fmaily though, they are like robbers can never take enough, lol. I first asked them to pay the cost of the cake ingredents, but for the more elaborate cake i was still out a great deal of time. So I finally decided that I will give a 25% discount to all fmaily on cakes that they request. On the other hand if the cake is something I "want to do" and I offer to make it, then it's free, thus far, it has gone over well with everyone.
As far as raising prices I would suggest what a friend has recomended to me. Start by raising the price a little at a time, $.10 a serving, on a monthly basis until you are up to par, or $.20-.30 every 3 months, this way it is a gradual raise and no one is shocked by the sudden jump in price.
I personally charge by the serving and add to that based on design detail, hince the simpler the cake , the less work I put in, the cheaper the cost to the client.
Things I have either learned or had reinforced here:
One you sell one cake, you ARE in business.
Check your state laws before selling even one cake.
Create a business plan. That research is invaluable. It will tell you who your market is, if there is enough market to start business, what your competetors charge, what your costs are, and what you should charge- among lots of other interesting info. It takes a lot of time to create a thorough plan, but it is time very well spent.
Best of luck in your caking adventures!
If you're not doing grocery store cakes, you shouldn't be charging the same prices, but it sounds like you already figured that out!
First of all, can you legally sell cakes in Georgia? You'd better figure that out and get your licensing in place, etc.
Once that's done, let all of your current customers know that you're going to be raising your prices, and get ready for them to bitch and moan. They've been taking advantage of you and they know it! The customers that don't want to pay what the cakes are worth AREN'T YOUR CUSTOMER, though. They're a grocery store customer who's been getting an excellent deal. If they don't want to pay your price then you just need to find a customer base who will.
The idea of offering a "loyal customer discount" is a good way to ease them into paying the right price, but I'd only do that for a few cakes. Make sure they know that they're getting a discount, maybe give them an invoice that has the right price with the discount noted on it so that they see both figures. They need to know that the price is going to be rising to where it should be at some point.
When they complain (not if, when), just tell them that if you continue to do the cakes for the amount that you've been doing them for you'll have to stop making them because you're losing money. Then nobody wins. You'll also burn out quickly if you keep working for pennies, nobody can sustain that for too long.
Know your competitiors and their prices. Then when they complain about the price you can say, "Bakery X charges $xx for the same size cake, and that is with your choice of balloons or roses. And their idea of a custom design is a plastic lay on or a toy, which will cost you a minimum of $15 more to add. Their cakes also come in a 1" tall disposable pan, and mine are a full 2" tall and fully decorated. So you can see you're still getting a bargain, even with the price increase." Be ready to defend your prices. Unfortunately, you'll have to. A fellow CC'er once advised doing the math and figure out after ingredients how much you're paying yourself per hour. That alone is what convinced me to go up. I was grossly undercutting myself, and many of my regulars actually told me after my first increase that I was giving myself a long overdue raise and that I was worth every penny. So are you, so be sure to charge what you're worth!
Sis asks for a free cake...
I say, "Sorry Sis, I'd love to but I just can't afford to do it at a loss anymore."
Sis says, "What? But I pay you $_____ (insert REALLY cheap price here)"
I say, "The cake ingredients alone are $_____, the extra materials in ribbons and boards are $________, and then I spend _____ hours making it which keeps me from getting my stuff done so I pay someone to babysit the kids, get take out for dinner, etc."
So I say "no" to begin with, teach them what it takes to make it, and wait for a "better" offer in pricing.... It opens the doors for a more realistic discussion of what it really takes to make that special cake.... good luck!
Hi Artsy...(aka fellow Georgia girl!)
I think sending out "Announcements" to introduce your services to your client base and others is a great idea. Come up with something that tells people, you are no longer an intern but started your own business...
As far as family & friends...I have made cakes for family members and don't take anything for them...BUT friends (true friends) pay my actual cost...haven't had anyone say anything. If they are friends, they understand that you are coming out of pocket and those dang boards add up!!!
If you're ever up near Gwinnett...come find me! We can have a "piece of cake!"