My sister and I made a cake for our cousins baby shower last year. Since we did it like a gift we didnt charge her. I dont even know how much money or time we put into it. But a friend of my sisters saw a pic and wants to know how much she would charge to make it for her. We have never charged and are not sure how much she should charge? I think the supplies were around $50 for the fondant and all. Any suggestions on price? Im going to try and attach the cake.
It wont let me upload the cake.
Here is the photobucket link for the pic...
To accurately price a cake you need to know the ingredients cost (which you already have), labor cost (# of hours needed to complete the order * your hourly wage), and per-order overhead cost (liability insurance, license fees, etc.). Since MD does not have a cottage food law you would need to rent a commercial kitchen and have it inspected before you could accept money for an order.
So as an example, let's say the cake takes you 6 hours to complete, your hourly wage is $10/hour, rent at the commercial kitchen is $15/hour, your other overhead costs are $1000/year, and you take 50 orders a year. Your labor cost is 6 * ($10 + $15) = $150. Your per-order overhead cost is $20, so your total cost is $50 (for ingredients) + $150 + $20 = $220. Add a 25% profit margin and the price would be $275.
If she is just making the cake for a friend but the friend wants to pay does she still need to have liability and a commercial kitchen and all that? I didnt realize all this stuff went into it.
Unless the state has a cottage food law (and you meet the requirements of said law), if you accept any compensation for a food product, legally that product must be baked in a kitchen inspected by the dept of health (or whoever is responsible for food safety in MD). This is true if you make a profit, break even, or lose money.
That said, if you are only occasionally making cakes for close friends and family (this includes the guests at the event!) and they feel like paying you, the risk of accepting that payment is relatively low. Whether you are willing to take that risk is your decision.
Liability insurance is not technically required by law, but many rental kitchens do require it by policy. Without liability insurance, if someone eats your cake and gets sick, they could sue you for damages and all your personal assets would be on the table to pay for any settlement or judgment, plus you would need to pay your lawyer (even if you win). Liability insurance protects your assets and covers the cost of your legal defense. Close friends and family probably won't sue you if there is an issue, but the same can't be said for strangers (as customers or guests at a party for a friend/family member). The kitchen inspection is required by law for commercial transactions and can lead to fines from the health dept if they find out, but as long as you don't advertise you are pretty safe there.
Thank you. I did not know any of that. Very new to this.