Hourly Rate

Business By nanefy Updated 13 Jun 2011 , 9:02pm by nanefy

nanefy Posted 13 Jun 2011 , 7:18pm
post #1 of 10

Hey,

I'm from the UK and starting up my business and I am calculating some basic costings for my website and price lists etc. I have calculated some basic costs for ingredients/recipes etc but I'm struggling to know how much my hourly rate should be? This is obviously something that varies depending on the type of business you have, what you sell and more importantly where you live, but I was hoping some folks could tell me what they charge an hour so that I can better choose my own.

My initial thought was £20 because when I worked free lance in IT I was on £24 per hour and that was far less stressful lol. So I thought £20 was a good starting place - I don't really want to charge MUCH less than that but can be persuaded to charge less if most others charge much less.

Anyway I understand this is difficult question to answer but any input is appreciated.

Cheers.

9 replies
jason_kraft Posted 13 Jun 2011 , 7:48pm
post #2 of 10

We are in northern California (a relatively high cost of living area) and we use $15/hour for our labor rate. If there are bakeries in the area looking for cake decorators you may want to ask what they pay for an hourly rate.

You can't really compare IT compensation with cake decorating...looking at the end product, IT services can be used to add value to businesses on an ongoing basis, whereas cakes are consumables largely aimed at the consumer market. Compensation for a job is based more on the value of the resulting product over its lifecycle rather than how difficult or stressful the job is.

nanefy Posted 13 Jun 2011 , 8:12pm
post #3 of 10

I'm finding that £20 per hour is working out just about right when I add up my costs because I charge £85 for a 10" cake covered in fondant, on a fondant covered board, with a ribbon round the board and some minimal decoration. I use SMBC, a genoise based sponge, ganache on outside of cake and my fondant is expensive - so once I add my hourly rate on top it comes to about £80'ish. That is pretty much the norm for that size of cake in my area (well it is if comparing like for like). In fact some people are charging a lot more but I think £85 is reasonable.

kristiemarie Posted 13 Jun 2011 , 8:13pm
post #4 of 10

Jason, that was very enlightening! I was going to charge $15 an hour but I don't live in a high cost of living area so maybe that's too high.

When looking at that, how do you decide? I picked that because it's more than minimum wage but less than what I make per hour at my regular job. It just seemed right. But you are much more skilled than I am so now I am doubting my deduction. LOL

jason_kraft Posted 13 Jun 2011 , 8:19pm
post #5 of 10
Quote:
Originally Posted by kristiemarie

When looking at that, how do you decide?



This might help:

http://www.payscale.com/research/US/Job=Cake_Decorator/Hourly_Rate

The hourly range for cake decorators is $8-15. But when setting your wage you need to take into account your skills and what the market will bear (in terms of final price) in additional to comps. I would have preferred setting a higher wage but since we also have to pay hourly rent at the commercial kitchen the final price was starting to exceed what was reasonable for our market. If you live in a state with a CFL and are baking from home a wage of $15/hour or higher could still be reasonable.

And don't forget that you still have a profit margin to add on top of your costs -- while that is not technically your wage, if you are 100% owner of your business that is still money that accrues directly to you.

jason_kraft Posted 13 Jun 2011 , 8:23pm
post #6 of 10
Quote:
Originally Posted by nanefy

I'm finding that £20 per hour is working out just about right when I add up my costs because I charge £85 for a 10" cake covered in fondant, on a fondant covered board, with a ribbon round the board and some minimal decoration. I use SMBC, a genoise based sponge, ganache on outside of cake and my fondant is expensive - so once I add my hourly rate on top it comes to about £80'ish. That is pretty much the norm for that size of cake in my area (well it is if comparing like for like). In fact some people are charging a lot more but I think £85 is reasonable.



Is the £80 figure your cost? If so, your final price should be in the £100 range, otherwise your business will not be making a profit.

nanefy Posted 13 Jun 2011 , 8:35pm
post #7 of 10

no the £80 is for the cost plus my hourly rate - obviously there is a learning curve when it comes to costing, once I'm established and have been trading for a while I'll know if I'm charging too much or too little.

jason_kraft Posted 13 Jun 2011 , 8:40pm
post #8 of 10
Quote:
Originally Posted by nanefy

no the £80 is for the cost plus my hourly rate - obviously there is a learning curve when it comes to costing, once I'm established and have been trading for a while I'll know if I'm charging too much or too little.



When calculating cost, your hourly rate is typically considered part of your cost -- specifically labor cost. You add that to ingredient cost and per-order overhead (insurance, license fees, etc.) to arrive at a total cost number.

From there, you need to add a profit margin (usually in the 20-30% range) to your cost to arrive at a price. If you only break even with all your orders (i.e. cost = price), you might as well be working for someone else, since your business wouldn't be capturing any of the additional value generated by your products.

kristiemarie Posted 13 Jun 2011 , 8:43pm
post #9 of 10

Jason you are such a huge help all the time!! Thank you!!!!

nanefy Posted 13 Jun 2011 , 9:02pm
post #10 of 10
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by nanefy

no the £80 is for the cost plus my hourly rate - obviously there is a learning curve when it comes to costing, once I'm established and have been trading for a while I'll know if I'm charging too much or too little.


When calculating cost, your hourly rate is typically considered part of your cost -- specifically labor cost. You add that to ingredient cost and per-order overhead (insurance, license fees, etc.) to arrive at a total cost number.

From there, you need to add a profit margin (usually in the 20-30% range) to your cost to arrive at a price. If you only break even with all your orders (i.e. cost = price), you might as well be working for someone else, since your business wouldn't be capturing any of the additional value generated by your products.




Thanks, I wasn't aware that after ingredient/overhead and labour costs that you added on even more for profit margin - I will have to consider this (I'll certainly have to do more research to see what others are charging) but even if I left out the profit margin, I'd still rather work for myself and have all the free reign I wanted than have to be someone's employee and be subject to their demands. However I might find after some more in depth research that I could be charging more - it's a fine balance between hourly rate and making sure what you are charging is giving you the profit you need to survive.
Anyway, thanks again for your advice icon_smile.gif

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