Pricing Is So Frustrating!!

Decorating By Bettyviolet101 Updated 18 Jun 2011 , 11:47pm by peetz

Bettyviolet101 Posted 14 Jun 2011 , 8:57pm
post #1 of 28

I live in a place where the only bakeries are Wal-Mart, Bashas, and Safeway. There are a few illegal at home bakeries that people use too. Well its becoming legal so now so I am getting my feet wet in the selling area. I am pricing a cake that is due in a couple months. Its a 2 tier, 8" and 10" fondant cake. I figured 3.50 per serving. Then there are 3 very big gumpaste roses on top and a drape down the two tiers with 3 little roses at the first drap point and then the end of the drape. I am thinking 5 bucks a gumpaste rose and 2.50 for the little ones and no idea for the drape. Plus ribbon on it. any comments on this and if it is okay or if I am over/under charge?

My other issue: I don't want to charge 3.50 per slice for a birthday cake. I really don't think people here would pay that. Any thoughts? I have read on here that people charge the same for wedding cakes and b day cakes. Just curious what would work best in a small town with little competition and everyone expecting you to have Wal Mart prices. Sorry its so long. Thank you!

27 replies
jason_kraft Posted 14 Jun 2011 , 9:22pm
post #2 of 28

We charge different prices for single tier ($2.50-$4+/serving) and multi-tier cakes ($5-$7+), and we have fixed prices for different sizes of single tier cakes, since most of our customers are shopping for birthday cakes and they are used to that pricing model.

To find out how much to charge (for both a cake and additional decorations), you need to look at the cost of ingredients, labor, and marginal overhead. As an example, how long does it take you to make a gumpaste rose, and what is the hourly wage you're paying yourself?

WykdGud Posted 14 Jun 2011 , 9:35pm
post #3 of 28

I believe hourly wage calculations are irrelevant and unfair for inexperienced bakers to charge. During the learning phase, we can do much less in the same period of time and it's unfair to pass that on to our customers.

I believe that without employees, or major overhead (a retail location, etc.), you should figure out the cost and multiply that times 3. The 2/3 mark-up should be enough to cover your labor and profit.

jason_kraft Posted 14 Jun 2011 , 9:40pm
post #4 of 28
Quote:
Originally Posted by WykdGud

I believe hourly wage calculations are irrelevant and unfair for inexperienced bakers to charge. During the learning phase, we can do much less in the same period of time and it's unfair to pass that on to our customers.



That's why the hourly wage you earn as a beginner is less than the wage you earn as an expert. icon_smile.gif

Quote:
Quote:

The 2/3 mark-up should be enough to cover your labor and profit.



For simpler cakes that would probably work, but for elaborate designs labor can easily make up 80-90% of your cost (or more!), even if you don't have to pay rent.

AnotherCaker Posted 14 Jun 2011 , 9:41pm
post #5 of 28
Quote:
Originally Posted by Bettyviolet101

My other issue: I don't want to charge 3.50 per slice for a birthday cake. I really don't think people here would pay that. Any thoughts? I have read on here that people charge the same for wedding cakes and b day cakes. Just curious what would work best in a small town with little competition and everyone expecting you to have Wal Mart prices. Sorry its so long. Thank you!




Do they expect you to have Walmart prices, or are you assuming they will, and are thus getting your hackles ready to play defense? Just curious. Produce a superior product, make no apologies for your pricing, and remember some people just do need to go to Walmart. There is no comparison between a custom cake and Walmarts slapped together crap, sorry. Also, I'm curious about the 8" topper, is that for a specific reason? Seems like a lot of space to fill.

JenniCakesAZ Posted 14 Jun 2011 , 9:49pm
post #6 of 28
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by WykdGud

I believe hourly wage calculations are irrelevant and unfair for inexperienced bakers to charge. During the learning phase, we can do much less in the same period of time and it's unfair to pass that on to our customers.


That's why the hourly wage you earn as a beginner is less than the wage you earn as an expert. icon_smile.gif

Quote:
Quote:

The 2/3 mark-up should be enough to cover your labor and profit.


For simpler cakes that would probably work, but for elaborate designs labor can easily make up 80-90% of your cost (or more!), even if you don't have to pay rent.




I so love reading your wisdom! Not that I'm a stalker or anything but you tell it how it is but with class and I appreciate that!

Sorry OP....just so you know I hate pricing too, it's a major pita!

Bettyviolet101 Posted 14 Jun 2011 , 9:57pm
post #7 of 28
Quote:
Originally Posted by AnotherCaker

Quote:
Originally Posted by Bettyviolet101

My other issue: I don't want to charge 3.50 per slice for a birthday cake. I really don't think people here would pay that. Any thoughts? I have read on here that people charge the same for wedding cakes and b day cakes. Just curious what would work best in a small town with little competition and everyone expecting you to have Wal Mart prices. Sorry its so long. Thank you!



Do they expect you to have Walmart prices, or are you assuming they will, and are thus getting your hackles ready to play defense? Just curious. Produce a superior product, make no apologies for your pricing, and remember some people just do need to go to Walmart. There is no comparison between a custom cake and Walmarts slapped together crap, sorry. Also, I'm curious about the 8" topper, is that for a specific reason? Seems like a lot of space to fill.




Maybe a little of both honestly. I HATE confrontations. I like that!! No apologies. I will say that over and over in my head. icon_smile.gif I have run into some things that would prove that people will put up a little bit o f a fight though. We shall see!!! icon_smile.gif

Bettyviolet101 Posted 14 Jun 2011 , 9:59pm
post #8 of 28

As for Jason and WykdGud thats what I was thinking. I was going between 3.50 and 4 per serving. But think my skill level keeps me at 3.50 at this point. I will raise it though as I get better and much more confident. that will be in a while.

WykdGud Posted 14 Jun 2011 , 10:03pm
post #9 of 28
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by WykdGud

I believe hourly wage calculations are irrelevant and unfair for inexperienced bakers to charge. During the learning phase, we can do much less in the same period of time and it's unfair to pass that on to our customers.


That's why the hourly wage you earn as a beginner is less than the wage you earn as an expert. icon_smile.gif

Quote:
Quote:

The 2/3 mark-up should be enough to cover your labor and profit.


For simpler cakes that would probably work, but for elaborate designs labor can easily make up 80-90% of your cost (or more!), even if you don't have to pay rent.




I have yet to see any design so eleborate it demands a 90% mark-up. I guess it's easy to make things up in an effort to appear more intelligent/busy savvy than one truly is though...

I'd love to have you give me an example of a design that warrants that kind of mark-up. thumbs_up.gif

johnson6ofus Posted 14 Jun 2011 , 10:03pm
post #10 of 28

Seems that at $3.50 per serving that should cover the smalls roses and drapes. I like the structure that someone here posted with "A" level "B" level and "C" level cakes... like plain, medium and elaborate styles. As a customer, I would be frustrated to pay for every little detail.
.
Don't forget, that some TV nuts think an elaborate carved cake served for a birthday still gets that cheaper pricing. So a price range, or style limitations may work better. A wedding cake is "extra" not because of the event, but because of the more detailed work on it- not just a sheet cake, with a shell border and a few butter-cream roses like a standard birthday cake.

jason_kraft Posted 14 Jun 2011 , 10:10pm
post #11 of 28
Quote:
Originally Posted by WykdGud

Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by WykdGud

I believe hourly wage calculations are irrelevant and unfair for inexperienced bakers to charge. During the learning phase, we can do much less in the same period of time and it's unfair to pass that on to our customers.


That's why the hourly wage you earn as a beginner is less than the wage you earn as an expert. icon_smile.gif

Quote:
Quote:

The 2/3 mark-up should be enough to cover your labor and profit.


For simpler cakes that would probably work, but for elaborate designs labor can easily make up 80-90% of your cost (or more!), even if you don't have to pay rent.



I have yet to see any design so eleborate it demands a 90% mark-up. I guess it's easy to make things up in an effort to appear more intelligent/busy savvy than one truly is though...

I'd love to have you give me an example of a design that warrants that kind of mark-up. thumbs_up.gif



I did not say 90% markup (they can only charge that in theme parks), I said that labor is sometimes 90% of your cost. For example, if a cake will take 15 hours to make, cost $30 of ingredients and overhead, and the hourly wage is $20/hour, the total cost is $330 (90% of which is labor). If the cake took 8 hours to make, labor would be 80% of the cost.

Markup is what you add to your cost to get your final price, which includes your profit margin. Typical markups in this industry are in the 20-30% range. More elaborate designs would not necessarily have a higher markup percentage, but your cost would be higher since it would require more labor.

TexasSugar Posted 14 Jun 2011 , 10:11pm
post #12 of 28

A beginner shouldn't charge the highest hourly rate they can. Or if they are very slow at something, they should adjust the hours they spend doing things. But I do think it is important for a beginner to keep track of how long they are spending making a cake. If for any other reason to have a realistic idea of how much time it takes them to do certain things.

When you are more advanced, you can charge a higher hourly rate. Plus the other side of this is that if you estimate how long it should take you to do a cake but you get faster then that just means you are going to end up making more in the profit side of things.

I think for both sides, it should be factored as an estimate time frame. Yes some cakes will take longer, which means you will make less profit, because you will need some of that to cover labor. But then you also have some cakes that will take less time and give you more profit.

As far as the difference in birthday cakes and other occasion cakes. Are you offering the same cake? If you find yourself doing more slab/sheet cakes, then I can see a little bit of a difference in the pricing. But if the birthday cakes you do are tiered cakes that take just as much time a the other cakes you do, why shouldn't they cost the same?

The last two cakes I did were a 3 tiered and a 2 tiered cake, neither were for a birthday or a wedding. So to me, it really doesn't matter what the occasion is, I use the same serving size for both, why shouldn't the price be the same?

I also think it is much easier for you and your customer if you keep pricing simple. I don't like a bunch of add on prices personally. There are some occasions that do warrant it, but I think in general, the price of the cake should also include the decorations.

WhenTalentsCollide Posted 15 Jun 2011 , 12:18am
post #13 of 28

yeah, i don't think you can say $4 a serving and then say oh yeah and it's $5 per flower...

I would just factor that price per serving into the amount of additional details you are adding to the cake...

I think as a beginner you want to keep yourself a little more "affordable" but don't low ball either... get your name out there and if you make a superior product you will gain market share...

after you have a customer base established start adjusting your prices to make sure you are making it worth your time...

sugarandstuff Posted 15 Jun 2011 , 12:41am
post #14 of 28

I price in a tier basis - Buttercream Level 1 (basic piped border, name and some sprinkles) Level 2 (fondant accents (bows, simple shapes, simple flowers) and Level 3 (custom work, high detail and a minimum applies) and then the same 3 levels for for Fondant.
I'm not wal-mart or Sam's club, nor do I want to be. I respect the fact that some people are fine with cakes from places like that and they do not "get" paying more than .50 for a cupcake. I also know there are people who appreciate quality baked goods for parties and special events in life and they are the customers I target.

howsweet Posted 15 Jun 2011 , 1:49am
post #15 of 28

Charging less because a cake is not a wedding cake implies that someone is overcharging for wedding cakes.

You will get used to dealing with these people. I used to be nervous to state my price and eventually toughened up. When you know your price and are comfortable with the price, the customer is also.

Sure, I've had people say, "That much for a kids cake?!" If they don't sound too rude, I tell them I understand it can seem outrageous, but there is more work involved than meets the eye and this is what we have to charge to make a fair profit. I know they aren't going to be a customer, but I figure I'm doing my part to educate them.

Your attitude makes all the difference. When I first started, I always had people trying to negotiate price down. Now it never happens. I think it's because I'm confident and matter of fact about the amount.

Remember, not everyone you talk to is going to be a customer. Your customer is out there. That person is willing to pay what's necessary to get an awesome cake. Make sure your cakes look/taste so good that they'll choose you.

Good luck

AnotherCaker Posted 15 Jun 2011 , 2:02am
post #16 of 28

Yeah, I have never found a reason for charging more for a wedding. It's a cake that will be delivered to a venue where a lot of people will see it. So if it needs a delivery charge, great. Sometimes it's fancier than a birthday cake, but for me, not the case most of the time. But if it is, then it gets priced accordingly.

If someone sees a wedding cake I've done, and asks for it for a birthday party, ummmm, it's not going to cost them less.

WykdGud Posted 15 Jun 2011 , 2:13am
post #17 of 28

To me it's not a birthday vs. a weddding cake - it's a tiered vs. a non-tiered cake.

The extra charge for tiered cakes goes toward the internal support structure and extra time and planning involved in making sure the cake does not collapse.

yummy_in_my_tummy Posted 15 Jun 2011 , 2:23am
post #18 of 28

Bettyviolet101, my suggestion to you is to first find out what you need to charge in order to make your profit after overhead (but I'm not going to get into all of that!! icon_smile.gif). Obviously, you don't want to be outrageously high compared to others in the surrounding areas (I know you said there arent any other custom cake shops in your immediate area), and you don't want to low ball them either. BUT, $3.50 per serving sounds very reasonable to me for someone starting out in the cake biz.

With all of that being said, don't UNDERSELL YOURSELF! If $3.50 per serving is your cost, then you need to SELL it at $3.50 per serving! If you're not confident that your product is worth what you're charging, the customer isn't going to feel confident about spending that $3.50 per serving. If you think that people in your area aren't used to buying custom cakes (they're used to getting them from Wal Mart), you need to tell them and show them why your product is worth what you're charging (they're custom ordered/made, you use fresh ingredients, etc). Don't lower your price to convince them icon_smile.gif

AnotherCaker Posted 15 Jun 2011 , 2:25am
post #19 of 28
Quote:
Originally Posted by WykdGud

To me it's not a birthday vs. a weddding cake - it's a tiered vs. a non-tiered cake.

The extra charge for tiered cakes goes toward the internal support structure and extra time and planning involved in making sure the cake does not collapse.


Exactly.

Bettyviolet101 Posted 15 Jun 2011 , 3:00am
post #20 of 28

Wow all very good points and wonderful advice!! Thank you everyone for your responses. I have A LOT to think about but will use all of these comments as I think about my final decision. Have a wonderful night! icon_smile.gif

Bettyviolet101 Posted 15 Jun 2011 , 3:05am
post #21 of 28

Oh and with the whole pricing flowers seperatly I just was sure on that. I have heard of people doing this but thought it sounded wierd as I was figuring it all out. So I know a lot of people say more design then more money. So when you are quoting someone does your price per serving just go up if there are a lot of flowers or whatever?

TexasSugar Posted 15 Jun 2011 , 1:51pm
post #22 of 28

Betty, if there is a great number of flowers, such as you having to make 20 plus time consuming flowers, as well as do some detailed piping on the cake, then I could see an up charge for flowers. But if the 5 or so flowers are the 'decorating design' and the rest of the decorations are pretty simple/basic, then no so much.

maitej17 Posted 15 Jun 2011 , 2:18pm
post #23 of 28
Quote:
Originally Posted by WykdGud

To me it's not a birthday vs. a weddding cake - it's a tiered vs. a non-tiered cake.

The extra charge for tiered cakes goes toward the internal support structure and extra time and planning involved in making sure the cake does not collapse.




This is what I think of as difference in pricing. It doesn't matter if they want it for a wedding or if they want it for a babyshower, it depends on if it's tiered or not. I keep pretty basic prices for the basic birthday and other event cakes but when people as for tiered, no matter the event then that's when the pricing changes, and that's noted as well so there's no surprise when they ask for a tiered vs a basic cake. HTH icon_smile.gif

jessim Posted 18 Jun 2011 , 9:54pm
post #24 of 28

Betty, I am also in a very small town. And there are very few choices, when looking for a cake, we have Wal-Mart, Publix and one professional cake supply/bakery. Pricing is still very very hard for me, but over time I have come to find out that the people who I gave a HUGE discount to are the ones who are never happy! Customers that you want to have will notice your confindence and will appriciate a great cake. Also, I have a new moto to those who question my prices. " If (insert grocery store that has gone out of buisness) Winn-Dixie counldn't compete with Wal-Mart"s prices how do you think I can?" That ususally makes them understand. Good luck!!

jessim Posted 18 Jun 2011 , 10:01pm
post #25 of 28

Betty, I am also in a very small town. And there are very few choices, when looking for a cake, we have Wal-Mart, Publix and one professional cake supply/bakery. Pricing is still very very hard for me, but over time I have come to find out that the people who I gave a HUGE discount to are the ones who are never happy! Customers that you want to have will notice your confindence and will appriciate a great cake. Also, I have a new moto to those who question my prices. " If (insert grocery store that has gone out of buisness) Winn-Dixie counldn't compete with Wal-Mart"s prices how do you think I can?" That ususally makes them understand. Good luck!!

jessim Posted 18 Jun 2011 , 10:05pm
post #26 of 28

Betty, I am also in a very small town. And there are very few choices, when looking for a cake, we have Wal-Mart, Publix and one professional cake supply/bakery. Pricing is still very very hard for me, but over time I have come to find out that the people who I gave a HUGE discount to are the ones who are never happy! Customers that you want to have will notice your confindence and will appriciate a great cake. Also, I have a new moto to those who question my prices. " If (insert grocery store that has gone out of buisness) Winn-Dixie counldn't compete with Wal-Mart"s prices how do you think I can?" That ususally makes them understand. Good luck!!

Vkandis Posted 18 Jun 2011 , 11:19pm
post #27 of 28
Quote:
Originally Posted by Bettyviolet101


My other issue: I don't want to charge 3.50 per slice for a birthday cake. I really don't think people here would pay that. Any thoughts? I have read on here that people charge the same for wedding cakes and b day cakes. Just curious what would work best in a small town with little competition and everyone expecting you to have Wal Mart prices. Sorry its so long. Thank you!




You also have to consider whether the area can support a bakery (even if out of the home). You say they won't pay it, is it because they won't or can't. I am only doing this as a hobby but did consider the idea of a business. I do have folks who know people who drive 2 hours for specialty cakes (they are willing to pay). However there are not enough of them. I live in a depressed area of the country (an area that is depressed even when things are good), people might want to pay for a specialty cake but can't.

Case in point a friend has asked if I would do a cake for her son's birthday. I am still a novice, but can do better than what the grocery bakeries can. I bake from scratch, am buying all the materials for it. It will not be elaborate, 2 tiers with fondant, fondant deco and some piping work. What I am planning is certainly comparable to cakes I have seen sold for $3.00 per serving. My friend could not afford it.

Sure it is more cake than she needs but she would not even be able to afford what folks typically charge for single tier dessert cakes ($50). She can afford the s cakes from Walmart. No she does expect to get a specialty cake for WalMart prices (she is totally jazzed I am making the cake). The point is she would like to pay for a specialty cake, she cannot--which I believe is the case for many around here. The area just cannot support a specialty cake shop--even one out of the home (which is legal where I am at).

Thus you need to consider why folks won't pay $3.50 for a birthday cake. Because if people can afford to pay it, I have found most people who can pay will pay for quality.

peetz Posted 18 Jun 2011 , 11:47pm
post #28 of 28
Quote:
Originally Posted by WykdGud

Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by WykdGud

I believe hourly wage calculations are irrelevant and unfair for inexperienced bakers to charge. During the learning phase, we can do much less in the same period of time and it's unfair to pass that on to our customers.


That's why the hourly wage you earn as a beginner is less than the wage you earn as an expert. icon_smile.gif

Quote:
Quote:

The 2/3 mark-up should be enough to cover your labor and profit.


For simpler cakes that would probably work, but for elaborate designs labor can easily make up 80-90% of your cost (or more!), even if you don't have to pay rent.



I have yet to see any design so eleborate it demands a 90% mark-up. I guess it's easy to make things up in an effort to appear more intelligent/busy savvy than one truly is though...

I'd love to have you give me an example of a design that warrants that kind of mark-up. thumbs_up.gif



She said it will MAKE UP 80-90% of your cost, not MARK up your cost to 80-90%.

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