## Home Based Cupcake Business Plan - Calling All Experts

By texastj Updated 17 Aug 2011 , 3:44am by scp1127

texastj Posted 16 Aug 2011 , 2:44pm
post #1 of 4

I've been toying with the idea of starting a cupcake business out of my home, legal of course. Starting a business is very foreign to me and I need a lot of information. So far I've just started running numbers. In order to reach an annual income of \$30,000/yr I would have to sell 1250 dz cupcakes. This is based off of 1dz cupcakes =\$24. Then I realized that this number does not include the cost of ingredients, supplies, etc. So then I calculated a \$10 profit (went with the least number) for each one dozen sold. The number then became 3000 dz!!!! 8 dz/day!!! That seems like a lot of cupcakes and a lot of hard work for just one person. Are my calculations off??? Is there something I'm missing??? How are other homebased cake decorators able to do this??? Also is there a site with home based business info that I can go to?

This is not looking good so far ..........

3 replies
jason_kraft Posted 16 Aug 2011 , 4:19pm
post #2 of 4

There's a difference between the annual income you receive based on your hourly wage earned by performing services for your business, and the profit margin earned by the business itself.

Price = ingredients + labor + per-order overhead + 20-30% profit. Let's look at a dozen cupcakes priced at \$24, and we'll estimate the cost of ingredients and supplies at \$8, with overhead an additional \$2 per order. Let's say a dozen cupcakes takes you one hour to bake and decorate, and the hourly wage you pay yourself is \$10. Your cost for those cupcakes is \$20 (\$8 + \$10 + \$2), and a \$24 price would result in \$4 in profit. This means that for every dozen cupcakes you sell, you would be making \$10 and an additional \$4 would flow to the business as profit (before taxes of course).

Since you are the only owner of the business, the additional \$4 profit could also be considered your income. So to make \$30K you would need to sell about 2150 dozen/year, or 43 dozen per week (with 2 weeks vacation). This corresponds to a 43-hour work week (assuming each dozen takes an hour of labor), which is perfectly doable for one person as long as you have enough orders.

It sounds like a lot because cupcakes are relatively inexpensive compared to cakes, and \$2/cupcake is on the low side for a custom shop. If you were able to charge \$3/cupcake, each dozen would bring in the same \$10 wage for yourself, but profit to the business would be \$16 instead of \$4. This means you would only need to make 1155 dozen/year to reach \$30K, or 23 dozen per week.

It will probably be difficult even hitting 23 dozen cupcakes per week on a consistent basis without wholesale partners (grocery stores, restaurants, coffee shops, etc.).

texastj Posted 16 Aug 2011 , 5:06pm
post #3 of 4

Wow, Jason!!!! That's some really good advice!!! It definitely sounds like a lot if work.......and a lot of missed family time. I will definitely take this info into consideration when making a final decision. Thanx for taking the time out to respond. Enjoy the rest of your day

scp1127 Posted 17 Aug 2011 , 3:44am
post #4 of 4

Don't forget your friends at the IRS and state tax dept. Plus additional self-employment taxes if you are used to a paycheck.