Starting Out Prices

Decorating By RnZmom Updated 26 Aug 2011 , 8:50pm by jason_kraft

RnZmom Posted 25 Aug 2011 , 3:41pm
post #1 of 19

I am curious if any of you started with much lower pricing when getting into the business and at what point did you feel confident enough to raise your prices?

I am finding that I tend to cover my costs plus very little right now because I am more focused on building up my reputation in the field. Am I wrong to go this route? Now that I am becoming a little busier I am wondering at what point I should increase my prices?

Thanks for the insight!

18 replies
mariacakestoo Posted 25 Aug 2011 , 4:51pm
post #2 of 19

Nope. I started out high, and have never had to worry about that stuff. I did a LOT of research first, got pretty good at decorating fast, and priced myself high right out of the gate. I have only had to increase costs by 1$ in 3 years. Might be time...

jason_kraft Posted 25 Aug 2011 , 5:00pm
post #3 of 19

We started out charging our cost (ingredients, labor @ $15/hour, and overhead) plus 25% and haven't changed that formula since. We've increased prices about once a year to reflect higher costs, mostly rent increases since in CA it's illegal to sell food that wasn't made in a licensed and inspected commercial kitchen (we rent by the hour).

If you want to build up your reputation as a low-price leader then starting out with low prices is fine, but if you want to compete on quality you are probably better off putting more money towards marketing and advertising as opposed to discounting your products.

Kiddiekakes Posted 25 Aug 2011 , 5:19pm
post #4 of 19

I started out lower back 10 years ago and gradually raised them..especially after learning so much from here and self worth etc...Reading posts on what others charge.I raised my prices about 2 years ago and only on a few things this year..Recession is tough and now is not the time to super inflate although others will dispute this.I am booked all the time but I have noticed that regular customers are down grading the design where as before they were spending more money on more extravagant designs.Also lots of tire kicker emails...

Kaylani Posted 25 Aug 2011 , 9:34pm
post #5 of 19

Starting out that way is a terrific way to train your customers that your work & time has little value.

It is also the perfect way to hurt the local cake business in your area & tick off your fellow cakers who DO value their time and work.

If you read back through this site you will find many burned out cakers on many threads complaining about customers who do not value them.

As a business owner, when a customer tells me another caker has quoted an insanely low price I immediately question ingredients. I ask a customer point blank, if someone can charge walmart prices, do you think they are using QUALITY ingredients? Do you think it will taste good? A lightbulb moment happens & that pretty much ends every conversation about cheap cakers.

You may be using the highest quality ingredients and giving the impression that you are using cheap ingredients because of your pricing. Is that the impression you want your customers to have?

Decide if you are running a business or having a fun hobby that you want people to ohh and ahh over.

Join ICES and meet your fellow cakers. You may see things in a different light.

Sorry if it sounds harsh, but this particular topic is SOOOO annoying. Either you are in business or not. If you are in business, you would not set up costs below what they should be and expect to thrive.

Customers are pretty savvy to this kind of pricing and many will move on to the next 'new' caker as soon as you raise your pricing.

I am stepping off my soap box. icon_cry.gif

boomerangbaker Posted 25 Aug 2011 , 9:42pm
post #6 of 19

I started out low ( $3 per serving is low for my area) and learned my lesson the hard way.
It's been a chore to raise my prices,I am now at a base price of $5-6 per serving but that took 3 years to get there, where I should of started out that high.

Start high or at least what you are worth, don't worry about trying to go low just to get customers, trust me you don't want the kind of customers who only shop according to lowest price.

cakestyles Posted 25 Aug 2011 , 10:39pm
post #7 of 19

I agree, don't train your clients to expect cheap prices from you.

It will be extremely difficult for you to raise your prices and keep the client base you've built because those clients will not want to pay higher prices for the same product they've been paying so little for.

Start out pricing at fair market value, don't undercut other bakers in your area and value your work and your time.

Do not work for free.

RnZmom Posted 26 Aug 2011 , 5:47pm
post #8 of 19

Thanks everyone for your wonderful comments, this is exactly what I was hoping to hear. I guess I just need to work on my confidence and stand firm on what my skills are worth. Thanks so much!

luntus Posted 26 Aug 2011 , 6:07pm
post #9 of 19

RnZmom, read this article...
http://www.freshlypickedblog.c.....rices.html

jennifercullen Posted 26 Aug 2011 , 6:08pm
post #10 of 19

This thread kinda leaves me wondering where I'm heading. I only started doing cakes in march, and now I do them for friends and family at cost price (cos its just a hobby and all that) but because people are seeing them at parties and stuff I'm being asked by friends of friends and family of friends. I really appreciate it because I love to do them, and I can't afford to just do them for no reason but I think if I did ever go into business, which I don't want to do yet, am I going to be stuck charging the lowest prices in the world. I mean if I charged for my time I reckon even my quickest cake would be almost £100, well, maybe not that much but pretty high.

luntus Posted 26 Aug 2011 , 6:10pm
post #11 of 19

http://www.freshlypickedblog.com/2011/04/why-you-should-raise-your-prices.html

oops sorry there was something wrong with the other link I posted

lschmitz05 Posted 26 Aug 2011 , 6:12pm
post #12 of 19

I have been very worried about the same thing. I am from a very small town (population under 200) and so for just starting out I have been worried about charging to much, but once I looked at all the time spent I guess others that are ordering the cakes also have to realize that. I have been charging the price of ingredients x3. Does that sound reasonable?

RnZmom Posted 26 Aug 2011 , 6:14pm
post #13 of 19

Wow GREAT link Luntus! Thanks for sharing. It was just the pep talk I was needing.

lschmitz05 Posted 26 Aug 2011 , 6:20pm
post #14 of 19

BTW loved the link icon_smile.gif Really made me think about how much I should be charging!

jason_kraft Posted 26 Aug 2011 , 8:15pm
post #15 of 19
Quote:
Originally Posted by lschmitz05

I have been charging the price of ingredients x3. Does that sound reasonable?



Ingredients * 3 might work for simple cakes, but once designs become more complicated and time-intensive the true cost may end up being 5-6 times ingredients or more. You really need to look at labor cost (and overhead if you live in a state that requires a commercial kitchen) when setting prices.

cassi_g16 Posted 26 Aug 2011 , 8:33pm
post #16 of 19

Wish I had read this a few days ago.....I quoted a friend $1.50 a serving for a 120 serving wedding cake. This is her 2nd wedding and her family is not wealthy. I basically will not be making any money off of this cake because I also am having to order pans to make it. We live in a very small town and people typically get their cakes from a grocery store. At least I am building up my gear for the next cake I am asked to make. Lessons learned.

jason_kraft Posted 26 Aug 2011 , 8:42pm
post #17 of 19
Quote:
Originally Posted by cassi_g16

I basically will not be making any money off of this cake because I also am having to order pans to make it.



The full cost for non-consumable equipment (like pans) should not be included in the cost for a product, unless you don't foresee using that equipment for any future products. So if you spend $32 on pans, but you expect to use those pans on 15 more orders in the next 12 months, that $32 can be divided up among those orders for a per-order cost of $2.

This is a rudimentary form of a concept called depreciation, which is used to more accurately capture the cost of equipment with a long lifetime (called "capital"). Technically the pans should last more than 12 months but I find it's better to err on the side of overestimating costs (by assuming the pans will only last a year).

TexasSugar Posted 26 Aug 2011 , 8:45pm
post #18 of 19

Jason, I'm gonna guess that what Cassi meant was because she charged so little what money she didn't spend on the basic supplies, will end up being spent buying pans, there for she will have nothing left over for her labor or profit end of the equation.

Not that she planned on 'charging' them for having to buy pans.

jason_kraft Posted 26 Aug 2011 , 8:50pm
post #19 of 19
Quote:
Originally Posted by TexasSugar

Jason, I'm gonna guess that what Cassi meant was because she charged so little what money she didn't spend on the basic supplies, will end up being spent buying pans, there for she will have nothing left over for her labor or profit end of the equation.

Not that she planned on 'charging' them for having to buy pans.



That was my interpretation as well, which is why I recommended charging for that order's share of usage for the pans (for future orders of course).

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