Thread For People Who Like Pricing!

Business By Bridgette1129 Updated 19 Mar 2012 , 10:37am by Roxy073087

BizCoCos Posted 19 Feb 2012 , 2:27pm
post #31 of 104

The difference in pricing is unbelievable, milk cost from 3.89 to 4.39 where I live in the East coast. Looking at your competitor's pricing and your costs is a basic start.

jenmat Posted 19 Feb 2012 , 4:32pm
post #32 of 104
Quote:
Originally Posted by GarciaGM



Jenmat, do you also have a minimum for dessert cakes? I think it was Indydebi who said she wouldn't even turn her oven on for $50 (or was it more than that?). Seems like some of the other posters here have echoed that same policy.



Sorry, wasn't getting updates. My dessert style cakes start at $25 and go up by size. I allow icing polka dots or icing roses in 2 colors- that's it.
I agree that you shouldn't turn your oven on for just anything. However, I am baking anywhere from $500-$1500 worth of cake per week, so another quick $25 is fine by me!!

Cheatize, you are now one of my new "I want to be her when I grow up" people. Wish I had the motivation to do the spreadsheet thing. I am in awe. In the beginning I did sit down and figure out costs, but to have it at my fingertips would be amazing!

jenmat Posted 19 Feb 2012 , 4:49pm
post #33 of 104

also, another thing in pricing I learned pretty quick is "perceived value."
A sheet cake with a hand drawn picture of the birthday boy may take a while, but it's still just a sheet cake in your customer's eyes. So the perceived value is low.

Since I began offering minimums, more custom type cakes and limiting sheet cakes, the perceived value has been less of a struggle, since Sam's club doesn't offer 3D backpack cakes...

Bridgette1129 Posted 19 Feb 2012 , 7:42pm
post #34 of 104

[quote="jenmat"]

Quote:
Originally Posted by GarciaGM

Cheatize, you are now one of my new "I want to be her when I grow up" people. Wish I had the motivation to do the spreadsheet thing. I am in awe. In the beginning I did sit down and figure out costs, but to have it at my fingertips would be amazing!




I have a spreadsheet with MY ingredient costs broken down to the tsp or 1/4 cup. I can send it to you if you want. But you'd have to tweak it and I need to make it more user friendly for sharing.

When I started making cakes I weighted out how much 1/4 cup of everything weighed in grams and then divided the package price down by how many servings. Lol

ajwonka Posted 19 Feb 2012 , 9:13pm
post #35 of 104

Along the same lines as figuring the unit price of each ingredient, I timed myself doing everything! I was seriously underestimating my time! Now I know exactly how long it takes me to mix up batter, make fondant animals, pipe 100 buttercream flowers! Obviously most carved cakes are designs new to me but, since I have written down how long it took to make the previous carved cakes, I can estimate pretty well!

Question: Do you assign overhead based on a percentage of the total or a flat rate per order? For example, I'm charging each order $10 for a portion of my insurance, accounting, advertising, etc. That seems steep, though, for a $40 8" cake and too low for a 4-tier wedding cake. Interested to hear how everyone does it! TIA!

Bridgette1129 Posted 19 Feb 2012 , 9:33pm
post #36 of 104
Quote:
Originally Posted by ajwonka

Question: Do you assign overhead based on a percentage of the total or a flat rate per order? For example, I'm charging each order $10 for a portion of my insurance, accounting, advertising, etc. That seems steep, though, for a $40 8" cake and too low for a 4-tier wedding cake. Interested to hear how everyone does it! TIA!




I haven't had overhead until now (I mean sure I have my home electricity but I wasn't charging) so I haven't done this. I need to. I feel like a % would be better but I also need help with this!

Bridgette1129 Posted 19 Feb 2012 , 9:33pm
post #37 of 104

Sorry dup post.

jason_kraft Posted 19 Feb 2012 , 10:00pm
post #38 of 104
Quote:
Originally Posted by ajwonka

Question: Do you assign overhead based on a percentage of the total or a flat rate per order? For example, I'm charging each order $10 for a portion of my insurance, accounting, advertising, etc. That seems steep, though, for a $40 8" cake and too low for a 4-tier wedding cake. Interested to hear how everyone does it! TIA!



We assign overhead based on a flat rate per order, since it covers fixed costs that have very little to do with the size of a specific order. Overhead is supposed to be steep for small orders, that's why we price smaller cakes at a higher per-serving price than larger cakes.

If you do mostly smaller orders you will probably fill more total orders per year, meaning you can lower the overhead component of each order. Conversely, if you focus on larger orders you will have a smaller number of annual orders meaning each order will need to contribute more to overhead.

For example, let's say you have $5000/year in overhead. If you focus on large wedding cakes and you make 50 per year, each cake will have an overhead component of $100. But if you make mostly smaller cakes and have 300 orders per year, the overhead per cake is only $17.

Bridgette1129 Posted 19 Feb 2012 , 10:06pm
post #39 of 104
Quote:
Originally Posted by jason_kraft


We assign overhead based on a flat rate per order. Overhead covers fixed costs that usually have very little to do with the size of a specific order, such as insurance, accounting, advertising, utilities, etc. Overhead is supposed to be steep for small orders, that's why we price smaller cakes at a higher per-serving price than larger cakes.




Oh, okay. I have been pricing all my cakes at the same price per serving. How did you figure out how steep the slope should be from 8" cake to 12" or whatever?

jason_kraft Posted 19 Feb 2012 , 10:10pm
post #40 of 104
Quote:
Originally Posted by Bridgette1129

Oh, okay. I have been pricing all my cakes at the same price per serving. How did you figure out how steep the slope should be from 8" cake to 12" or whatever?



We didn't set a specific percentage to decrease cost per serving as the cake size increases, the price just naturally works out that way if you use the cost + profit margin formula.

Also note that this is only for our single tier cakes, which have flat prices. For multi tier cakes the overhead is such a small component (thanks to the smaller cakes) we don't bother adjusting per-serving prices based on cake size, only for premium fillings and design complexity.

cheatize Posted 19 Feb 2012 , 10:36pm
post #41 of 104

Perhaps this is not what the OP intended, but this is the BEST pricing thread I have read on here. Kudos to all of you!

Bridgette1129 Posted 19 Feb 2012 , 10:40pm
post #42 of 104
Quote:
Originally Posted by cheatize

Perhaps this is not what the OP intended, but this is the BEST pricing thread I have read on here. Kudos to all of you!




This is precisely what I intended icon_smile.gif I wanted a place to just talk pricing. You can post specific or vague questions or just post a cake and say what you charged and ask others what they would charge. Anything and everything pricing icon_biggrin.gif

Bridgette1129 Posted 19 Feb 2012 , 10:43pm
post #43 of 104
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by Bridgette1129

Oh, okay. I have been pricing all my cakes at the same price per serving. How did you figure out how steep the slope should be from 8" cake to 12" or whatever?


We didn't set a specific percentage to decrease cost per serving as the cake size increases, the price just naturally works out that way if you use the cost + profit margin formula.




*PHEW*!!! Okay, when I was trying to figure out my prices I tweaked, worked and re-worked my prices on single tier/flat price cakes for hours trying to make it work so that the little ones were high enough in price but the bigger ones weren't insane. I love that I can just use the figure that comes out of the equation! Sometimes the simplest things are the hardest haha. For some reason I thought they should all be the same price per serving.

So if a customer were to calculate it and ask why it was cheaper per serving for a bigger cake, you just tell them you get a discount for buying more kinda thing?

jason_kraft Posted 19 Feb 2012 , 10:53pm
post #44 of 104
Quote:
Originally Posted by Bridgette1129

So if a customer were to calculate it and ask why it was cheaper per serving for a bigger cake, you just tell them you get a discount for buying more kinda thing?



In four years and 700+ orders that has never come up, in my experience customers don't usually question why they are paying less than expected. icon_wink.gif

If they did ask I probably would sell it as a discount for buying more. This form of pricing for smaller cakes is also a great upsell opportunity -- when someone asks for a quote for a basic 8", I always mention the price for the 10" as well since it's only $10 more.

Bridgette1129 Posted 19 Feb 2012 , 11:04pm
post #45 of 104
Quote:
Originally Posted by jason_kraft


In four years and 700+ orders that has never come up, in my experience customers don't usually question why they are paying less than expected. icon_wink.gif




I meant more in the opposite way, as in "why is your 6" cake so expensive?!" icon_wink.gif

Another random question, what do you guys charge for smash cakes? My 6" cakes are pretty expensive (in my eyes) for a 6" cake. But it's not worth my time to do one for $15. But smash cakes I would assume are 6". So do you give them a deal on one since they're buying a bigger cake for their guests? I've seen some bakeries even include it.

traci_doodle Posted 19 Feb 2012 , 11:05pm
post #46 of 104

Sorry to veer the thread, but how much business do you need to have to make renting a kitchen worthwhile? It seems like it would be too expensive to rent a kitchen just for one or two cakes a week.

jason_kraft Posted 19 Feb 2012 , 11:24pm
post #47 of 104
Quote:
Originally Posted by Bridgette1129

Another random question, what do you guys charge for smash cakes? My 6" cakes are pretty expensive (in my eyes) for a 6" cake. But it's not worth my time to do one for $15. But smash cakes I would assume are 6". So do you give them a deal on one since they're buying a bigger cake for their guests? I've seen some bakeries even include it.



I actually don't think we've ever sold a smash cake...people have bought 6" cakes a few times, but they are priced the same as 8" cakes.

If the customer wants a smash cake to accompany a $500 order there's some more leeway there than if the smash cake is with a $50 order. It would certainly not be free but we might charge something like cost + 5-10% instead of cost + 20%.

jason_kraft Posted 19 Feb 2012 , 11:29pm
post #48 of 104
Quote:
Originally Posted by traci_doodle

Sorry to veer the thread, but how much business do you need to have to make renting a kitchen worthwhile? It seems like it would be too expensive to rent a kitchen just for one or two cakes a week.



It really depends on your costs, how efficient your processes are, and your anticipated revenues based on demographics and your target market (all this should be in your business plan). If you can rent a kitchen for $10-15/hour and sell two $200 cakes a week it might be worthwhile.

Many successful baking businesses will supplement their custom cakes with a wholesale line of lower end products, this goes a long way towards chipping away at overhead and filling in slack time.

jenmat Posted 20 Feb 2012 , 12:29am
post #49 of 104
Quote:
Originally Posted by Bridgette1129


Another random question, what do you guys charge for smash cakes? My 6" cakes are pretty expensive (in my eyes) for a 6" cake. But it's not worth my time to do one for $15. But smash cakes I would assume are 6". So do you give them a deal on one since they're buying a bigger cake for their guests? I've seen some bakeries even include it.




If someone is ordering a custom 1st bday cake, I will do a 4" single layer smash cake in white or chocolate for $5. It isn't on my website, they have to ask for it, and it isn't overly decorated either- sprinkles and a number 1. I have some small single cupcake boxes and just put it in there. It isn't to make a profit, more of a service I can do for my customers, and it's just so darn cute to know a little one will be destroying it in a matter of hours!

However if someone orders one of my $25 dessert cakes, it's not going to happen. And if they want it overly customized, it's not going to happen. If they want it for Johnny's 6th birthday, it's not going to happen. One of the pleasures of owning the business I guess.

There is no reason a 1 year old needs a 6" cake. TOO MUCH SUGAR!! icon_smile.gif The 4" single layer is probably even a little too much, but at least it is smaller.

Bridgette1129 Posted 20 Feb 2012 , 3:32am
post #50 of 104
Quote:
Originally Posted by jenmat

There is no reason a 1 year old needs a 6" cake. TOO MUCH SUGAR!! icon_smile.gif The 4" single layer is probably even a little too much, but at least it is smaller.




Thanks for your insight! I completely agree that a 1 year old doesn't need a 6" but they barely eat any of it, it's more just so they have a lot to smash icon_smile.gif I feel like the 4" might be a little small for aesthetics reasons. But maybe not.

Bridgette1129 Posted 20 Feb 2012 , 3:35am
post #51 of 104
Quote:
Originally Posted by jason_kraft


If the customer wants a smash cake to accompany a $500 order there's some more leeway there than if the smash cake is with a $50 order. It would certainly not be free but we might charge something like cost + 5-10% instead of cost + 20%.




Is that percentage on top of cost before the profit or do you mean that as your profit margin?

ajwonka Posted 20 Feb 2012 , 4:11am
post #52 of 104

My smash cake is 4". The last 2 weekends I've done 2 & 3 tier custom 1st bday cakes. Each also ordered a smash cake. I explained that a 4" round, bc icing, same flavor as top tier (which yielded extra batter anyway), child's name = $5. Neither opted for that & each ordered a 4" with more custom decoration for $15. Seems silly to me but whatever!

To Jason_kraft : I know you're asked these same questions over & over in multiple threads yet you're so patient with us! Thank you for sharing your experience & expertise!

AZCouture Posted 20 Feb 2012 , 4:33am
post #53 of 104

I throw in a 4" smash cake for free with a tiered cake order only. It's literally 5 minutes of my time and practically zero extra ingredients.

jason_kraft Posted 20 Feb 2012 , 4:59am
post #54 of 104
Quote:
Originally Posted by Bridgette1129

Quote:
Originally Posted by jason_kraft


If the customer wants a smash cake to accompany a $500 order there's some more leeway there than if the smash cake is with a $50 order. It would certainly not be free but we might charge something like cost + 5-10% instead of cost + 20%.



Is that percentage on top of cost before the profit or do you mean that as your profit margin?



The percentages are the profit margin. For a very simple smash cake the cost would be quite low, probably in the $15-20 range, or less if you consider the main cake to take care of the overhead contribution for the order.

Bridgette1129 Posted 20 Feb 2012 , 5:09am
post #55 of 104
Quote:
Originally Posted by ajwonka

My smash cake is 4". The last 2 weekends I've done 2 & 3 tier custom 1st bday cakes. Each also ordered a smash cake. I explained that a 4" round, bc icing, same flavor as top tier (which yielded extra batter anyway), child's name = $5. Neither opted for that & each ordered a 4" with more custom decoration for $15. Seems silly to me but whatever!




Okay! Thanks! Is $15 your standard price for 4" or do you not offer them except for smash cakes? I sold one for a mini cake for Valentine's and charged $17 after a $3 VDAY discount. I don't have 4" on my menu but had them as a mini cake special for 2 (even though they serve more than 2).

Bridgette1129 Posted 20 Feb 2012 , 5:10am
post #56 of 104
Quote:
Originally Posted by AZCouture

I throw in a 4" smash cake for free with a tiered cake order only. It's literally 5 minutes of my time and practically zero extra ingredients.




Sounds like a good idea. Tiered cakes makes sense. Thanks!

Bridgette1129 Posted 20 Feb 2012 , 5:10am
post #57 of 104

Thanks so much Jason!!

cheatize Posted 20 Feb 2012 , 7:13am
post #58 of 104
Quote:
Originally Posted by Bridgette1129

Quote:
Originally Posted by cheatize

Still, my pricing was not finalized. I had to consider who were the most likely to buy my product. What is their income? What do they typically spend on custom items, on weddings, etc...? Is there a niche market I can fill? On and on and on, I considered and researched such things.



How do you find out what people spend on custom items and who to target? I understand how to look up their income, how much they spend on weddings and stuff but don't understand how to find out who to market except to look at their income.




Okay, this is gonna be long and rambling. I hope it helps someone and gives you some insight into how much work all of this is. icon_smile.gif


What do you do best? What do other people say is your best work? What do you want to do? What is your goal for your business? Do you want to do $1,000 cakes? Wedding cakes only? Birthday cakes? Sheet cakes? Cupcakes?

When people see something about your business, what do you want them to think? Upscale? Classy? Friendly? Like getting a cake grandma used to make? Custom? What words would be describe your business?

Lets say you want a wedding cake only business. You want it to be custom work only, no copying other cakes, and you want to do grand centerpiece cakes. All your recipes are scratch and people dont seek you out for vanilla or chocolate. You make chai, boysenberry, whatever specialty flavors with the finest ingredients and will buy local even if it costs more as long as it compares favorably to national brands. You dont do sheet cakes, kitchen cakes, cupcakes, or grooms cakes.

Thats an upscale market. Already you can rule out some income levels are these are not your main clients. Starbuck coffee instead of McDonalds drive thru. What are the most likely venues where your clients hold events? Go online, go in person, make a phone call, or whatever so you get a feel for those places. How much are they to rent? How much are chair, tables, and tablecloth rentals? Who is on their preferred vendor list? Check out those people and their prices. You already know these are not $300 wedding cake people. They expect to pay quite a bit more for the cake but how much more?

Where are the upscale areas near you? Where do they shop? How expensive are the places where they shop? How do they find people to hire? The local cake supply store? Peer recommendations? Whats the latest craze among this income level- can you check out those places to see if advertising there is appropriate? Do you need to advertise in certain publications?

Start checking out the competition for the area. Go online, ask people, ask venues. What names keep coming up over and over? What media coverage has there been for these cake artists and for those upscale weddings? Anywhere that you think will give you info/lead you somewhere, check it out. Check out industry reports and the census stats.

Hang out where they hang out. What do they expect of people? Are they looking for personal relationships where they feel you work exclusively for them? Do you need to provide services not normally provided like table design and set up? Do they need to feel you are helping them out and making them feel like you are making their hectic lives easier?

Perhaps these links will help, as I feel I am rambling.

http://www.inc.com/guides/201104/how-to-narrow-your-target-market.html

http://sbinfocanada.about.com/od/marketing/g/targetmarketing.htm

http://www.marketingmo.com/strategic-planning/brand-strategy/

http://www.brandingstrategyinsider.com/2009/10/10-branding-and-marketing-trends-for-2010.html

http://articles.bplans.com/running-an-online-business/online-business-strategy/your-online-competitive-analysis/163

http://www.census.gov/econ/census/snapshots/SNAP72.HTM

http://www.costofwedding.com/

http://www.e-myth.com/cs/user/print/post/marketing-vs-advertising

http://www.marketresearch.com/

https://www.aibonline.org/resources/statistics/cake.html

Bridgette1129 Posted 20 Feb 2012 , 8:01am
post #59 of 104

WOW, Cheatize! Thanks so much!!

cheatize Posted 20 Feb 2012 , 2:45pm
post #60 of 104

You're welcome! I hope it answers the question.

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