Pricing Of Cakes

Business By CCSP Updated 6 Mar 2012 , 6:37am by Bridgette1129

CCSP Posted 4 Mar 2012 , 6:38pm
post #1 of 7

I am just stating out and have some questions about pricing and I have gotten many different answers.
Some say to take your ingredients and supplies and multiply by 4
Others say to charge for ingredients and supplies and then charge by the hour (But what is fair - I am currently charging $12/hr)
Or to charge by the serving. I am in Ontario and wondering what is fair. Currently I am charging $3.50 and up

Any help or suggestions would be greatly appreciated.

6 replies
kisamarie Posted 4 Mar 2012 , 6:54pm
post #2 of 7

Only you can decide on your pricing, it will vary depending on the ingredients you use and the level of detail that goes into your work. I found the best way to determine my pricing was to make an Excel spreadsheet and put in all of the ingredients and costs per qty used, and provided you are using the right formulas it will give you a price per slice. HTH and Good luck with your new business!

cashley Posted 4 Mar 2012 , 7:19pm
post #3 of 7

Depends on your overhead too. Insurance, utilities ect.. I know you cannot bake from home where I am in Ontario and it is a huge fine if caught.

kisamarie Posted 4 Mar 2012 , 7:38pm
post #4 of 7

Sorry I didnt mention the insurance and electricity, I put everything in my spreadsheet down to the papertowels and trashbags! This is why I say only she can determine what to charge, there is no way for anyone to know her costs except for her.

Bridgette1129 Posted 5 Mar 2012 , 2:26am
post #5 of 7
Quote:
Originally Posted by CCSP

I am just stating out and have some questions about pricing and I have gotten many different answers.
Some say to take your ingredients and supplies and multiply by 4
Others say to charge for ingredients and supplies and then charge by the hour (But what is fair - I am currently charging $12/hr)
Or to charge by the serving. I am in Ontario and wondering what is fair. Currently I am charging $3.50 and up

Any help or suggestions would be greatly appreciated.




Ingredients x 4 doesn't work because you are not accounting for accurate labor. You need to add up supplies + ingredients + overhead (rent, electricity, etc) + labor then add 20% (or whatever you choose) for profit on top of that.

Charging by the serving is just a matter of how you write it. Once you use the formula to find out your price, you can charge by the cake or the serving. So a 8" cake would be $40 or $1.66 per serving. (24 servings) I just made this number up, btw.

scp1127 Posted 5 Mar 2012 , 8:36am
post #6 of 7

This is the true business model and the only true way to arrive at price. Argue if you want, but it has been the model since commerce and trade began.

Gather every bit of info about your competition, including buying their product and eating it.

Compare all cometitors including yourself. Compare flavor and price first. Now be brutally honest or you are only kidding yourself. Put yourself in the mix and derive a price based on where you fit. Now you have a preliminary price.

Now add up every cost. Subtract that cost from the fair market price and that is the amount you get as income and profit, pre-tax. If you like the number, great. If you don't, then your quality needs to come up or your expenses need to go down.

You can take into consideration special circumstances that will up or lower that price. Convenience, credit cards, longer hours, flavor options, etc. But be sure to credit these to your competitors too if they have these assets.

The business model will show that if you deviate from your true place in the market, you will either have too little business if you are overpriced, or too much business with little net income if you are underpriced.

As an example, I am sometimes three times higher in price compared to my competitors, so how does that fit? I still closely adhere to my model and I actually fit where I have placed myself. I offer a product that is not offered by my competitors, so I had to look outside my industry for my numbers. I'm not going to give that information, but again, I fit perfectly.

So I had to be happy where the market put me, or I did not have a viable business plan. Did you see that... business plan. With this you wouldn't have to ask the question and all businesses should have one before they even think of opening. That is the reason 85% of new businesses fail.

Since I have opened, I have found numerous ways to save money, mainly by being able to buy larger quantities. This has only widened my income to expense ratio.

You can't just decide your income. If it was that easy, we would all be making a fortune and that 85% that fail would succeed. And we can't just price to market and cross our fingers. We still have to be responsible for our expenses.

One other very important issue that is easily overlooked... saturation. In some markets, there are just too many vendors already out there. If you can fit and take someone's business, great. But just because you open doesn't mean that your area is automatically adjust their desposable income for you. Your area may not be able to support one more business in this industry.

I owned a marketing company for years and this is the first exercise I would do. They had to take their place in the market seriously, truthfully, and critically. Without this basic knowledge, I couldn't help them take business from someone else, as that is how it is done.

Bridgette1129 Posted 6 Mar 2012 , 6:37am
post #7 of 7

Wow, scp1127. Everyone should save this topic because of you!

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