Blueridgebuttercream Posted 18 Mar 2012 , 10:26pm

So I got a request for a wedding cake to feed 180, fondant with modeling chocolate fall leaves. The customer gave me a picture of a 4 tier buttercream round cake and said she wanted a similar design, but square tiers. Based on a calculated cost of $160 for ingredients (scratch baking) and supplies, and the other local shop (the one I bought my wedding cake from, probably box mix cakes) being listed as $3-4/serving, I quoted her $2.50 per serving, or $450 total, because I'm just starting out and trying to get more business. My other emails she replied within the hour, now she hasn't replied for a week, so I expect she's decided it was too much. Was that price nuts?




(Just to forestall the questions - home-baker, not inspected yet, but legal in VA, licensed, insurance in the works)

107 replies
Edit Posted 18 Mar 2012 , 10:45pm

Your price was waaaaay too low for a fondant covered cake with modeling chocolate accents.
If she decides to take your offer, you will be upset the whole time while making the cake and wishing you had charged more.
Oh, and there's clean up time.....

peg818 Posted 18 Mar 2012 , 10:46pm

You might be to high for her. But at $450- $160 for ingredients your looking at a gross profit of $290 that's not giving you much for your time. Plus you have to figure the cost of your utilities and you gas for delivery boards rowels and all the little things we forget to count. In the end unless you really work fast you probably aren't even making minimum wage

Karema Posted 19 Mar 2012 , 2:18am

That is way to low of an estimate. I just $650 for the wedding cake in my album. It was my first cake and it was in buttercream. For a fondant covered cake I would start at $5/serving and then I would charge extra for fondant accents.

leah_s Posted 19 Mar 2012 , 3:50am

And, it's not nice to undercut the competition like that. it hurts us all.

Blueridgebuttercream Posted 19 Mar 2012 , 5:05am

Peg and Karema, thanks for your opinions. I have a hard time believing anyone actually pays that much for cake (I sure wouldn't!), but I'll take your word for it. We must have very different financial situations, 'cause if I got the order, the whole time I'd be thinking, "Wow, I'm making a whole $290 at a job I don't hate! I've never done that before!"

In general about the financial advice I've seen on here: not everyone is in a position to sneer at minimum wage. From down here, it looks pretty good to me. Actually, when I think about it, there is no way for a mother like me to make more than minimum wage at anything other than cake decorating either, because I'd have to make more than $18/hr to end up with minimum wage after paying daycare costs. And you can't make that around here in my (former) field, even if the jobs were available.

Leah, could you explain to me why it is illegitimate to have a range of prices (corresponding to a range of skills/offerings) available to the consumer? I don't understand this. Should I charge the same price as the best decorators in town? Because my skills are not equal to theirs and anyone with the choice between a world class decorator and myself at the same price is going to choose them. But not everyone wants a world class decorator. I know when I was buying my own cake, I was perfectly happy to pay a lower price for a competently decorated and decent tasting cake.

TexasSugar Posted 19 Mar 2012 , 6:51pm

The quickest way to cake burn out is under pricing. While it sounds good, you have to keep in mind how much time away from your family you are spending working on this cake.

You also don't want to be know as the cheap decorator, because then people will want grander and grander cakes for very little pieces.

jason_kraft Posted 19 Mar 2012 , 7:26pm
Quote:
Originally Posted by Blueridgebuttercream

Leah, could you explain to me why it is illegitimate to have a range of prices (corresponding to a range of skills/offerings) available to the consumer? I don't understand this. Should I charge the same price as the best decorators in town? Because my skills are not equal to theirs and anyone with the choice between a world class decorator and myself at the same price is going to choose them. But not everyone wants a world class decorator. I know when I was buying my own cake, I was perfectly happy to pay a lower price for a competently decorated and decent tasting cake.



World class decorators charge a lot more than $3-4/serving. It is very important to look at what the market is in your area and try to stay in line with those prices (while still making sure you are earning a decent wage and funneling profit into your business).

When you eventually grow your business you may have to find a whole new set of customers once you increase your prices, so you may as well increase them now so you can build a more profitable customer base. And when you do increase your prices, how do you think you will feel when competitors pop up with a similar skill level undercutting your prices?

Price wars are great for customers in the short run, but in the long run the only winners are the businesses that are the best at cutting expenses as opposed to providing quality products. Walmart uses a variation of this strategy with great success -- they move in to a town, cut prices (sometimes even taking a loss) until their competitors are out of business, then they push prices back up once they have a monopoly.

carmijok Posted 19 Mar 2012 , 8:25pm

I believe the OP was basing her pricing based on her own estimation of her skill level. Nothing wrong with that IMO. What she may have done though was under price her cake so much that the customer thought that she must not be any good!

If you want to offer a discount without looking like you're desperate, my suggestion would be to quote a higher price but show a 'new customer discount' of X%. That way you will be able to create the cakes that will give you more experience and confidence, PLUS it implies that any future order will not be discounted. Hopefully by then you've got 'em hooked on your cakes and you can get paid what you'll be worth. Just an idea! icon_smile.gif

Blueridgebuttercream Posted 19 Mar 2012 , 11:38pm

I appreciate all your opinions and responses.

Carmijok, thanks, that's pretty much what I was saying.. And considering this person was referred to me by a former customer who (I have no doubt) gave her a rave review, it's unlikely that she thinks I suck because I'm so cheap. I'm surprised that it seems so hard to believe that she thought that was too much. I do not live in a major metropolitan area; I live in a rural area currently saying "Recession is over? Are you kidding me? We're still in the Depression!"

There actually are a class of people who only have so much money in their budget for the cake. Jason, you may choose not to target them as your customers for your business. Does that mean no one should cater to their needs and price range? Not everyone has to have the same business plan and target. Good thing, or we'd all be competing for the same small segment of the population.

I'm not "stealing" anyone's customers by targeting my services to a lower income bracket; if they only have $400 to spend, my charging a higher price isn't going to make them go to the established bakery and shell out $1000. They have to get their cake somewhere. Why should they have no choice other than Wal-Mart? As far as how I would feel if someone "undercut" my prices, well, there's more to cake than decorating skill and price; I'd just make darn sure that there is something different or better about my cakes that justifies the higher price. It's a business. I don't have a moral right to a certain profit margin or to have my competition not compete.

jason_kraft Posted 20 Mar 2012 , 12:03am
Quote:
Originally Posted by Blueridgebuttercream

There actually are a class of people who only have so much money in their budget for the cake. Jason, you may choose not to target them as your customers for your business. Does that mean no one should cater to their needs and price range?



Of course not...many grocery stores, Walmart, Costco, etc. offer cakes for cheap, as do legions of Craigslist bakers who don't know how to price. If you can't afford a premium price, you probably won't get a premium cake...it may not be fair, but that's life.

It's fine if you want to limit yourself to people with low budgets, just be aware that you will most likely end up doing very simple designs (or doing elaborate designs for below minimum wage if you don't force your customers to compromise). The former may be OK if you enjoy the baking aspect more than decorating, but the latter will eventually make you resent your customers and your work.

Quote:
Quote:

there's more to cake than decorating skill and price; I'd just make darn sure that there is something different or better about my cakes that justifies the higher price.



That's a great outlook, an additional competitive advantage is always a plus. The primary target for the bakery I founded is relatively downmarket, as our basic BC cakes range from $50-150 and are about 90% of our orders. We can make this work because we offer a product no one in the area can match, but if you want to create elaborate multi-tier works of art every week you would likely be disappointed working in this kind of business.

Overboard Posted 20 Mar 2012 , 6:26pm

I've been reading some of your comments about cake pricing and I try to stay right with my competitors for pricing or a little below because I know pricing too low is bad and pricing too high isn't good either. But I have a request for a full sheet cake, covered in fondant AND I have to ship it. So here is what I came up with and I'd like some opinions because I've never done a full sheet in fondant and shipped it. Though I have done a designer cake (2 shoes with the shoe box) and shipped with no problem. I firmly believe the verse in the bible where it says "God likes a just weight"...so I try to think of that whenever I price my cakes and I've been in business for 9 years now (online store). From what I've learned your suppose to double the cost of whatever it cost you to make your cake. I'm going to use 4 boxes of cake mix and just add my touch to it since I've never like the consistency of cake mix but I've come up with a recipe to make them taste SO much better but, here is my breakdown:

Cake ingredients: $37.50
Doubled, Total: $75.00
Boards,Cover, Frosting, Fillings: $30.00
Total:$90.00
My cost, labor, time:$80.00 (I charge $10 per hour)
Total:$170.00
Fondant/Decor: $100.00
Total:$270.00
Tax: $22.57
Final Total:$$327.55

This does not includeicon_razz.gifackaging/dry Ice and shipping.
I live in the Colorado area if that will help.

Appreciate the feedback...only "CONSTRUCTIVE" critcism please. Thanks.

jason_kraft Posted 20 Mar 2012 , 6:35pm
Quote:
Originally Posted by Overboard

Cake ingredients: $37.50
Doubled, Total: $75.00
Boards,Cover, Frosting, Fillings: $30.00
Total:$90.00
My cost, labor, time:$80.00 (I charge $10 per hour)
Total:$170.00
Fondant/Decor: $100.00
Total:$270.00
Tax: $22.57
Final Total:$$327.55



The total cost for ingredients and supplies is $105 ($75 + $30).

What is the $100 figure for fondant/decor, is that ingredients, labor, or both?

My advice would be to add your profit margin to the final price including shipping (20% or so). You'll also want to get a quote for shipping and see if your customer still wants to go through with it, I'm guessing you will spend at least $150-200 just for shipping/packaging, which would increase the price of the order to the $600 range.

Plus if you've never shipped a fondant-covered cake before you'll want to do a trial run to make sure your packaging method doesn't compromise the design.

Overboard Posted 20 Mar 2012 , 6:50pm

Thanks Jason, the $100 is for making the fondant/labor. The first time I shipped a cake I actually put a photo of it outside the box with a "Please don't drop this cake sign" AND insured it (don't know if that help but, it got there without a scratch). This cake would be shipped over night, I'll still need to get a price on that. I don't have time for a dry run since it's due by 13 April. My customer knows the risk and I'd offer a % back if it arrived damaged?

jason_kraft Posted 20 Mar 2012 , 6:57pm

So it will take you 8 hours for prep/baking/cleanup and another 10 hours to make the fondant and decorate?

I'm not sure if insurance will help, since it usually only covers you if the shipper does the packaging themselves. You can basically assume that the box will get thrown around regardless of what you put on it.

Personally I would offer a full refund if the cake was damaged. Presumably they are buying the cake for your decorating skill, otherwise they would buy one locally for a fraction of the price.

Overboard Posted 20 Mar 2012 , 7:09pm

Yep, that just about covers my cost as I'll be doing this over a two day period in a commercial kitchen I rent. I did suggest a local Bakery but...they wanted me. I'd only offer a full refund if the cake was horribly dammaged, we both know the possibilities and risk of shipping. But I'm hoping to package it just as well as my last but this one would be shipped over night un-like the last which took 3 days. Appreciate your input. Have a good one!

jason_kraft Posted 20 Mar 2012 , 7:13pm
Quote:
Originally Posted by Overboard

Yep, that just about covers my cost as I'll be doing this over a two day period in a commercial kitchen I rent.



How much do you pay in rent for your commercial kitchen (hourly or daily)?

Texas_Rose Posted 21 Mar 2012 , 12:19pm
Quote:
Originally Posted by Overboard

Thanks Jason, the $100 is for making the fondant/labor. The first time I shipped a cake I actually put a photo of it outside the box with a "Please don't drop this cake sign" AND insured it (don't know if that help but, it got there without a scratch). This cake would be shipped over night, I'll still need to get a price on that. I don't have time for a dry run since it's due by 13 April. My customer knows the risk and I'd offer a % back if it arrived damaged?




If it costs you $100 to make fondant, you should check the prices on premade. You can get 20 lbs of Satin Ice for $50.

I make my own fondant but it only costs me about $12 and takes a little under an hour to make 12 lbs.

Overboard Posted 21 Mar 2012 , 1:25pm

Thanks Texas Rose, I do make my own and buy Satin Ice to mix with it because I have so much trouble getting those rich colors they have AND it's the best tasting pre-made out there to me. But I think my customer and I have come to a solution because I don't want to over charge. I'm going to send the cake, they know the risk of shipping and only charge $190 plus shipping and tax, if that goes well then I'll charge an additional $75. For fondant I found the Twisted Sisters recipe to be the easiest and less sticky.

jason_kraft Posted 21 Mar 2012 , 3:07pm
Quote:
Originally Posted by Overboard

But I think my customer and I have come to a solution because I don't want to over charge. I'm going to send the cake, they know the risk of shipping and only charge $190 plus shipping and tax, if that goes well then I'll charge an additional $75.



Is that price including shipping? If so you are basically making the cake for free.

Overboard Posted 21 Mar 2012 , 3:14pm

Of course not.

barrynrichmond Posted 21 Jun 2013 , 4:53pm

I agree with everyone as far as pricing cakes too low. Just because you feel like your cake decorating is not up to par, is no reason to give cakes away. If your cake is from scratch its probably way better than most cakes your customer would get for "cheap". You said that your cakes were edible, if thats all they are, I'm afraid you might be in the wrong business

barrynrichmond Posted 21 Jun 2013 , 4:54pm

I agree with everyone as far as pricing cakes too low. Just because you feel like your cake decorating is not up to par, is no reason to give cakes away. If your cake is from scratch its probably way better than most cakes your customer would get for "cheap". You said that your cakes were edible, if thats all they are, I'm afraid you might be in the wrong business

DeliciousDesserts Posted 21 Jun 2013 , 5:42pm
Quote:
Originally Posted by Blueridgebuttercream 

Based on a calculated cost of $160 for ingredients (scratch baking) and supplies  Does this really include ALL your costs?  Dowels, cake boards, fondant, electric, gas, renting kitchen or % of your mortgage, parchment paper, licenses fees, insurance, etc.? 
 
, and the other local shop (the one I bought my wedding cake from, probably box mix cakes) being listed as $3-4/serving, Is that a starting price or does that include fondant?
DeliciousDesserts Posted 21 Jun 2013 , 5:50pm
Quote:
Originally Posted by Blueridgebuttercream 

Peg and Karema, thanks for your opinions. I have a hard time believing anyone actually pays that much for cake (I sure wouldn't!), but I'll take your word for it.  Quite frankly, I find that offensive.  YOU are making a judgement, based on little to no knowledge, of the value of someone else's work.  Not very nice.
 
We must have very different financial situations, 'cause if I got the order, the whole time I'd be thinking, "Wow, I'm making a whole $290 at a job I don't hate! I've never done that before!"  Are you really "making" that amount.  How much does that work out to as an hourly wage?

In general about the financial advice I've seen on here: not everyone is in a position to sneer at minimum wage. From down here, it looks pretty good to me.  I could be wrong, but I've never witnessed anyone sneer at minimum wage.  I have seen posters caution members to verify they are making at least minimum wage.
Actually, when I think about it, there is no way for a mother like me to make more than minimum wage at anything other than cake decorating either, because I'd have to make more than $18/hr to end up with minimum wage after paying daycare costs. And you can't make that around here in my (former) field, even if the jobs were available.  I'm certain there are many ways to make more than minimum wage....babysitting, cleaning homes, book keeping, or running errands.  Currently, minimum wage ranges $6.15-8.25 depending on states.

Leah, could you explain to me why it is illegitimate to have a range of prices (corresponding to a range of skills/offerings) available to the consumer? I don't understand this. Should I charge the same price as the best decorators in town? Because my skills are not equal to theirs and anyone with the choice between a world class decorator and myself at the same price is going to choose them. But not everyone wants a world class decorator. I know when I was buying my own cake, I was perfectly happy to pay a lower price for a competently decorated and decent tasting cake.  I don't think anyone would argue that you shouldn't base your prices at least in part on your skill level.  I would argue that there is a minimum skill level expected of someone "selling" a cake.  As such, there is a minimum acceptable price which provides you profit while not perpetuating the fallacy that customers can get high quality cake for rock bottom prices.  
DeliciousDesserts Posted 21 Jun 2013 , 6:04pm
Quote:
Originally Posted by Blueridgebuttercream 

 And considering this person was referred to me by a former customer who (I have no doubt) gave her a rave review, it's unlikely that she thinks I suck because I'm so cheap. She may not value the opinion of that customer as much as you think.  
 
I'm surprised that it seems so hard to believe that she thought that was too much. I do not live in a major metropolitan area; I live in a rural area currently saying "Recession is over? Are you kidding me? We're still in the Depression!"  That is entirely possible.  Part of that may because of the fallacy I mentioned earlier that is sometimes perpetuated by those who have little to no business experience.  Some clients have no idea how much cake should costs & fully expect it to be similar to a grocery store.

There actually are a class of people who only have so much money in their budget for the cake. Jason, you may choose not to target them as your customers for your business. Does that mean no one should cater to their needs and price range? Not everyone has to have the same business plan and target. Good thing, or we'd all be competing for the same small segment of the population.  I just have to say, you sound quite hostile.  No, not everyone can afford expensive cake.  I can't afford many of the things I would like.  That doesn't mean I can't appreciate the quality or the fact that it's worth it.  Would I take advantage of someone selling a Lexus for a Kia price?  ABSOLUTELY!  Sadly, that dealership would not be making any profit.  Eventually, they would realize this....probably too late.

I'm not "stealing" anyone's customers by targeting my services to a lower income bracket; No, but you are contributing to devalue the rest of us.  Not only in your actions, but also in your attitude in this post.
 
if they only have $400 to spend, my charging a higher price isn't going to make them go to the established bakery and shell out $1000. They have to get their cake somewhere. Why should they have no choice other than Wal-Mart?  You are so right!  I SHOULD be able to buy anything I want for my budget!  I want a Vera Wang dress for my $150.  Think I can find a seamstress to do that?
 
As far as how I would feel if someone "undercut" my prices, well, there's more to cake than decorating skill and price; I'd just make darn sure that there is something different or better about my cakes that justifies the higher price. It's a business. I don't have a moral right to a certain profit margin or to have my competition not compete. Just wow.  I am fairly certain that everyone here things they can justify their price.  I bet their clients agree!  Maybe not moral, but you DO have a right to profit.  
 
If it is truly possible, in your area, to make a reasonable profit at that price, I say go for it.  Only you have access to your expenditures.  I can certainly see $2.50 as a starting price being a fair price.  Not sure that it would still be so with fondant.  Only you know.  If, however, you have only priced out the bare necessities (forgetting perhaps food wrap, dish detergent, extra water usage, the time to clean up), you are not only doing yourself an injustice, you are harming those who work in your industry.  If you would like to be a charity, BE ONE!  
 
Furthermore, I would greatly appreciate you stepping down from your high horse.  It's not nice to look down your nose at those of us who take great pride in our VERY hard work to run a profitable business.

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