Need Pricing Please

Business By AnthonysMom Updated 12 Apr 2012 , 4:54am by vgcea

AnthonysMom Posted 10 Apr 2012 , 2:26am
post #1 of 20

What would you charge for this cake? It ended up being $50 in product, took me 18 hours from bake time, icing, making mmf, decorating. WASC cake with BC and Fondant. Ended up being 16" tall and 6" wide.
LL

19 replies
FromScratchSF Posted 10 Apr 2012 , 2:43am
post #2 of 20

One million dollars. icon_biggrin.gif

Apti Posted 10 Apr 2012 , 2:44am
post #3 of 20

Hello and welcome to the forum.

Unfortunately, this is probably the most common question by newbies to cake decorating. We can welcome you, we can offer decorating advice and support, but we cannot tell you how to price your cakes; far, far, far too many variables.

Read this excellent article by CakeBoss software:
"How Much Should I Charge for my Cakes"
http://www.cakeboss.com/PricingGuideline.aspx

then read this excellent current thread:

"New cake business at home...help!"
http://cakecentral.com/modules.php?name=Forums&file=viewtopic&t=742057&highlight
----------------------
Good luck and nice cake!

nicunurse Posted 10 Apr 2012 , 3:24am
post #4 of 20

FromScratchSF, Thanks LOL LOL!!

jason_kraft Posted 10 Apr 2012 , 6:52am
post #5 of 20

With $50 in ingredients, a wage of $10/hour, and $30 in per-order overhead, the cost for that order would be $260, and with a 20% profit margin the price would be $312.

This is assuming you are baking from home and can legally sell cakes made from home in your state. If a commercial kitchen is required you would need to add the rent to the cost, so for example if rent was $20/hour the new cost would be $620 and the new price would be $744.

The Red Bull logo is also copyrighted, so you would also need permission from the company that makes it.

vgcea Posted 10 Apr 2012 , 6:32pm
post #6 of 20
Quote:
Originally Posted by nicunurse

FromScratchSF, Thanks LOL LOL!!




The last time she did that I almost spat out my drink. I was NOT expecting that response. Classic!

Annabakescakes Posted 10 Apr 2012 , 8:09pm
post #7 of 20
Quote:
Originally Posted by jason_kraft

With $50 in ingredients, a wage of $10/hour, and $30 in per-order overhead, the cost for that order would be $260, and with a 20% profit margin the price would be $312.

This is assuming you are baking from home and can legally sell cakes made from home in your state. If a commercial kitchen is required you would need to add the rent to the cost, so for example if rent was $20/hour the new cost would be $620 and the new price would be $744.

The Red Bull logo is also copyrighted, so you would also need permission from the company that makes it.




thumbs_up.gif That is a pricey cake!

AnthonysMom Posted 10 Apr 2012 , 10:58pm
post #8 of 20

Thank you for your reply. I was just wondering how much I SHOULD have charged... I actually work for Red Bull and my boss knows that I make cakes so he asked me to make it. I only charge $100 but have gained much business from it.

FromScratchSF Posted 10 Apr 2012 , 11:33pm
post #9 of 20

Nope, I got nuthin to say.

FromScratchSF Posted 10 Apr 2012 , 11:37pm
post #10 of 20

Meh, changed my mind.

jason_kraft Posted 10 Apr 2012 , 11:49pm
post #11 of 20

You're right that quality is not baked in to the cost/price equation, it merely tells you how much to charge so you can pay yourself a decent wage and earn profit for your business. If you find that you need to charge a price beyond what the market will bear to run a sustainable business, this is a sign that you need to add value (by providing additional value propositions to customers), reduce cost (buying ingredients in bulk, becoming more efficient at decorating, etc.), and/or target a different market altogether.

tokazodo Posted 10 Apr 2012 , 11:57pm
post #12 of 20
Quote:
Originally Posted by FromScratchSF

Meh, changed my mind.





I still say we need a "Like", button. This just made me laugh out loud. Full of yourself, aren't ya Scratch?

vgcea Posted 11 Apr 2012 , 12:01am
post #13 of 20

Darn! I missed it! icon_sad.gif

scp1127 Posted 11 Apr 2012 , 7:22am
post #14 of 20

I must disagree with Jason on one point.

Just because you don't have rent in a commercial kitchen does not mean you disregard "rent". If it is your home kitchen, you still have overhead associated with the use. You have utilities and you shoud apportion an overhead amount to the space. You either rent, pay a mortgage, or own that space.

For example, I have about 1200 sf on the ground level of my home converted to a commercial bakery. Not only was there considerable cost in construction, the county re-assessed that area as commercial, it has commercial insurance on the space, and it has equipment insurance. I use more utilities and most of all... I deserve a return on the appreciated space.

Even in your home kitchen, you should charge this type of overhead. This is part of your profit, your reward for a conversion of personal space that you had the insight to see a way to profit from an asset, even if it is still personal space 50% of the time.

You DO NOT charge less because you are at home or have your space free and clear. You charge market price and pocket that money as a return on your investment.

jason_kraft Posted 11 Apr 2012 , 3:12pm
post #15 of 20
Quote:
Originally Posted by scp1127

Just because you don't have rent in a commercial kitchen does not mean you disregard "rent". If it is your home kitchen, you still have overhead associated with the use. You have utilities and you shoud apportion an overhead amount to the space. You either rent, pay a mortgage, or own that space.



I agree that your costing should include marginal overhead that you would not otherwise have incurred, such as increased utilities or interest on loans taken out to convert or build new space. I can see where you're coming from on allocating the use of personal space as a percentage of a rent or mortgage payment...the way I look at it is that the personal kitchen space would probably be idle otherwise (since most CFLs require orders to be processed at a different time from personal food prep) and the hassle factor is covered by the hourly wage. I would rather increase the hourly wage than change costing based on what is paid for rent/mortgage on the home.

Quote:
Quote:

You DO NOT charge less because you are at home or have your space free and clear. You charge market price and pocket that money as a return on your investment.



You're right that you shouldn't undercut market prices, but market prices in areas where home bakeries are legal are typically lower and building personal space allocation into the price may not be realistic.

Your cost will absolutely be less if you don't have rent, that gives you more flexibility to lower prices if necessary.

sweetflowers Posted 11 Apr 2012 , 4:06pm
post #16 of 20

$10/hour?? Is that the going rate for skilled fondant work? I'd have a serious talk with myself about artistic talent if I paid myself that low rate and I could find myself someone else to take my place ;o)

jason_kraft Posted 11 Apr 2012 , 4:14pm
post #17 of 20
Quote:
Originally Posted by sweetflowers

$10/hour?? Is that the going rate for skilled fondant work?



Depends on your location (cost of living will often determine market price), skill level, and how efficient you are.

vgcea Posted 12 Apr 2012 , 3:43am
post #18 of 20
Quote:
Originally Posted by scp1127

I must disagree with Jason on one point.

Just because you don't have rent in a commercial kitchen does not mean you disregard "rent". If it is your home kitchen, you still have overhead associated with the use. You have utilities and you shoud apportion an overhead amount to the space. You either rent, pay a mortgage, or own that space.

For example, I have about 1200 sf on the ground level of my home converted to a commercial bakery. Not only was there considerable cost in construction, the county re-assessed that area as commercial, it has commercial insurance on the space, and it has equipment insurance. I use more utilities and most of all... I deserve a return on the appreciated space.

Even in your home kitchen, you should charge this type of overhead. This is part of your profit, your reward for a conversion of personal space that you had the insight to see a way to profit from an asset, even if it is still personal space 50% of the time.

You DO NOT charge less because you are at home or have your space free and clear. You charge market price and pocket that money as a return on your investment.





Amen and Amen! The last part of your post reminded me of something I had considered a while ago when people indicate that because one uses a home kitchen, one should not be justified in charging what 'commercial' bakeries are charging. Yes their overhead will be greater than the home bakers' but where the home baker is 'saving' money with less overhead compared to the commercial bakeries, he or she is also 'losing' money by virtue of the fact that he/she does not have the same buying power (or storage capacity) as a bigger commercial bakery, and thus can not fully take advantage of the economies of scale that are available to a bigger commercial entity.

Many home bakers end up buying their ingredients and supplies at, or close to, retail rates.Those of us who can buy some things wholesale just don't have the capacity to take advantage of buying in bulk like a commercial bakery can, this raises the cost of ingredients relative to the commercial bakery. At my local restaurant depot I still end up buying butter in single units cos I don't have the storage capacity for cases of 36 units. The home baker is 'saving' money by not having the higher overhead but still gets bitten when it comes to the cost of ingredients-- and those dollars and cents add up real quick for the little guys too.

This is just something I've had on my mind and haven't seen discussed here. The factors that are influencing the COGS for each type of entity are different and very real, and I feel like a bit of this gets disregarded when advice is being dispensed leading to a skewed perspective.

jason_kraft Posted 12 Apr 2012 , 4:30am
post #19 of 20
Quote:
Originally Posted by vgcea

Yes their overhead will be greater than the home bakers' but where the home baker is 'saving' money with less overhead compared to the commercial bakeries, he or she is also 'losing' money by virtue of the fact that he/she does not have the same buying power (or storage capacity) as a bigger commercial bakery, and thus can not fully take advantage of the economies of scale that are available to a bigger commercial entity.



The fact that someone bakes from home does not necessarily mean that they cannot take advantage of economies of scale, all they would need is extra space for dry storage and an extra fridge and/or freezer. The cost of this extra space would be a good candidate for passing on to customers in the form of overhead since it is used 24/7 by the business (e.g. 50sf of dedicated storage in a 2000sf house with a $2000 monthly payment would be $50/month in overhead plus marginal electric for the fridge/freezer).

If you choose to also include the overhead of business use of your home kitchen it won't amount to much...even if a 200sf kitchen has a business utilization of 25% (an average of 42 hours a week) you are looking at another $50/month in overhead, which is a rounding error compared to the rent for 168 hours of commercial kitchen use.

Building separate dedicated commercial kitchen space on your property is a different story and would indeed add quite a bit to overhead considering the larger footprint and buildout costs.

There is some added cost in the loss of efficiency with a home kitchen, but for a business that derives its profitability from premium products instead of higher volume that's not as much of an issue, and in any case it pales in comparison with the overhead of a commercial kitchen.

vgcea Posted 12 Apr 2012 , 4:54am
post #20 of 20

^^ "... Cannot fully take advantage of..." we may enjoy some of it but it would not be to the same degree. I'm not saying the cost of doing business for a commercial bakery and a home bakery are comparable. Of course they're not comparable, I believe I added that the factors influencing our COGS are different. What I was getting at is this: there are other factors that push up the cost for a home baker which would give them justification to charge market prices or prices comparable to a commercial bakery. Often times it's just plain expensive to be a 'smaller' business even in the world of small business.

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