I feel like I'm spending too much money.

Business By dantherex Updated 23 Aug 2012 , 1:08am by EvMarie

jason_kraft Posted 21 Aug 2012 , 4:25pm
post #31 of 54
Quote:
Originally Posted by Jess155

Customers expect the costs of insuance, utilities, etc, in their cakes. They do not expect to pay for a set of pans for you to keep and reuse.



The cost of supplies, including pans, should be allocated as overhead across all orders taken during the useful life of the supplies. This means that every customer is paying for a portion of all your pans, even pans that aren't being used for their order. Not trying to beat a dead horse here, but I think this is an important point that is too often overlooked when costing products.

If you don't feel comfortable charging back the entire cost of a specialty pan you can charge a percentage you deem appropriate or just add it in with the rest of your overhead, but in my mind that's more unfair since other customers will be subsidizing the customer who chooses a design with a specialty pan.

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Many bakers already charge a premium price for petal shapes because of the added labor.



The whole point of a specialty pan or stencil is to reduce or eliminate the added labor, which means the customer saves on labor costs. If the labor cost of the order with a specialty pan is the same as without a specialty pan, there's no point in buying the pan in the first place. By the same token, if the savings in labor is less than the price of the specialty pan, it might make more sense to execute the design without the specialty pan (assuming there is no loss of quality).

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Aaaand hope they won't notice.



On the contrary...if the customer asks about the price difference for different designs, I explain that the more expensive design is more complex and will require additional labor and/or specialty equipment (depending on the design). There's absolutely nothing wrong with telling the customer this up-front either.

Jess155 Posted 21 Aug 2012 , 5:15pm
post #32 of 54
Quote:
Originally Posted by jason_kraft

The cost of supplies, including pans, should be allocated as overhead across all orders taken during the useful life of the supplies. This means that every customer is paying for a portion of all your pans, even pans that aren't being used for their order. YES! That's why you should have the pan they want on hand!

If you don't feel comfortable charging back the entire cost of a specialty pan you can charge a percentage you deem appropriate or just add it in with the rest of your overhead, but in my mind that's more unfair since other customers will be subsidizing the customer who chooses a design with a specialty pan. No, one customer is subsidizing the cost for anyone coming in next wanting that shape. And you're probably not going to separate out costs that have been fully paid for by the customers, so you're going to get paid a portion of that pan by the next customer. You're getting paid twice.


jason_kraft Posted 21 Aug 2012 , 5:36pm
post #33 of 54
Quote:
Originally Posted by Jess155

That's why you should have the pan they want on hand!



Ideally yes, but as I said before it may not be realistic to stock every possible shape and size of pan due to budget and space constraints.

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No, one customer is subsidizing the cost for anyone coming in next wanting that shape.



Depends on how much you allocate to that one customer's order. If you think you will be using that shape again, allocate less than 100%.

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And you're probably not going to separate out costs that have been fully paid for by the customers, so you're going to get paid a portion of that pan by the next customer. You're getting paid twice.



If you are more conservative when estimating whether or not a shape will be used again, and you use a shaped pan more than you estimate, then you're right that you will be paid more than once for the pan (but not 2x, since the allocation to the second order should be considerably lower than 100%). This situation is better than the alternative, when you recover less than the full cost and end up paying the cost out of your own wages and/or profit margin.

Jess155 Posted 21 Aug 2012 , 5:40pm
post #34 of 54

In which world are you living in where you know that you know that you KNOW you will only use the pan twice? It's a petal pan. I see them on cakes all the time.

jason_kraft Posted 21 Aug 2012 , 5:44pm
post #35 of 54
Quote:
Originally Posted by Jess155

In which world are you living in where you know that you know that you KNOW you will only use the pan twice?



You don't know anything for sure, which is why you need to estimate based on what you know about trends in the industry. If you guess too conservatively you would just lower the allocation on future orders.

For something relatively generic like a petal pan I would probably allocate 25% or so (plus profit margin) to the order. We had an order a few years ago with a detailed Chinese dragon design, and we charged 100%+ of the cost of the mold to the customer since I was pretty sure we wouldn't be using it again.

Jess155 Posted 21 Aug 2012 , 5:49pm
post #36 of 54
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by Jess155

In which world are you living in where you know that you know that you KNOW you will only use the pan twice?


You don't know anything for sure, which is why you need to estimate based on what you know about trends in the industry. If you guess too conservatively you would just lower the allocation on future orders.




Well that's a far cry from your original thoughts of charging them 100%. Are you coming around Jason??

You could also start suggesting the petal shape in future designs so you have more of a chance of using it many times.

jason_kraft Posted 21 Aug 2012 , 5:57pm
post #37 of 54
Quote:
Originally Posted by Jess155

Well that's a far cry from your original thoughts of charging them 100%.



Not really, that's just the general algorithm I use to determine allocation of new specialty equipment. A 100% chargeback is merely one example of implementing that algorithm for equipment that you are fairly confident won't be used again.

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You could also start suggesting the petal shape in future designs so you have more of a chance of using it many times.



That's definitely a good strategy, but when determining allocation for the initial order you shouldn't assume that this type of future promotion will work.

Jess155 Posted 21 Aug 2012 , 6:20pm
post #38 of 54

I won't tell anyone that I won. It will be our secret.

And now, since I know you lurve to have the last word...

Ladies and gentlemen....JASON "Everybody's wrong but me" KRAFT!!!!!! Wahoo!!!!! clap clap clap!!!!!

The floor....... is yours......

jason_kraft Posted 21 Aug 2012 , 6:28pm
post #39 of 54

It was probably my fault by not generalizing the 100% chargeback example into an algorithm earlier (since that's an extreme data point) but hopefully it's more clear where I'm coming from re allocation of new equipment, and when it makes sense to charge back some or all of the cost.

Personally I feel it's more productive to look at threads from a win-win perspective (everybody wins when threads stay on topic) instead of win-lose, the only time people lose is when personal attacks come out. This is a discussion, not a competition.

Jess155 Posted 21 Aug 2012 , 7:11pm
post #40 of 54

Jason, that was a great lesson in fair-play. Maybe you could remember your helpful hints there in future threads. I didn't personally attack you. Pretty sure we've seen worse.

jason_kraft Posted 21 Aug 2012 , 7:14pm
post #41 of 54

To clarify, I wasn't referring to this specific thread when I mentioned personal attacks, just that threads tend to be win-win when a topic is actually being discussed (like this one) and win-lose when people attack each other (that didn't happen here).

inspiredbymom Posted 21 Aug 2012 , 7:26pm
post #42 of 54

Wow! What a read! I have to say that I have added some to my quotes for items that I don't have and had to special order. I always make my customers aware of this though and I don't charge full price. It is usually towards the shipping of a special item and a little towards the item itself. I have not had a problem. These are not everyday things, but special molds that can get pricey. I have yet to have someone go to another baker because of it. They are just happy that I was so open about the process. Now, having said that, my prices are not very high and a $60 item can kill me!

As far as being reimbursed, I don't have to worry about that now, but when I worked at a state job, we were told that we were having our gas cards taken away for the cars that we used for State business. We were going to have to pay for the gas with a private credit card and they would pay that (less interest and charges because they are late paying for everything). I quit my job. I don't use credit cards and our State only pays once a month. They would not let me pay cash either. I had to have a credit card. No love lost. I didn't like the job anyway. My husband on the other hand has to purchase things in the field all of the time out of pocket and he sends in the receipt (he can pay cash) and they pay him back. The items are no more than $10 so I don't mind that. I just wasn't in the position to pay $400 a month for fuel when I only made (before taxes) $1,200.

In the end, you need to talk to your boss and then make an informed decision that you are comfortable with. If they want you to pay and don't give (or are slow in paying) you the money back, it will harbor ill will. If you are an employee and don't have the say on what is used, they need to give you guidelines on what is acceptable to make. Even though I am my own boss and have been for almost 17 years, I still talk to my hubby before I spend more than $30 on a specific item. It has saved me from spending money on things that I really didn't need.

Good luck to you in your new cake adventures. I don't think that your cake should belong in cake wrecks. I think you should get gold stars for having the guts to make the leap! Great job!!!!!!!

Addictive_desserts Posted 22 Aug 2012 , 1:41am
post #43 of 54

This has been an interesting read. I can see both sides, and therefore won't give an opinion however,
Jason you said " (but not 2x, since the allocation to the second order should be considerably lower than 100%)"

The only thing with doing this, your prices wouldn't be consistent, something that could be dangerous if customers discuss it amongst themselves!

jason_kraft Posted 22 Aug 2012 , 1:53am
post #44 of 54
Quote:
Originally Posted by Addictive_desserts

This has been an interesting read. I can see both sides, and therefore won't give an opinion however,
Jason you said " (but not 2x, since the allocation to the second order should be considerably lower than 100%)"

The only thing with doing this, your prices wouldn't be consistent, something that could be dangerous if customers discuss it amongst themselves!



That's a good point...but when dealing with a custom design that requires specialty equipment it's unlikely two customers will have exactly the same specs, so it won't be an apples-to-apples comparison.

Even if it is an exact comparison, IMO it's better than the alternatives (taking a loss on the specialty pan, giving money back to the first customer, or also charging the second customer 100% of the pan's cost).

howsweet Posted 22 Aug 2012 , 2:15am
post #45 of 54
Quote:
Originally Posted by jason_kraft

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Originally Posted by howsweet

If a customer wants petal shaped pans does she have to pay for those, too?


So if you don't see yourself ever using those petal-shaped pans again for another order, who should pay for them?


But I would see myself as using them again. Why wouldn't I use them again? They are a common bakery tool. I'd be offering them out as an option. Same with the damask stencils.

jason_kraft Posted 22 Aug 2012 , 2:37am
post #46 of 54
Quote:
Originally Posted by howsweet

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Originally Posted by jason_kraft

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Originally Posted by howsweet

If a customer wants petal shaped pans does she have to pay for those, too?


So if you don't see yourself ever using those petal-shaped pans again for another order, who should pay for them?

But I would see myself as using them again. Why wouldn't I use them again? They are a common bakery tool. I'd be offering them out as an option. Same with the damask stencils.



If you see yourself using them frequently then you can just allocate them over all orders for the expected life of the pans, as you would with the rest of your overhead. Either way, your customer(s) are paying for the pans.

howsweet Posted 22 Aug 2012 , 2:45am
post #47 of 54
Quote:
Originally Posted by jason_kraft

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Originally Posted by howsweet

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Originally Posted by jason_kraft

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Originally Posted by howsweet

If a customer wants petal shaped pans does she have to pay for those, too?


So if you don't see yourself ever using those petal-shaped pans again for another order, who should pay for them?

But I would see myself as using them again. Why wouldn't I use them again? They are a common bakery tool. I'd be offering them out as an option. Same with the damask stencils.


If you see yourself using them frequently then you can just allocate them over all orders for the expected life of the pans, as you would with the rest of your overhead. Either way, your customer(s) are paying for the pans.


That is stating the obvious as if it's somehow a new idea. The point is, if you buy a new stencil or a new oven, bakery equipment/tools would not be charged to the first customer that they are used for.

jason_kraft Posted 22 Aug 2012 , 3:08am
post #48 of 54
Quote:
Originally Posted by howsweet

That is stating the obvious as if it's somehow a new idea.



I never said it was a new idea, businesses have been allocating costs this way for a long time.

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The point is, if you buy a new stencil or a new oven, bakery equipment/tools would not be charged to the first customer that they are used for.



Sure they would, the percentage of the cost charged to the first customer would vary depending on how much use you can expect out of the item. For something like an oven that would be used on every order you might charge .1% of the cost (at 100 orders/year and a 10 year life), but in my example earlier in the thread of a mold that probably won't be used again, 100%+ of the cost goes to that customer.

FromScratchSF Posted 22 Aug 2012 , 4:34am
post #49 of 54

Personally, I only add charges on to an order if the customer wants something totally custom, like a custom mold. If it's a tool, mold or pan that I can buy retail (preferably wholesale) in order to execute a design that someone wants, it's not added to the cost of the cake - because I already have it in my yearly budget to buy new tools and supplies to keep up with trends - which in turn has already been added into my pricing structure. I think 2 or 3% of everything I sell is earmarked for tools and equipment, but I don't remember exact. In fact, the more advanced my designs get I think I have to adjust that figure up for 2013 because this stuff is getting pricey!

But anyway, I had to buy a damask stencil to execute a cake last year. Guess what? I used my powers of sales and eye for design to figure out how to work that stencil into designs I came up with over the year to at least get some use out of that stencil. Cupcakes, cookies, random patterns on fondant - you name it, if I can use that stencil, I do. I do the same with every technique and tool I spend money on. I just had to buy a bunch of isomalt gem molds and isomalt for an upcoming design - so guess what I'll be trying to sell at all my upcoming consultations? If someone wants a petal shaped cake and I have to buy a set of pans? Guess which shape I'll be suggesting at all my consultations?

As for reimbursing, once upon a time the USA used to have a lot of money and companies had things like employee charge cards. No so anymore, or it's more rare. Can only speak from experience, but in my former life I had a company charge card that they took away in 2006 when the economy tanked. Here's why - charge card accounts show as debt on a balance sheet. Employee reimbursements show as an expense. Much better column.

Addictive_desserts Posted 22 Aug 2012 , 6:19am
post #50 of 54

That's a good point fromscratch. Allocating x amount for new supplies per year would prevent the first customer to want a leaf cake pah for the whole cost of the tin.

Evoir Posted 23 Aug 2012 , 12:12am
post #51 of 54

Quick tip: rather than buying a new pan every time you get a unusual shape requested, go hire it from your local cake deco shop. Some even mail out for you. Charge the customer 100% for all the associated costs.

This is not what I do, but a handy tip for small CFL bakers etc with limited space and budget for new tools.

Evoir Posted 23 Aug 2012 , 12:17am
post #52 of 54

Quick tip: rather than buying a new pan every time you get a unusual shape requested, go hire it from your local cake deco shop. Some even mail out for you. Charge the customer 100% for all the associated costs.

This is not what I do, but a handy tip for small CFL bakers etc with limited space and budget for new tools.

Evoir Posted 23 Aug 2012 , 12:33am
post #53 of 54

Quick tip: rather than buying a new pan every time you get a unusual shape requested, go hire it from your local cake deco shop. Some even mail out for you. Charge the customer 100% for all the associated costs.

This is not what I do, but a handy tip for small CFL bakers etc with limited space and budget for new tools.

EvMarie Posted 23 Aug 2012 , 1:08am
post #54 of 54

I don't have an opinion to offer on the specialty tools. I don't do enough cakes to add anything of value.

However - I do have a thought on your venue wanting to offer cakes made by their very own pastry chef. Perhaps you and your boss can offer 2 styles of cakes. So, you don't have to stress out over learning every tiny little technique all at once.

I'm not sure if your target market are interested in cupcakes. However, you could offer cupcakes with a topper cake. OR, a 3 tiered cake with fresh flowers and/or ribbon. If you kept it these two offerings, you can perfect the basics. THEN...move on to other trendy techniques and fancy things.

Offering cupcakes is very convenient for a new decorator. With an acrylic stand, a neat presentation is offered effortlessly. With the options out there for great cupcake liners and wrappers...again, it adds to the flawless presentation. For add ons like pretty flowers and pearls, a sheen airbrushed on for sparkle. All these things are easily cut out in fondant, dried and placed on top of the icing. Monogram medallions look very pretty as well. I'm NOT a piper. I have NO desire to learn the basic buttercream techniques. So, I use cutters. Tons of them. You are a pastry chef! Maybe you know some neat things to do with chocolate & sugar for fun garnishes. Do you do anything special for your desserts? Perhaps those things would translate onto the cupcake tops?

For the 3 tier cake. Perhaps you can look into a standardized way of stacking. If you are offering the same 3 tier cake, technically the size and height of the cake would be the same, you can re-use say...hidden pillars and wilton separator plates. Doing the same technique of stacking over and over will build confidence. What about looking into the alternative ways of applying buttercream? Lots of people like the smooth application. I do too. But there are very pretty ways to apply buttercream "roughly" to get an effect. I've seen many that are elegant. So...then you just add fresh flowers.

When I first tried cakes....I went nuts trying this technique and that new idea & I just never got great at any ONE thing. Maybe it's best to offer 2 styles & 2 structures. That way, you are super confident a lot quicker.

THEN...think about adding another variable. Just my 4 cents. icon_wink.gif

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