I had no idea that how we all charge for cakes is such a contentious issue! 
I think each of us just has to use what works best for us at the time. What works for me now in pricing my cakes may not work for me later. As I get faster, I will factor in the number of hours it takes me to make a cake. But for now, I don't think it is fair for me to do so. And I don't think that makes me less of a professional. I am very good at what I do, just not as fast as some others may be. So to sum up my opinion...do what is best for you. There is no set answer that works for everyone.
I was thinking "if she didn't know, she must be new here!" but then I saw you have been here since '07, so Where ya been? :-)
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Original message sent by Norasmom
There's no way I could charge for my hourly time.
So you don't consider your labor costs when charging for a cake?
Very good point. I try to make the same one.
Mechanics have a standardized "hourly" for labor. Although it make take a beginner longer to (insert kewl car maintenance term here) or take half the time for an expert, they typically charge the same fixed time.
Skill level must be considered. It's not fair to charge someone 6 hours if the average would only be 3.
Exactly! If it is a new technique for me, and I know it would take someone else 2 hours, but I have to research and practice first with trial and error first, and it still takes me 4 hours on top of the 2 hours on "the internets"I do not charge for that, it is the cost of doing business, continuing education, if you will ;-)
Soooo, does anyone on here charge the same as say...Ron Ben Israel? I doubt it. Skill level should play a great deal in pricing. I mean...you could spend 24 hours on a cake that will end up on Cakewrecks. Would it be worth $240 just because you spent the time but couldn't back it up with skill?
Oh, yeah, absolutely!!! My husband and I were talking about that yesterday. I have not been messing around lately, and I have been over-bidding things I do not want to do, and charging for what I really think it would be worth, rather than bidding just to get the order. I made 5 cakes this week, and I charged a decent amount, and made twice what my husband makes in 2 weeks. We had a lot of fun, but the cakes looked awesome, and nobody else in this area could've done them! That is worth quite a bit!
AHis minimum order is $500.... I had a conversation with a friend I. The food service industry 2 days and she insisted that ingredients had nothing to do with the price. She is he type u can't convince so I didn't try too hard but I tried to explain that even though bakeries charge a per serving price their are usually upcharges for premium fillings, flavors, fondant and frostings. The cake we were discussing took 18 eggs between the cake and frosting and expensive chocolate and heavy cream for the ganache. My per serving price is obviously going to be higher for that than for a yellow cake with American BC. I wanted to choke her but I just smiled.
No, I really don't, not to the point of charging for 6-7 hours what would take someone with more experience 3 hours. It's probably not the most entrepreneurial thing to do on my part, but my prices are market value. I just take a long time to do my work. I charge the same prices as the bakery 20 miles away. The bakers at that bakery have tons of experience and move quickly. I am still practicing and learning.
It reminds me of hairdressers. At the place where I get my hair cut, the new stylists charge half of what the "master stylists" charge. They take a bit longer but my hair looks pretty darn good. Someday the new stylists will be "master stylists"...with time, clientele and experience.
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Original message sent by Norasmom
No, I really don't, not to the point of charging for 6-7 hours what would take someone with more experience 3 hours. It's probably not the most entrepreneurial thing to do on my part, but my prices are market value. I just take a long time to do my work. I charge the same prices as the bakery 20 miles away. The bakers at that bakery have tons of experience and move quickly. I am still practicing and learning.
The other bakery presumably incorporates labor into their pricing, so even if you are blindly copying a competitor's pricing structure you are in fact taking labor into account. (If the other bakery does not include reasonable labor rates as a cost component they do not represent true market value.) You are just earning a lower effective hourly wage because you are not as efficient.
There's nothing wrong with this (as long as you understand why you are pricing the way you are and are in line with the market), as you become more efficient your effective hourly wage will increase automatically. You can also increase your wage by applying new skills to improve quality and move your products upmarket (similar to the "master stylists").
The other bakery presumably incorporates labor into their pricing, so even if you are blindly copying a competitor's pricing structure you are in fact taking labor into account. (If the other bakery does not include reasonable labor rates as a cost component they do not represent true market value.) You are just earning a lower effective hourly wage because you are not as efficient.
There's nothing wrong with this (as long as you understand why you are pricing the way you are and are in line with the market), as you become more efficient your effective hourly wage will increase automatically. You can also increase your wage by applying new skills to improve quality and move your products upmarket (similar to the "master stylists").
I dont think she said she wasn't taking her labour into account though... just that she couldn't justify basing it on hourly time.
I have started working on the cost of each recipe and I'm excited to find out my carrot cake is only $3! Haven't figured the cost of icing yet....but that leaves me plenty of margin for profit....It's going to take some time to do all of it though.....
annabakescakes...Yes, I have been a member since 2007. I got a slow start....soaked up tons of knowledge from all of you amazing Cake Central members and have been improving my hobby. I'm now in the process of opening my own bakery. Building a second kitchen in my basement as we speak, opening for business in August. I've been on a lot here lately and have been contributing much more. I hope to become more and more involved. I liked to lurk a lot before, but I have a resolution to participate more as well. I love this place!
I think the simplest way is:
cake price quote = (raw materials and supplies) + (overhead fraction) + (estimated hours * $___/hour)
As a decorator, how much do you value your time? ($20/hour)?
You can also break down the hours and charge less/more for baking, torting, filling/icing, versus designing and decorating.
I don't quite understand why this is such a popularly accepted system.
If you price your cakes by setting the amount per hour based on "how you value your time", that is pricing your work like a plumber or lawyer does except you are not a service, you are selling a tangible item. It's such an unnecessarily subjective call to have to make. And from what I've seen on these boards, hardly anyone is charging as much as a plumber, let alone a lawyer.
Doesn't everyone want to get as much as they cake for their cakes? That formula doesn't take into account market price. If McDonald's can make a hamburger for $1 that everyone else is charging $5 for, they are going to charge something like $5.
I had no idea that how we all charge for cakes is such a contentious issue! I think each of us just has to use what works best for us at the time. What works for me now in pricing my cakes may not work for me later. As I get faster, I will factor in the number of hours it takes me to make a cake. But for now, I don't think it is fair for me to do so. And I don't think that makes me less of a professional. I am very good at what I do, just not as fast as some others may be. So to sum up my opinion...do what is best for you. There is no set answer that works for everyone.
And that exemplifies why you charge market value for cake. And while as you say, there may be no set answer, there can be awful answers that effect others and are therefore irresponsible. That's why it's a contentious issue. If home bakers are charging less than what a viable business would charge (someone making a living from cakes instead of, for example, a husband supported cake subsidy program), that is unconscionable. Unfortunately many of the people who drastically undercharge don't have the slightest bit of understanding of the problem and if you explain it, they don't believe that their "little cake business could possible hurt anyone". But cumulatively the little cake businesses do indeed have an effect. The smaller the town, the larger effect.
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Original message sent by howsweet
If you price your cakes by setting the amount per hour based on "how you value your time", that is pricing your work like a plumber or lawyer does except you are not a service, you are selling a tangible item. It's such an unnecessarily subjective call to have to make. And from what I've seen on these boards, hardly anyone is charging as much as a plumber, let alone a lawyer.
Doesn't everyone want to gwet as much as they cake for their cakes? That formula doesn't take into account market price.
You are absolutely correct that looking at your cost is only part of the equation, accurately measuring market value is the other key component since it determines your profit. Depending on your market you may need to revise your hourly wage to better reflect your customer base, and if you find that you are making $1/hour with zero profit it's probably time to reassess your business.
To your other point, I would argue that cake decorating is more of a service. The fact that a tangible product (like a new faucet or a legal motion) is provided as part of that service doesn't make it any less of a service.
Most cake decorators don't charge as much as plumbers and lawyers because the barriers to entry are considerably lower for cake decorators. Cakes also tend to be luxury items, as opposed to plumbing and legal services which are often necessities.
I don't quite understand why this is such a popularly accepted system.
If you price your cakes by setting the amount per hour based on "how you value your time", that is pricing your work like a plumber or lawyer does except you are not a service, you are selling a tangible item. It's such an unnecessarily subjective call to have to make. And from what I've seen on these boards, hardly anyone is charging as much as a plumber, let alone a lawyer.
But you are selling a service in a sense (the designing and decorating part of it), AND a tangible item. The tangible item is accounted for in the cost of ingredients (which becomes the cake itself), and the service is accounted for in the time and skill it takes to custom design and decorate a cake. Plumbers and lawyers are charging for their experience and skill, are they not?
I want to also add... I believe one of the biggest problems home bakers have when pricing is that they are trying to sell to customers who can't afford high end custom cakes. Most of us who sell these cakes don't have lots of rich friends and acquaintances. But rich people are the folks who can afford, say, $300 for a 32 serving birthday cake. Who else pays that much for cake? There are people who make the occasional splurge, but they don't tend to be returning customers.
I hear a lot of, "cakes don't go for that much in my area". Of course they do ---- unless there are no rich people in your area. The reason I know that's what cakes go for is because I know what you have to sell them for to eek out a living. Period. So when you decide that no one in your town pays that much for cake, carefully examine exactly what you're really basing that on.
And the third thing that we have problems with is - because we are not our target customer and are not rich, we have trouble charging $300 for a 32 serving bd cake. It just doesn't fall easily off the tongue because that sounds like so much money for cake to us.
So if you aren't going to locate your target market, people who can easily afford a high end custom cake, what are your options? Charging less? Undervaluing your product? I don't see undercutting someone whose trying to make a living selling cake as a very kind thing to do.
But you are selling a service in a sense (the designing and decorating part of it), AND a tangible item. The tangible item is accounted for in the cost of ingredients (which becomes the cake itself), and the service is accounted for in the time and skill it takes to custom design and decorate a cake. Plumbers and lawyers are charging for their experience and skill, are they not?
I suppose one can look at it that way, but personally I don't spend much time on the design relative to the time spent making the cake. And lots of people already want a predesigned cake from my website or have a photo of a cake they like.
Honestly I don't give a flying flip how people price cakes, but am interested in the end result being realistic. And this "decide what you want to make per hour" thing is really tripping people up in my opinion. Crazy as it sounds, I think there's an argument to be made that all these people undercharging should forget calculating what their costs are to the nth degree and just go find out what Joe's Bakery is charging for comparable work and use that price. From what I've read here, it seems like practically everyone would have to raise their prices. :)
Well, yes, we don't always have a lot of design work to do for every cake either. But the decorating itself is a service too. That's why we charge more than Wal-Mart or other grocery stores, because we are providing a service that they don't.
If new cake decorators want to just start out by matching prices with their local competition, more power to them! That's actually how we started out too, and it worked well for us as a starting point. And as you said, at least that way they're not undercutting. However, if you really want to do this as a long term business, at some point I think you're going to have to figure out what your actual costs are.
You are absolutely correct that looking at your cost is only part of the equation, accurately measuring market value is the other key component since it determines your profit. Depending on your market you may need to revise your hourly wage to better reflect your customer base, and if you find that you are making $1/hour with zero profit it's probably time to reassess your business.
To your other point, I would argue that cake decorating is more of a service. The fact that a tangible product (like a new faucet or a legal motion) is provided as part of that service doesn't make it any less of a service.
Most cake decorators don't charge as much as plumbers and lawyers because the barriers to entry are considerably lower for cake decorators. Cakes also tend to be luxury items, as opposed to plumbing and legal services which are often necessities.
I'm not going to defend my opinion that it's less a service and more a product, because I do agree it can be argued either way. I'm just trying to present a different way of looking at it so people will stop undercharging. I think for some people if it's looked at as a product, it will be easier to place a higher value than if we're talking about "what my time time is worth". It takes the high price off of the person and places it onto the cake.
All that matters to me is the bottom line as I have been undercut quite a bit since the cottage food law here in Texas went into effect. Somehow the "formula" keeps leaving out the market value and in spite of all the lip service, I don't honestly believe most people are even really figuring out their costs or keeping track of how much time is spent on the cake.
The undercutting is extremely vexing to me. Last time I got sick and found a home baker to do a certain cake, instead of being grateful her eyes had been opened about what she should really be charging, she gave the customer a cake that was twice as nice for the price. I was stunned. Not only did she not even seem to realize that she had blatantly tried to lure the customer away from me, she totally missed the pricing lesson. I wanted to shake her and say, "Wake up, silly!" hahaha. And she was indeed running a husband funded cake subsidy program.
Well, yes, we don't always have a lot of design work to do for every cake either. But the decorating itself is a service too. That's why we charge more than Wal-Mart or other grocery stores, because we are providing a service that they don't.
If new cake decorators want to just start out by matching prices with their local competition, more power to them! That's actually how we started out too, and it worked well for us as a starting point. And as you said, at least that way they're not undercutting. However, if you really want to do this as a long term business, at some point I think you're going to have to figure out what your actual costs are.
My sole source of income for my household is my cake business. I would rather not compete against people who think they are running a business, but are not. Who knew it would be easier to compete with people who actually have business sense?
I apologize to the OP. i never answered your question. There are a number of ways to look at it and as Jason pointed out, what works well for one person will not work for another. For my business, what I need is the highest price possible for each order. So I charge the same for a one tier as for a 2 tier. Most customers don't want to pay that much for a single tier, so what happens usually is the customer who wants a simple one tier cake either finds another baker or chooses a fancier two or three tier cake from me. It only takes me slightly more time to stack a cake and it's easier for me to roll out fondant for two small cakes than one giant one. I used to think tiering was scary and hard, but now I can do it easily and quickly. If they don't mind paying the same price for the single tier, that's not a problem either. I just need at least $200-300 per order.
My sole source of income for my household is my cake business. I would rather not compete against people who think they are running a business, but are not. Who knew it would be easier to compete with people who actually have business sense?
I know, right?? ;)
Our shop and custom cakes is our sole source of income, too. (Although, at the moment, "income" is being very generous!) We're in our second year of business as a storefront, and it is SUPER frustrating to be undercut by all of the home bakers. Our market feels totally oversaturated right now (cottage food law state here, too). It seems like a new "cake business" pops up every day!
I would honestly rather home bakers charge the same price we do (or at least close to it) and keep all of the extra money it gives them, instead of charging less just because "I work from home and don't have the overhead the storefront bakeries do."
I know, right?? ;)
Our shop and custom cakes is our sole source of income, too. (Although, at the moment, "income" is being very generous!) We're in our second year of business as a storefront, and it is SUPER frustrating to be undercut by all of the home bakers. Our market feels totally oversaturated right now (cottage food law state here, too). It seems like a new "cake business" pops up every day!
I would honestly rather home bakers charge the same price we do (or at least close to it) and keep all of the extra money it gives them, instead of charging less just because "I work from home and don't have the overhead the storefront bakeries do."
I agree and it's not always really extra money at home because expenses in terms of supplies can be more and labor can be longer. I don't ever make a zillion cookies en masse, so I don't have exact numbers, but I bet with my huge oven and mixer, I could easily make 24 dozen choc chip cookies in an hour and be finished cleaning, too!
So what do you do when you find out someone is running a pretty successful "business" without a license or required food service permit from the health department. as for the market being saturated it would seem so when I look at all of the "businesses" on Craigslist but when I call the real bakeries they are booked up through Aug-Sept so that gives me some hope. In this area of VA you cannot cook out of your home or get licensed if you are not baking in a place with a health cert. Iam a home based business as in I take my orders, do my research and do everything from home except my baking. I do that in a kitchen I rent. So if there are so many home bakers out there that you know are operating illegally would you turn them in? Or just continue offering a quality item and advertising that you are licensed?
So what do you do when you find out someone is running a pretty successful "business" without a license or required food service permit from the health department. as for the market being saturated it would seem so when I look at all of the "businesses" on Craigslist but when I call the real bakeries they are booked up through Aug-Sept so that gives me some hope. In this area of VA you cannot cook out of your home or get licensed if you are not baking in a place with a health cert. Iam a home based business as in I take my orders, do my research and do everything from home except my baking. I do that in a kitchen I rent. So if there are so many home bakers out there that you know are operating illegally would you turn them in? Or just continue offering a quality item and advertising that you are licensed?
But where do you prep the icings/fillings/decorations? Surely you're required to do ALL of the work involving you touching the cake in the rented kitchen. Correct me if I'm wrong, but I don't think I've ever heard of a law that restricts the baking to a commercial facility, but allows for making other ingredients and assembly in your home.
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Original message sent by BatterUpCake
So if there are so many home bakers out there that you know are operating illegally would you turn them in?
Absolutely. The health dept's job is to enforce food safety laws, and they can't be everywhere so they rely on citizens to refer suspected illegal businesses.
So if there are so many home bakers out there that you know are operating illegally would you turn them in?
You better believe it ! And I've seen a fair share of dirty legitimate businesses so I can only imagine illegal ones. And if the illegal ones are so keen on following all the rules and sanitation and this and that, might as well go legit.
For the pricing part of the thread. If you can't pay yourself minimum wage for your cakes, go do something else, seriously. You will make more money restocking shelves at walmart and you will have workers comp. If you sell cakes without making minimum wage, you are undercutting. But not only that, you are running a failed business. Or like my new favorite word around here is " husband subsidized cake program " you are not a viable business.
Cut your losses. If you can't provide a product at market value with paying yourself at least minimum wage and bring in profit to sustain your business and grow, get out. You're doing no one a favor. Go acquire more skills, re-evaluate the products you use, where you are doing your business from and whatever else that needs to be done to make you a profitable business. Otherwise you are just milking a side income, fooling yourself that this is awesome that you are living your dream of making cakes. But that's not a business.
As far as the OP, I think you already got the answer you seek. Personally if it takes more time and material to do tiered cakes, that will be reflected in the price. The price per serving is not arbitrary, it should reflect your costs / labor / overhead / profit.
And I just wanted to add. No offence, but people who price themselves strictly on other bakeries in the area are insane. That's not a business plan at all, it's suicide. Unless you base yourself off the most expensive places in your area, but even then that's nuts ( to me ). You clearly won't have the same overhead, your suppliers won't provide you with the same prices ( if you even have one ), there's just so many other factors. Maybe your work is actually not up to par. And maybe you could actually provide a similar product for a cheaper and start growing your customer base faster because of it, but you won't because you just matched someone else and you have no competitive advantage.
Yes Yes Yes, for some people, this as worked. CC is a BIG place, with people from all over the world. Even if 20 people around here tell you they did it and it worked, it doesn't make it a good decision. They are fortunate and I'm happy for them. What you won't see is all the ones who failed doing the same thing. The won't come on CC to tell you they wen't bankrupt and lost their house.
But where do you prep the icings/fillings/decorations? Surely you're required to do ALL of the work involving you touching the cake in the rented kitchen. Correct me if I'm wrong, but I don't think I've ever heard of a law that restricts the baking to a commercial facility, but allows for making other ingredients and assembly in your home.
I do it at the restaurant... I currently only do about 2 cakes a week and my daughter owns the restaurant so I have access whenever I need it....usually during slow times or while it is closed
And I just wanted to add. No offence, but people who price themselves strictly on other bakeries in the area are insane. That's not a business plan at all, it's suicide. Unless you base yourself off the most expensive places in your area, but even then that's nuts ( to me ). You clearly won't have the same overhead, your suppliers won't provide you with the same prices ( if you even have one ), there's just so many other factors. Maybe your work is actually not up to par. And maybe you could actually provide a similar product for a cheaper and start growing your customer base faster because of it, but you won't because you just matched someone else and you have no competitive advantage.
Yes Yes Yes, for some people, this as worked. CC is a BIG place, with people from all over the world. Even if 20 people around here tell you they did it and it worked, it doesn't make it a good decision. They are fortunate and I'm happy for them. What you won't see is all the ones who failed doing the same thing. The won't come on CC to tell you they wen't bankrupt and lost their house.
Just curious who you are replying to...so your advice is to undercut other bakers? Tsk Tsk....
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