Annabakescakes Posted 21 Aug 2013 , 7:49pm
post #1 of
Quote:
Originally Posted by howsweet 

Quote:
Originally Posted by Annabakescakes 

My prices are already higher than everyone else in the area.


Do you have employees? If not, maybe it's time to start considering it. You don't want to build up the business of someone else by turning away customers...if you don't have to. If something happens to slow business in your area you're better off having to let go an employee than compete for the business that's left. Just a thought.

I may as well get some advice on this too.

 

 

I have had someone enquire about renting my kitchen, but obviously I couldn't have them become competition, right under my own roof, lol!  I was considering contracting them to make the cakes I don't want to do, or the cakes I don't have time to do, KWIM? I was thinking of paying myself a set fee per serving, to cover supplies, cost, overhead, and bit profit, and having them take what is above that amount. They would have absolutely no overhead, and the benefit of an established name, and I could take more business. I would buy any and all needed cake toys, and they would still be mine. My recipes and methods. I haven't asked her is she wanted to be able to put her own name on them, though. I don't think that would work.

 

Is that weird? There would also be some training involved, but the person I am speaking to has a LOT of potential, and an eye for detail.  I haven't met her, so I would want personalities to mesh before we agreed to anything, but just hashing out the details before meeting, so we can discuss them in person, would be great.

 

If you were me, or this other gal, what do you think would be fair in this situation? If you currently own a business but don't want to have an hourly employee, would that work for you? Or if you live in a non-cottage food state, would you be happy not having your name on your work? What sort of compensation would work in each case? Anything else you can think of?

32 replies
jason_kraft Posted 21 Aug 2013 , 8:01pm
post #2 of

AYou are better off either hiring them as an employee or working out an independent contractor situation where they would be paid hourly or based on the job.

Annabakescakes Posted 21 Aug 2013 , 8:14pm
post #3 of

APaying them per cake would be paying them per job. The job is the cake.

Annabakescakes Posted 21 Aug 2013 , 8:18pm
post #4 of

AIt would be figure out on a per slice basis, but paid in full. I'm not saying I would pay them for 12 servings if that is all they did, if the cakes served 100. I'm sorry I must not have been clear, I. Was just giving the benefit of the doubt most people with reading comprehension were intelligent enough to figure that out.

jason_kraft Posted 21 Aug 2013 , 8:20pm
post #5 of

A

Original message sent by Annabakescakes

Paying them per cake would be paying them per job. The job is the cake.

A job may have multiple items, but that's really beside the point. The key aspect to paying by job is calculating how many hours a certain job should take, and paying your employee/contractor based on that labor cost. This adds some overhead for you (and depending on the situation there may be minimum wage issues), but it also protects you from paying more to an employee who is slower than normal.

Annabakescakes Posted 21 Aug 2013 , 8:21pm
post #6 of

ASay a cake serves 100 and I charge $350 and buy supplies and bake and fill and it is ready to decorate, and I give them $100-150. That is pretty easy for most people to figure out a percentage on a slice basis. The next 100 serving cake may be a $500 order but cost the same to bake and fill, but have in depth decorating. I could pay $350 for that one.

Annabakescakes Posted 21 Aug 2013 , 8:21pm
post #7 of

Anot rocket science.

jason_kraft Posted 21 Aug 2013 , 8:27pm
post #8 of

A

Original message sent by Annabakescakes

Say a cake serves 100 and I charge $350 and buy supplies and bake and fill and it is ready to decorate, and I give them $100-150. That is pretty easy for most people to figure out a percentage on a slice basis. The next 100 serving cake may be a $500 order but cost the same to bake and fill, but have in depth decorating. I could pay $350 for that one.

It sounds like you are basing the amount you give them on how long the cake should normally take to decorate (depending on complexity of course), this is in line with my advice above on paying based on the job.

The percentage would be labor cost for decorating (and any other services the employee provides) divided by the total cost of the order. If you want a per-serving amount and the order is only one cake you would just divide by number of servings. If you have preset items that customers can buy you can work out a percentage for each item, but with custom cakes you may need to adjust on a case by case basis.

And you're welcome, by the way. :)

Annabakescakes Posted 21 Aug 2013 , 8:27pm
post #9 of

AI would never figure or pay per hour since we are totally different, nor do I care how long it takes them as long as it looks good and gets done. If I set a per hour price for myself, I would have to take a huge cut in pay for some of the simple cakes. For many of those, it works out to $80 an hour. I am not going to go below my minimum price just because I or my contracted person smoked through the order in record time. That is where your formula fails.

Annabakescakes Posted 21 Aug 2013 , 8:33pm

AOh my bad, Thanks for nothing. I can figure that out for myself in about .02 seconds. I stated I would divide the profit. I didn't say I needed someone to do it for me. The question was directed at people with current business facing current times. You are welcome to find another thread to pick apart. Please don't respond any further, you are not helping, since you haven't answered a single qustiin and are just arguing about semantics.

jason_kraft Posted 21 Aug 2013 , 8:35pm

A

Original message sent by Annabakescakes

I would never figure or pay per hour since we are totally different, nor do I care how long it takes them as long as it looks good and gets done. If I set a per hour price for myself, I would have to take a huge cut in pay for some of the simple cakes. For many of those, it works out to $80 an hour. I am not going to go below my minimum price just because I or my contracted person smoked through the order in record time. That is where your formula fails.

The price you charge the customer would not change, we are only talking about how much you pay your employee.

The whole reason for job-based pricing is to avoid variance based on how fast or slow a specific employee is. If a cake (regardless of size or price) normally takes 6 hours to execute to the level of quality you expect and you value the decorating work at $20/hour, you would pay the employee $120 for that cake. If they are super-efficient and finish in 4 hours and the quality is to your satisfaction, they get paid $120. If it takes them 10 hours because they are just getting started, they get paid $120. If they rush through in 3 hours and need to put in another 5 hours of rework because the quality is not there, they get paid $120.

jason_kraft Posted 21 Aug 2013 , 8:39pm

A

Original message sent by Annabakescakes

I stated I would divide the profit.

Basing employee compensation on your profit may not be the best model, because profit includes markup for ingredients and overhead, neither of which the employee is responsible for. You really want to focus on just the value of the work the employee/contractor is providing.

Annabakescakes Posted 21 Aug 2013 , 8:59pm

AI will wait for someone that can add something. So far I haven't had any responses, just over complicated rantings that don't pertain to the question.

Annabakescakes Posted 21 Aug 2013 , 9:21pm

ARMy part would be the same for every cake, i would take the order, discuss it with the contractor, collect payment, bake, and fill most likely, then my part would be done. I know what it costs me, and an average of how long it takes to do my part, and I would still have my own cakes to bake and fill. The only variable is what the customer is paying, so that part the contractor earns would be the variable. I'd really prefer not to over complicate things, and would pay myself the exact same thing for doing it per cake order. The rest would go to the contractor. Simple.

Yes, some orders cost me more, others will cost me less. It all averages out, and I am perfectly fine with that. I also don't have a greedy bone in my body, so I am perfectly fine and even relish the thought of the decorator making considerable more money

Annabakescakes Posted 21 Aug 2013 , 9:23pm

AThan me on every cake she does, and considerably more doing "her specialty" than she ever though she would.

K.I.S.S.

jason_kraft Posted 21 Aug 2013 , 9:35pm

A

Original message sent by Annabakescakes

RMy part would be the same for every cake, i would take the order, discuss it with the contractor, collect payment, bake, and fill most likely, then my part would be done. I know what it costs me, and an average of how long it takes to do my part, and I would still have my own cakes to bake and fill. The only variable is what the customer is paying, so that part the contractor earns would be the variable. I'd really prefer not to over complicate things, and would pay myself the exact same thing for doing it per cake order. The rest would go to the contractor. Simple.

This would be an extremely generous compensation package for your contractor, since you would be essentially reversing the roles of entrepreneur and employee by collecting your own costs and a small fixed profit for yourself with all the additional benefits accruing to the contractor.

If your primary goal is to have as simple a compensation structure as possible and you are not concerned about the opportunity cost of lost profits then your formula will work for you.

as you wish Posted 21 Aug 2013 , 10:21pm

AI think what you are proposing could work if you got just the right person. If what they are looking for is a foot in the door to build their own business it could be a problem. They might not want to put out a product without their own name on it. However, if they can appreciate what you are offering in terms of an already established business with a solid reputation and customer base, this could work. Have you had much communication with the person you have in mind? You mentioned that she was interested in renting your kitchen; does that mean she wants to be doing her own thing? Or do you have some indication she would be interested in what you are thinking of?

liz at sugar Posted 21 Aug 2013 , 10:25pm

If the work has to be done in your kitchen (because that is where the license is) I don't think you can consider the other baker an independent contractor.  Would have to be an employee.  But please check with your state regulations.

 

Liz
 

jason_kraft Posted 21 Aug 2013 , 10:31pm

A

Original message sent by liz at sugar

If the work has to be done in your kitchen (because that is where the license is) I don't think you can consider the other baker an independent contractor.  Would have to be an employee.  But please check with your state regulations.

Good point. The IRS has a pretty good guide (although as you said some states may vary), in this case I agree that this sounds like an employee situation.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Behavioral-Control

as you wish Posted 21 Aug 2013 , 10:42pm

AHmm. I am kind of thinking out loud here but I wonder if a partnership kind of thing would work? Not an equal partner, but a small percentage sort of thing. I really don't have a great handle on small business employee laws and whatnot, especially in the US, so feel free to disregard my thoughts here.

morganchampagne Posted 21 Aug 2013 , 11:04pm

AJust chiming in. I have a lady who I contract all of my sugar flower work to. I'm just no good with it. She's not a partner but I do supply her with gumpaste. I work all that in to my pricing and it's worked out nicely.

While its not the same I just wanted to share that it can work. Don't know that I would want to do it with a complete stranger. But I'm a success story of sorts!

Annabakescakes Posted 21 Aug 2013 , 11:08pm

AI know of several independent contractors that do painting and maintenance for an apartment complex and the work has to be done there, but they have to use their own tools, that is the only thing I am worried about. Obviously I would have to look into it further.

hislilbaker89 Posted 23 Aug 2013 , 11:06pm

ACan u explain more about ur arrangement please

Original message sent by morganchampagne

Just chiming in. I have a lady who I contract all of my sugar flower work to. I'm just no good with it. She's not a partner but I do supply her with gumpaste. I work all that in to my pricing and it's worked out nicely.

While its not the same I just wanted to share that it can work. Don't know that I would want to do it with a complete stranger. But I'm a success story of sorts!

hislilbaker89 Posted 23 Aug 2013 , 11:08pm

AWhat if she had a license too and she just uses the equipment would it still be considered a employee?

Original message sent by jason_kraft

Good point. The IRS has a pretty good guide (although as you said some states may vary), in this case I agree that this sounds like an employee situation.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Behavioral-Control

kikiandkyle Posted 24 Aug 2013 , 12:18am

ABefore you get too far into how you'd pay them, are you even sure they'd be interested in that kind of arrangement? If she approached you about renting your kitchen I'm guessing she's looking to start her own business rather than a job.

Are you proposing that she brings any clients to you and they buy from your business, with her doing the decorating? Is she ultimately going to want to go out on her own, and if she does how will you handle the clients?

morganchampagne Posted 24 Aug 2013 , 2:04am

A

Original message sent by hislilbaker89

Can u explain more about ur arrangement please

It's a neighbor I have. She's amazing with her hands, but she's not a baker, and has no interest in being one. So I mix the gumpaste and let it mature, and take it to her. I price the sugar flowers and she gets that part of the money. I get paid for the cake and other decorating. She also is in on the discussion of the design of the cake if they want flowers

Annabakescakes Posted 24 Aug 2013 , 2:57am

Someone privately posted something to me, (because she didn't want to start arguing semantics either), that I will look into further, but this is what they said (edited to stay anonymous and to take out all the hilarious things she said about a CC member)

 

 

Quote:

...... but I don't feel like having ***** pick it apart and ask me questions, lol.

I have an arrangement with a woman and a business I own, (not caking.)
I own the business and location, all the tools, pay all the bills, etc etc, she comes in as a contract worker and 'rents' my tools, and gets paid a commission per job.
It works out well for both of us, and is completely legal in my state

 

So, it has been done, and it works, and it certainly was concise, without a lot of added off topic, dead horse beating and BS. HOW REFRESHING! I love it.

Annabakescakes Posted 24 Aug 2013 , 2:59am
Quote:
Originally Posted by morganchampagne 

Quote:
Originally Posted by hislilbaker89 

Can u explain more about ur arrangement please

It's a neighbor I have. She's amazing with her hands, but she's not a baker, and has no interest in being one. So I mix the gumpaste and let it mature, and take it to her. I price the sugar flowers and she gets that part of the money. I get paid for the cake and other decorating. She also is in on the discussion of the design of the cake if they want flowers

I would love someone to do figure work for me, I really would love to be able to whip out beautiful people and pets, but I am not interested in it enough to practice.

jason_kraft Posted 24 Aug 2013 , 3:05am

A

Original message sent by Annabakescakes

I have an arrangement with a woman and a business I own, (not caking.) I own the business and location, all the tools, pay all the bills, etc etc, she comes in as a contract worker and 'rents' my tools, and gets paid a commission per job. It works out well for both of us, and is completely legal in my state ... So, it has been done, and it works

The situation as described above certainly can work and be fair to both parties if the commission is based on the value added by the contractor. You may think this is "semantics", but it's a critical component of your compensation structure that will help you maintain your profits down the road.

And in any case, I don't think anyone has said this type of arrangement was illegal.

jason_kraft Posted 24 Aug 2013 , 3:09am

A

Original message sent by hislilbaker89

What if she had a license too and she just uses the equipment would it still be considered a employee?

The distinction between contractor and employee (from the IRS and the state) can sometimes be unclear. The best thing to do if you have a question is to contact a local attorney with expertise in state and federal labor laws.

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