HI Everyone,

I need your help on negotiating with my boss.  I am a cookie and cake decorator and my boss loves my cookies to sell at the shop.  I don't have the time to bake and make them at work because of the cakes. I am also licensed from my home as well.  I would like to make extra money on the side so I would like to make them from home.  What do you all think would be a good and fair percentage between the both of us?  It would be my supplies, utilities, and time.

No percentage - you make them at home with all your own supplies - you work out what you need to sell them for (not cheap because he is your boss) - you give him the price - if he wants to sell them he pays you what you ask - when he sells them in his shop he adds his mark-up.

When you are calculating your price - do NOT think about what he will sell them for and use that to factor your price. 

IF he doesn't want to pay what you ask...... DO NOT negotiate !

IF he REALLY wants them - he WILL pay   ....  don't let him get rich at the expense of your health and well being - you want to make EXTRA money - not run a charity for your boss

ASolid advice!

All too often people get all excited about selling to a store. They try to lower the price to make it easier for the company to purchase them. Are they any easier to make? No!

you are so right!  That's why I need your help.

AJust be honest with him - "the cookies cost me $x to make and x hours at $x per hour, so I can't sell them for less than $x each. It's my time off and I don't need to spend it working for less than a fair wage."

AVery likely, his ingredients are cheaper than yours, so I would work something out where you could buy your ingredients through his supplier and then give him a little break on the price. Seems to me that if you want to charge too much, he'd just hire someone else to make them in bulk - KWIM?

If it were me, I would keep it simple and factor it as overtime. If you're doing the labor anyway, why not stay longer at work and have him pay you time and a half? Seems easier than negotiating or figuring out what he owes you, him ordering from you, transporting them, etc. Unless he's willing to let you slap a sticker on them with your name, etc. then I would do it as overtime.

Thank you all for your help!!   It was very helpful.

A

Agreed. Check out the Pricing Formula link in my signature for details on how to incorporate ingredients, labor, overhead, and markup to come up with a price.

When you are calculating your price - do NOT think about what he will sell them for and use that to factor your price.

It is still important to consider what the final price will be after the retailer's markup (which you should find out before you work out pricing). If the markup pushes the retail price higher than your target market is willing to pay then the product won't sell, in which case you need to reduce your costs and/or come up with a different product that provides enough value to make the final price workable.

Go into your negotiations with an idea of what your minimum acceptable wholesale price would be (preserving a decent wage and profit margin for yourself), but start by offering a higher wholesale price that produces a retail price at the upper range of what the market will accept.

A

It's standard practice to include the manufacturer's brand on a product that is sold wholesale (with the exception of private label deals such as generic products for grocery stores). If OP is interested in growing his business then not being able to advertise his brand would be a deal-breaker.

For ingredients you can just approach wholesale suppliers directly, as long as you have a business license there shouldn't be an issue.

The other thing to consider is if your home bakery license allows you to sell wholesale, in some states this would require a separate commercial kitchen. If wholesale is not an option for you then you would need to make a case that the increased revenue from the cookies would exceed the shop's incremental costs for your overtime.

A

Bakeries don't always advertise who makes their product. I worked at one that baked Otis Spunkmeyer cookies daily but claimed they were scratch. In my experience, the standard practice for bakeries is to want credit for everything they sell.

Wholesalers will often have different prices for different customers. A bakery that buys in larger quantities will get a price break that a small home-based business will not. Also, some wholesalers will only deliver to actual businesses - with some only delivering to those with loading docks. Many wholesalers operate only by delivery and only to actual businesses (those semi trucks aren't usually allowed on residential streets).

In some states selling wholesale requires different procedures and permits and you must label all products with ingredients, etc. You would have to check with your local health department to find out if your current license allows you to sell wholesale and what additional requirements apply to wholesaling in your area.

A

You're right that there are other options for selling wholesale, but if OP is interested in growing his business then selling the items packaged with OP's business name and brand is the best way to do that. Generally that's how things go when a manufacturer approaches a retailer to sell a packaged good. Of course open stock is a different story (although it does make packaging much easier), and private label arrangements tend to be initiated by the retailer.

Huge issue alert: Most bakery suppliers will only deliver to a business that has a retail location or a manufacturing facility. They will not deliver to a residential address.

The wholesale bakery supplier I dealt with (BakeMark) had no problem with a cash & carry pickup as long as it was arranged in advance. They have many distribution centers across the US. Wholesale prices are also available at restaurant supply stores like Restaurant Depot.

As far as price breaks, they might be available if you buy by the pallet, so unless OP's boss runs a chain that leverages their procurement across several different bakery locations it's doubtful there will be an advantage for OP buying on his boss's account. Assuming OP's boss is even willing to do that.

A

What are you basing that on? Have you worked with any suppliers other than your local BakeMark?

A

That's been my experience at BakeMark, Restaurant Depot, and two independent Cash & Carry stores in San Jose.

Can you share your own experience of different price points at wholesale suppliers?

A

I have dealt with Sysco, Bakemark, Dawn, and FSA.

I have shopped at Cash & Carry, etc. but they are also open to the public and aren't what I would really call "wholesalers" although they do allow you to purchase some items tax-free with the proper business documentation. Cash & Carry, et al. are no different in my opinion than Costco and not what I (and I believe some others) were referring to. Most bigger businesses buy in bulk from larger suppliers and don't run to the local Cash & Carry when they need ingredients.

Also, suppliers DO give you price breaks and offer different prices to different customers based on the contracts that are signed. I have entered into contracts where I was guaranteed certain pricing if I ordered minimum quantities.

A smaller scale business such as you used to operate probably weren't offered the same deals and didn't have the need to buy in higher quantities since your needs were small. I could see why shopping at your local Cash & Carry would have made sense for you.

:grin:

A

Can you give some examples of the discounts offered for different minimum quantities? If it is significant enough to make a difference and OP's boss can hit the required quantities then it might indeed be worth it to strike up a discussion.

Of course, I'm not sure if the wholesale suppliers would be happy if they discover that you are ordering product for another company under your account. The alternative would be OP purchasing supplies directly from OP's boss, assuming the bakery wants to get into the reselling business (if the contract even allows resale of the ingredients themselves).

The main reason behind shopping at Cash & Carry was price, not tax-exempt status. In some cases they had lower prices for cases of ingredients than the wholesale suppliers.

A

That's true. There are a few options for buying wholesale quantities online but depending on the product shipping could be an issue, in this situation piggybacking on another business's supply chain (if allowed) becomes a more desirable option.

A

No, I can't give specifics as my prices and contracts are confidential per the terms of the contract. However, it is a significant savings, especially when certain commodities suddenly jump in price.

I also don't need to provide confidential information in order to answer the OP's question.

A

General ballpark figures would be fine...for example, does the price break for butter happen at 250# or 2500#?

If you are not comfortable sharing this information then don't worry about it, I'm just curious. :)

AIt's not necessary to answer that, as it is only relevant to me. OP's prices would vary as would any other baker here.

What I have negotiated with my suppliers is privileged information. OP (or anyone else here) should know that prices are often negotiable and you can get price breaks if you ask - or even insist. It helps in negotiating if you have another big supplier in the area.