ASo, I am almost done with college. After next semester I will have my bachelors in Dietetics and Nutrition. I have also been a successful decorator for 9 yrs but wish to get out of the house with my business. A local "new" coffee shop has asked me to work there supplying sweets at the counter. The pay is a measly $7.50 with 20% commission on all cakes the I CURRENTLY have an order for and10% for orders taken from this day forward....I feel like this is a rip off?! Papers have not yet been signed, so I will be discussing this with the owner tomorrow. Am I being selfish and egotistical or am I justified in asking for the bare minimum of 20%? The cafe is supplying all supplies... I am bringing in an estimate clientele of 300+! My clientele expands over a 200 mile radius. No small time decorating here!
I think you have to do some math before you decide the value of the offer.Â
First of all, I wouldn't take orders for any of my regular customers through the business. You wouldn't want to risk a situation where the biz owner refuses to let you take your client list when you go.
But back to the numbers, I assume the ingredients and overhead are paid by the shop owner? So from there you have to figure the amount you would earn per cake.Â
Let's go with round numbers: if a client orders a $100 cake, you get $20 off the top and then your hourly rate. If it takes you 3 hours, you're at $42.50 gross earnings. The question is, is that comparable to what you would earn if you were on your own? I don't know, you have to figure out all the numbers and compare.Â
Of course, the number of cakes that are ordered is important too. Can he guarantee a certain number of orders each week? Who sets the prices on the cakes? Who controls your work load? Can you negotiate a higher commissionÂ on customers who are part of your personal customer list?Â
I don't think the offer is good or bad, it's just Â a starting point,Â AND you can negotiate, don't forget.Â
AThank you!! After crunching the numbers, 20% is comparable. Just not having to buy the supplies is worth it, HOWEVER, the 10% is kind of a kick in the teeth. We definitely have some fine tuning to do...just wanted to get an outside opinion first :) I don't want to be greedy but as you all know, cake decorating an be emotionally, mentally and physically taxing.
Discreetly look around at other opportunities at different bakeries. Â You might get a better offer in which case you can tell your current employer to match or you walk.
This is done all the time with job-seekers, even in a not-so-good economy! Â Â
A little more information would help. First are you doing the baking and decorating there? I ask because you state they are buying the supplies. However if that work is done at the shop then they are also covering utilities, insurance, inspection fees/liscencing fees (if needed), depreciation on ovens, mixers, and all other baking related equipment etc.
What do you pay yourself now? You cannot just subtract expenses like supplies as your current wage is also aÂ cost. Why this matters is the profit you are making now (the excess of returns over expenditures which includes labor costs) would no longer be yours in this arrangement, the profit goes to the owner of the coffee shop. Put another way, in your business you are both owner and employee, as owner you pay your employee Â (you)Â a particular wage, as employee your owner (also you)Â profitsÂ from the price they are able to charge in excess of the costs incurred to produce the item.Â
Based on your description it sounds like you are being asked to become an employee and not a partner with a profit sharing arrangement. Thus to determine if it is fair compensation for your labor you need to base that calculation only on what you paid yourself as a wage and not include an excess returnÂ earned on any sale. It will always look unfair if you include excess returnsÂ against an arrangement where you are asked to work as an employee. If what you paid yourself as a wage was a fair wage andÂ is equivalent to $7.50 plus 10% then deal is fair. By opting to work for someone else, unless you have a profit sharing arrangement, the excess returns goes to the business you are now working for.
gatorcake's response reminded me of something else to consider. Becoming an employee will also change the way you pay your taxes. I rely on my home business to reduce the cost of my housing expenses by taking a deduction for the business use of my home. That would certainly figure into my compensation structure if I were considering a move like yours.