Pricing Feedback

Business By PhunCakes Updated 19 Sep 2014 , 2:43pm by cai0311

PhunCakes Posted 17 Sep 2014 , 6:15pm
post #1 of 20

Hi guys,

 

So I've spent the past few weeks reading the forum threads and honestly I'm a little confused lol

there's so much differing ideas on how cakes should be priced but I think I'm on the right track.

I'm starting a new cake decorating business from home ( yes I will be getting licensed before selling, so easy where I live btw :) ) and I'm in the "price planning" stage. This example is based on a 8" 4 layer cake (2 cakes cut in half) covered and filled with basic vanilla butter cream. From what I've read, I have to figure my cost, overhead prices, hourly wage, and profit for business. I'm having a challenge with the overhead charges as I don't know exactly how to measure them (gas,water,electric etc.)

Here's what I have so far:

8" Cake

$1.32 Cake mix    (I also have a scratch cake that's actually a couple cents cheaper lol who knew)
$0.40 Eggs
$0.23 Milk
$0.81 Butter
$2.76 Total

 

Buttercream 2/3 (I use 2/3 of this recipe to cover and fill a cake)
$0.83 Egg White
$4.29 Butter
$0.45 Sugar
$0.16 Crisco
$3.82 total

 

Misc.
$0.27 Cake circle
$0.30 Foil
$0.60 Cake box
$5.00 Water/Electric/Gas/parch paper/nonstick/tools (I have NO idea what I did here. total estimation)
$6.17 Total

 

Addons
8.25 Modeling choc.(It's Belgian chocolate and very expensive!)
3.85 Fondant

 

Total For 8" Round Cake
Buttercream: 12.75
Modeling Choc: 21.00
Fondant: 16.59
 

Time To make:


1hr prep/baking
1hr cool/freeze
30 min filling/frosting (I know, I'm slow :( )
10/hr 37.75 
15/hr 50.25
20/hr 62.75

 

Market Value: 35-45*

*Market value is based on bakeries I have visited/researched and might be slightly over/under.

My target area is very affluent and could most likely afford a higher price.

 

From this info, I am choosing $50 for this cake (the BC version) because I rather overshoot and lose a costumer and then bring price down if necessary , than undershoot and miss out on monies.

 

With this in mind, I can afford to pay myself either

1) 15/hr with no strict "for business" profit or

2) 10/hr with $12.25 "for business" profit

 

Is this an ok way to make my prices? I'd really appreciate feedback on what I can improve so start figuring out the price of everything I want to sell (just cakes/cupcakes for now).

 

P.S: HOLY COW this is so time consuming. When do I get to actually BAKE a cake?!?

19 replies
thecakewitch Posted 17 Sep 2014 , 7:01pm
post #2 of 20

ADon't forget the cost of being legal like license, insurance, marketing, advertising etc.

PhunCakes Posted 17 Sep 2014 , 11:41pm
post #3 of 20

AWould that be part of overhead costs? That's the one I'm most troubled with :/

Norasmom Posted 18 Sep 2014 , 2:38am
post #4 of 20

Yes, those expenses, marketing, e.t.c., would be part of overhead costs.  Also make sure your time estimations are correct.  It takes me far longer than I think it will take when I make a cake.  :-D Also, where are you finding a cake box for just .60?  Are you buying in massive bulk?  I cannot find one that cheap at all!

I think it's more than $5.00 for water, electric, gas…but I live in an expensive area.  Don't forget about the cost of laundry to wash dishtowels.  silly but it all adds up.

Good luck you seem to have a handle on your costs!

costumeczar Posted 18 Sep 2014 , 2:43am
post #5 of 20

Yes, that's part of your overhead...Anything you'd pay for that you wouldn't pay for if you didn't sell cakes has to be taken into account.

 

For the first year it's going to be a guessing game. Once you do your taxes the first time you'll be able to see what you made for real.

 

If you're a single proprietor or a pass-through LLC that files your business taxes along with your personal taxes, there isn't a deduction for salary that I've ever seen. Everything that isn't an expense is considered  your income. The idea of paying yourself a salary on top of business profits is kind of muddy here, because that isn't really a "thing" tax-wise, it's just a way to make sure you're taking personal earning into account when you set your pricing. After you've done your taxes a couple of times and you can see what your gross profit is vs your net, you'll start to see a pattern and you'll be able to decide whether to raise your prices. For the time being, your formula will work but you just need to be careful to leave enough in the business bank account to cover unexpected expenses that you don't know are coming (but they are coming).

PhunCakes Posted 18 Sep 2014 , 2:45am
post #6 of 20

ANorasmom- Thank you for the reply. God that part really messes me up. I have no idea how to even begin to measure things like laundry :( May I ask how you did it?

Also, wesellcoffee has the cheapest boxes I've found so far. And they sell them by the each! Agreed, it probably takes me an hour to ice a cake lol

AZCouture Posted 18 Sep 2014 , 7:20am
post #7 of 20

If your target area is very affluent and has money to burn, and you don't already have people used to smaller and cheaper cakes, I would look into not even offering piddly little 8 inch cakes. The cake in your avatar is pretty, looks like you're a decent decorator, why not start right out offering higher end cakes? Minimum order of say $100, maybe only two tiers and up, unless they need a larger single tier? Focus only on custom work, avoid character cakes, etc….look into it, I'm not saying definitey do it. But shoot, here's your chance to dive right in and not have to deal with cheap people, or raising prices a little here and there. :D 

PhunCakes Posted 18 Sep 2014 , 9:08am
post #8 of 20

A

Original message sent by costumeczar

Yes, that's part of your overhead...Anything you'd pay for that you wouldn't pay for if you didn't sell cakes has to be taken into account.

For the first year it's going to be a guessing game. Once you do your taxes the first time you'll be able to see what you made for real.

If you're a single proprietor or a pass-through LLC that files your business taxes along with your personal taxes, there isn't a deduction for salary that I've ever seen. Everything that isn't an expense is considered  your income. The idea of paying yourself a salary on top of business profits is kind of muddy here, because that isn't really a "thing" tax-wise, it's just a way to make sure you're taking personal earning into account when you set your pricing. After you've done your taxes a couple of times and you can see what your gross profit is vs your net, you'll start to see a pattern and you'll be able to decide whether to raise your prices. For the time being, your formula will work but you just need to be careful to leave enough in the business bank account to cover unexpected expenses that you don't know are coming (but they are coming).

I understand. What do you think would be a reasonable estimation for the time being? Also, the "personal income" is just for pricing purposes. I plan on re investing 100% of whatever profit I make for the first few years or until the business is stable enough to allow for it. Thanks for the help.

AZcouture- that's a very attractive idea. Might save a headache or two. I will look further into the market to see if it is a feasible course of action. Thanks for the cake compliment!

costumeczar Posted 18 Sep 2014 , 10:34am
post #9 of 20

APricing is tricky...you can't really have people tell you this amount is right or this is wrong. Whatever you feel is a good return is good for you, but you want to charge as much as the market will bear, obviously. I'd charge more than full-service bakeries because you'll be giving more attention to the cake than they would, so customers would be paying for the service.

The problem that most people have when they're starting out is not charging enough to cover all of their expenses, but it looks like you're aware of those. I'd start on the high end and see what happens. That way if you want to do a promotion along the way you won't be dipping into the red to do it. If you market yourself as higher end, though, you'll have to make everything high end, so don't neglect your website etc.

AZCouture Posted 18 Sep 2014 , 4:10pm
post #10 of 20

ARight, everything needs to insinuate high end. How you word your website, how you communicate with customers (very polite, formal, no text speak, grammar and spell check)...people need to understand from the get go that you're offering higher service.

costumeczar Posted 18 Sep 2014 , 4:41pm
post #11 of 20

Quote:

Originally Posted by AZCouture 

Right, everything needs to insinuate high end. How you word your website, how you communicate with customers (very polite, formal, no text speak, grammar and spell check)...people need to understand from the get go that you're offering higher service.

No using facebook as a messaging service...
"how much a cak be?"

goodymob Posted 18 Sep 2014 , 5:26pm
post #12 of 20

AOmg! I feel so lost when I get to this point There are not many fondant bakeries around here and not very many helpful ppl. So I've been just drawing 3 options for them and pricing by how much wok I think it will be to do. I know I'm probably screwin myself. But I'm like a blind deer in headlights ! I know I need to boost my pricing. As I've gotten much better!!

costumeczar Posted 18 Sep 2014 , 7:01pm
post #13 of 20

Quote:

Originally Posted by goodymob 

Omg! I feel so lost when I get to this point
There are not many fondant bakeries around here and not very many helpful ppl. So I've been just drawing 3 options for them and pricing by how much wok I think it will be to do. I know I'm probably screwin myself. But I'm like a blind deer in headlights ! I know I need to boost my pricing. As I've gotten much better!!

Just do the pricing the way you've been doing it, get to a price that you think is right, then add at least 25% to that!

PhunCakes Posted 18 Sep 2014 , 7:31pm
post #14 of 20

AI agree. Next thing I have to work on is the website. I'll post a link when I'm done so you guys can check it out :) And LOL so I shouldn't have a Facebook page? I already made one to show friends/family... should I take it down?

costumeczar Posted 18 Sep 2014 , 8:41pm
post #15 of 20

Quote:

Originally Posted by PhunCakes 

I agree. Next thing I have to work on is the website. I'll post a link when I'm done so you guys can check it out icon_smile.gif
And LOL so I shouldn't have a Facebook page? I already made one to show friends/family... should I take it down?

No, a facebook page is fine, but taking orders on it borders on Craigslist-y as far as asking for a higher price goes. If people send you cake requests on facebook direct them to your website email and don't have the conversations on facebook. Not to mention facebook is REALLY bad about being reliable as far as getting messages to you.

PhunCakes Posted 18 Sep 2014 , 9:15pm
post #16 of 20

AGotcha. That sounds like a good idea. Thank you so much for all the help!

AZCouture Posted 18 Sep 2014 , 11:20pm
post #17 of 20

Quote:

Originally Posted by costumeczar 
 

No, a facebook page is fine, but taking orders on it borders on Craigslist-y as far as asking for a higher price goes. If people send you cake requests on facebook direct them to your website email and don't have the conversations on facebook. Not to mention facebook is REALLY bad about being reliable as far as getting messages to you.

Yep. 

AZCouture Posted 18 Sep 2014 , 11:22pm
post #18 of 20

I am amazed that some businesses out there solely rely on their Facebook pages for business. I mean, totally different target market, I get it, but just the keeping everything straight, from wall messages and comments, to keeping up with the message string. What about when people close their accounts temporarily, or delete it all together, or any other number of things brides can do when it gets close to the wedding out of stress and who knows what else. Or any customer. Yikes. Nope, I need at least two good contact numbers, and email addresses.

AZCouture Posted 18 Sep 2014 , 11:23pm
post #19 of 20

Quote:

Originally Posted by costumeczar 
 

No using facebook as a messaging service...
"how much a cak be?"

How much 4 dis? 

 

Too much. 

cai0311 Posted 19 Sep 2014 , 2:43pm
post #20 of 20

AI operate from a licensed home bakery too. It can make it difficult to get an accurate cost nailed down. For example, the electricity used when my kitchen lights are on when I am decorating is a business cost - but I am home so my lights would be probably be on anyway. To count or not to count... that is the question.

Here is what I do to make my life simple: Bills I pay whether I have a home business or not I don't bother accounting for. It is a few dollars a month and, frankly, my time is too valuable to me to are. These bills include: Cell Phone (I only have a cell so some calls are business and some are personal) Electricity Gas (to heat my home) Water Mortgage (I don't count any part of my mortgage as a deduction because I would be paying it no matter what)

Items I do include: License (a whopping $10 / year) The Knot listing (per month fee) Website Domain Name (per month fee) Ingredients Boxes, Boards... Equipment (such as pans, molds, cutters...)

I don't calculate a per hour wage on each cake - that would drive me crazy. I know how long it takes me to complete a cake from start to finish based on the size with nothing extra/complex. If there is something extra on the design then I add an additional fee to cover the ingredients and time. The reason I don't break it out is the cake money is not used for anything (I work full time and this is a side thing) so it sits in its business account waiting to be used. If the business needs something - I buy it. If we want something - we buy it. Because of that I don't have to split the profit between me and the business for reinvesting.

I do however make sure my pricing is in line with bakeries in my area (I am acutally on the high side) so I don't under cut anyone and get accurately compensated for my time.

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