This is a standard hospitality industry formula. Work out the cost of your ingredients. So if you pay $5 for a 200g packet of something and you are going to use 1/4 of it in a recipe, then that is $1.25 etc. This is what is known as "cost of goods sold" or COGS. Once you have the total cost of ingredients, you need to add a cost for your time, electricity and some profit to make it all worth your while. To do that you take the COGS figure and multiply by 2.65. If the figure you end up with seems to high, come back a bit, but don't give your work away!
Pricing varies sooo very much across the US -- and way different in other countries so it is very hard to say how much you should charge, The other poster gave you a good start on how to figure costs. Yes, it takes some time to figure how much is invested in a cake but once you have donw it for each size you don't have to do it again -- unless your costs change a lot:)
Another thing you can do is survay some local bakerie or other home decorators -- call them like you want to order or go into the store(s).
also the cost times 3 formula has no basis and is not accurate the only way to have an accurate price is to do the work in pricing ingredients,materials, time and overhead. If you don't know how much things cost you including how much it costs to fire up your oven you should probably figure that out before you sell anything assuming you are legal to sell your products. Also I don't give discounts to anyone for any reason. if I'm working on a cake I'm giving a discount on it may interfere with being able to take an order that would pay full price so I don't do that. But I'm a business baker not a hobby baker making some extra money on the side so maybe I might see things differently. also calling other bakers pretending to place an order is wasting their time. If you want to know look online most have a basic price list I know I do. And they might not have the same expenses you do or vice versa so it's not always a good idea to base your prices off of someone else's.
the cost times three (or 2.65) has been used for decades as a viable way to not get screwed too badly when you make and sell things to others especially if one is new -- nothing wrong with it --
knowing what others charge in your area is very important -- your goal (at least eventually) is to charge the most or at least charge the same as the highest priced nicest brick and mortar free standing bakery in your area -- and everybody gets calls about pricing it's part of the price of doing business -- if you call, make it a simple 100 serving cake or whatever and get the dimensions they offer too -- one bakers 100 servings can be quite different size wise than the next baker's 100 servings -- don't make it a long drawn out phone call -- and certainly check the websites first that's a big advantage to have available -- call if you need to but be brief --
and yes of course people who have home kitchens have much less overhead than free standing brick and mortar bakeries that pay rent, security, wi-fi, phone, utilities, parking space fees and employees etc. that's why tons of neighborhood bakeries have gone the way of the dinosaur because of the inequality in overhead -- and because of norman wilton -- and because of places like this where we literally give away every trade secret known to man -- there is nothing protected --
anything else you wanna know
Cost of goods sold works better in production kitchens, not for custom small-order businesses. If I used the ingreidnets x3 rule I'd be making about 75% less than what I'm making now and that wouldn't be worth the time.
For pricing out your cakes, you need to take way more than your cost of goods into account.
exactly -- it's good for starters you've been in business for almost 20 years and you're at cogs times 4 -- makes sense to me -- it's a viable starter tool
oh wait no my math is off -- but you have a $500 minimum too you're not the model for the starting baker at this point -- like i said the goal is to charge as much or more as the nicest b&m bake shop in the area --
three times your costs is a viable place to start --
@GuadasCakes21 I did an e-class on pricing, which is very thorough and takes things into account that aren't mentioned in this thread. If you don't want to get that, use one of the online pricing calculators that you can find to give you a better idea of what you should be charging. Like I said, any formula that tells you to take a base price and multiply it times any fixed amount is better used for wholesale businesses or for production bakeries that are doing a lot of volume, it's not the way to price a custom cake. This is one that is NOT 100% right, if you take my advice it's missing a few things, but it's a good starting point to show you how to think of it. http://www.bakecalc.com/cake-pricing-calculator/
Once you have your COGS figure, to multiply x 1 would only give you a return on your ingredients. To multiply by 2.65 covers your time, wear and tear on the equipment you use ( at some point you will need a new oven or even new utensils ), electricity ert, etc and also builds in a profit margin. As I said, this is a standard hospitality industry calculation, and as such is designed for commercial operations such as restaurants and cafes and all of their associated running costs. If you are a home cook, some of those operating costs will not apply, however the idea is the same.
The idea isn't really the same for custom items. Multiplying by a fixed amount is too simple a formula for anything custom, more should go into it than that.
2.65 times the cost of ingredients does NOT give you a living wage for custom baking. The ingredient cost x3 is a commercial formula for LARGE operations where you churn out multiples of the same thing over and over. It's not the same as pricing a custom item, which isn't made the same way and takes a lot longer to produce a one-off item. The cost of my ingredients is about 15% of the total cost of my cakes, which DOES pay for my time, profit, overhead, etc. If I changed my pricing to COGS x 2.65, and my ingredients cost $15, I'd be charging $39.75 instead of $100. That wouldn't cover my time, let alone profit or overhead.
There's a lot more that SHOULD go into pricing a custom item than just multiplying by a fixed number. Don't follow simple pricing formulas or you'll be ripping yourself off.
i didn't think we were supposed to promote our own sales (sale-able items like your eclass) on the message board here without paying for the advertising -- i've noticed you do it regularly -- maybe the policy changed?
congrats on the american cake decorating magazine deal --
I didn't see a link or an ad so I don't consider that promoting sales.
Also so you can tell all the secrets in the world but if you lack the actual talent to do them it's worthless. Wilton selling the tools doesn't guarantee the person buying them knows how to use them or use them well. It's like giving a monkey a hammer and wood doesn't mean he can build anything with it.
Back to pricing I'm actually right at or higher than brick and mortar building and I'm a starter business. When you offer something custom you have a custom price. I don't just crank out 1000 of the same item and I don't have shelves to fill with product so there is more expense for me. I don't have a minimum order at this point and I would never dare doing the x3 formula for my business. Next month alone I have a $400 food permit fee due on top of my other expenses not to mention my insurance which is now up to $685 a year. So being home based with a commercial kitchen doesn't necessarily keep my costs down all that much compared to a brick and mortar shop. Bottom line running a custom bakery and selling custom work requires a good pricing system that is accurate and not just a guess. A good start is doing the work involved to set your pricing at the right mark for you. If I did the times 3 method my doors would not stay open. When you work for free you tend to burn out fast.