Need Help On How To Charge A Cake

By Lalacc Updated 13 Jan 2016 , 5:28pm by -K8memphis

Lalacc Posted 12 Jan 2016 , 5:28pm
post #1 of 11

I have to bake a single layer 8" inch cake, fully covered with white fondant for a customer. I am new to this and usually only make Cc but since its a close family friend I'll make an exception but how much should I charge for that cake?

10 replies
cakesmith.oh Posted 12 Jan 2016 , 8:14pm
post #2 of 11

Small cakes are always difficult to price because they're...well...small...and people don't want to pay a lot for something that's small  unless its a diamond :)

The formula I use for calculating prices is:

material cost + (hourly wage x hours worked) = cost of the cake

then I take the "cost of the cake" and add 25% profit (I have a home-based business so I pay myself a wage and put the 25% into the business account, but you don't have to add the 25% if you don't want to)

So, lets say your material cost is \$7.50 and you spent 1 1/2 hours working on the cake (baking, icing, decorating)

\$7.50 + (\$15/hr x 1.5 hr) = cost of the cake

\$7.50 + (\$22.50) = \$30.00  you can charge this amount...or

\$30 + 25% profit= \$37.50  you can charge this amount

For an 8" 2-layer cake I typically charge \$45 and add \$5 (for materials) if they want fondant.  So, \$30 for a single layer decorated cake is not far off.  Don't sell yourself short.  Charge what you need to cover the materials plus extra for your time.

This struggle is real!!!  I used to go through the same thing every time I had to price a cake.  But, I took some cake business classes and learned to value myself, my time, and my work.  I also had some decisions to make as far as what I was willing to offer.  I used to do anything and everything people would ask and many times took a loss because I was not charging enough and I gained the reputation that I would give them an awesome product for cheap.  Not good!

Don't be shy about pricing and tell them up front what the price will be.  Then they can decide if they still want you to do it.  If people are not willing to pay what you need to charge, then they can go buy a cheap grocery store cake.  I'm sure your cakes are way better than grocery store cake and you deserve to be paid for your quality products and hard work.

Best of Luck!

Lalacc Posted 13 Jan 2016 , 12:17am
post #3 of 11

Thank you so much, this really helps.

And yes it's definitely a struggle, I know my Cakes and Cc are better then what you get from stores but since I just started doing this I dont want to overprice and then not get any customers!

But I will go with your formula and see how that works out for me, it seems more than fair!

Thank you again!

costumeczar Posted 13 Jan 2016 , 1:41am
post #4 of 11

I wouldn't charge less than \$75 for an 8" custom cake. For one layer I might do \$50 but probably not. You have to take ALL your time into account, not just the hands-on time with the cake. How much time did it take you to plan and shop for ingredients? And to answer questions and talk to the customer about what they wanted? Then there are overhead costs involved in the electricity and water to make the cake, and gas to go to the store. If you're paying insurance or license fees you have to account for that (sounds like you don't have to deal with that yet, but you might in the future). For one simple cake you probably end up putting at least three or four hours into it overall, depending on what kind of decorations are on it. and since minimum wage in some places is now \$15 an hour that's the low end of the pay scale.

Say you had \$7.50 in food expenses, and \$5 in overhead (probably low but just use it as an example.) Then you put in three hours, even at \$15 an hour that's \$45, with the other expenses added to it is \$57.50. A 25% profit would make that \$76.67 (divide that by 4 and multiply by 3 to get \$57.50.

25% profit on a cake that costs you \$30 to make would make the selling price \$40, that's how the math works, it's weird. You don't multiply the cost by a percentage, you have to divide it by 100-the percentage you want. So you should charge a little more @cakesmith.oh  ;)

Natka81 Posted 13 Jan 2016 , 3:38am
post #5 of 11

I too think \$45.00 for 8" cake is too little money if nothing at all.

Shopping, baking,  decorating,  cleaning is at least 4 hours.

cakesmith.oh Posted 13 Jan 2016 , 5:39am
post #6 of 11

Thanks for the feedback on my prices :)  There are things you've mentioned that I opt not to charge for like shopping and cleaning.  I just started my business in September last year.  Things are going well, but slow.  I do not have enough orders coming in yet to really make a stink about charging for shopping and cleaning.  I just do them as part of my normal routine.  Once my business gets going and the orders are rolling in, I will start charging for those things because there will be more demand for my time.  Based on research I've done on other cake decorators in my area, my prices are right in the ballpark, although I'm not opposed to raising the bar :)

-K8memphis Posted 13 Jan 2016 , 12:44pm
post #7 of 11

of course it is all your decision -- but some food for thought

i would clean for No One for free -- shopping is time and car expenses --  cleaning is time plus hot water which is a costly utility plus products -- once you get your business rolling on underpriced work you will have a slow go raising prices and retaining the customer base you built low balling it --

an idea is to charge full price on the invoice but give/show a discount -- so the information is out there and you charge the price you want at the same time educating your clients -- it's a win/win or get the bandages and salve ready for burn out

love,

kate

Natka81 Posted 13 Jan 2016 , 3:26pm
post #8 of 11

@cakesmith.oh, I had same thinking as you described,  when I was starting. Thankfully I  stumbled upon very smart people on this forum right on time,  otherwise I  would have arrived nowhere with my cakes.

I hear a lot from home bakers husbands complaining that there is no future in cake decorating business,  yet their wife's are still baking with no end.

costumeczar Posted 13 Jan 2016 , 3:27pm
post #9 of 11

is that in line with what other people in your area would charge for a similar cake? If it'a lower, you can probably raise your prices to reflect your time even if you're new to the market. If you attract people who are buying based on price you might not be able to retain those customers when you do raise your pricing. If you're starting out and your prices are on par with other custom bakers in your area, nobody will blink when they see how much you're charging and you can start at the right price.

Jeff_Arnett Posted 13 Jan 2016 , 3:43pm
post #10 of 11

A problem most customer don't understand about small cakes is that while it does take a bit less in materials, doing the work is just as hard.  There's very little difference in the amount of fondant or the time it takes to cover a single layer vs a two layer cake.

-K8memphis Posted 13 Jan 2016 , 5:28pm
post #11 of 11

another thing you can do is have a minimum dollar amount for any order -- \$100 is a typical place to start give or take and it helps to eliminate people who want a sculpture to serve five people or something crazy -- so no matter how small the order the minimum you charge is X amount whatever you decide -- that way you avoid this kind of drama and people trying to dumb down their elaborate order to fit their teeny tiny budget --

best to you