Am I Undercharging ?? Help

Business By yjflores1 Updated 28 Apr 2016 , 3:54am by yjflores1

yjflores1 Posted 27 Apr 2016 , 7:03am
post #1 of 17

Hi guys!! So I recently started making cakes it all started because I wanted to make my sons first birthday cake. I've been getting really good it. I try Charging 2.25 per slice if they want buttercream and fondant decor . I've been charging 3 per slice if they want all fondant and filling . Then depending on the designs add more. When I tell people and get no response back I feel like I'm overcharging but yet again local high end bakery shops start no less then 2.5 and go up to 6 a slice ? I try to stick to my prices but then I feel like I'm overcharging so I lover the price !!

16 replies
costumeczar Posted 27 Apr 2016 , 11:45am
post #2 of 17

Never lower your price because someone says they can't afford it. That's on them, not you. I can't afford a Rolls Royce, but for some reason the dealer won't drop the price when I tell them that! :(

I wrote an article about pricing in the upcoming issue of American Cake Decorating, and it's basically a simple formula to figure out what you should be charging. It's your expenses (and that's everything, not just the cost of your ingredients)+ your salary +profits. That's a very simplified version of the formula, and you do need to take your local market into account by doing market research. Plus figure out your annual expenses and spread that out through every cake to cover those, so it's not a 5-minute job to figure out, but it's all numbers, no emotion!

If you sit down and do the work to see what you need to charge to make a decent profit FOR YOU, you can stick to that. If you see that dropping your price to fit someone's budget will meant hat you're earning less than minimum wage it's easier to say no to people. Get all of that in order and you'll know what your baseline is.

yjflores1 Posted 27 Apr 2016 , 4:12pm
post #3 of 17

Thank you I'm so new to this so it's been a bit difficult and at first I wasn't making any profit because I was only charging a dollar per slice and saw NO results I was killing myself ! Now I'm like hell no I love doing this and if I continue charging the way I do I'll start gating what I do and get no profit out of it ! 

Gingerlocks Posted 27 Apr 2016 , 4:31pm
post #4 of 17

Not hearing back from people once you give them a quote is par for the course; a lot of people don't understand the work and money that goes into just making the cake and then there are those that anything over Wal-Mart prices is extravagant. So don't take it to heart; in my opinion your starting prices are probably too low, so I absolutely wouldn't consider lowering them.

SimplyIcedCC Posted 27 Apr 2016 , 6:06pm
post #5 of 17

Unfortunately, that's just how the business works.  You will get a lot of people that won't respond back because they are cheap, and don't understand how much goes into cake decorating. Costumeczar is absolutely right!  You need to figure out all of your numbers, then go from there.  If you do that first, you will set a baseline for your business which will show people you are serious.  Then, you don't have to lower your numbers because, this is how you do it for everyone that orders from you. If they say that's too much, tell them what they can get with how much they are willing to pay. Good luck to you! :)

Misstiffanyjoy Posted 27 Apr 2016 , 7:10pm
post #6 of 17

As a fairly new baker (about a year and a half as a business venture) myself, I've discovered there are two prices you have to take into consideration, what you'd ideally like to be charging, and what's the minimum price you'd make the cake for that'd even make it worth your time. 

Everyone says to just never lower your price, but the fact of the matter is that if you are new, untrained, don't have a store front, bake from home etc., even if you are talented, you can't really compare what your charging to established local bakeries. Their pricing can give you a guide to judge your prices by, but at the end off the day, you're baking out of your house, they're an established business baking in a commercial environment and adhering to health/safety standards, paying taxes, and licensed, etc etc. that's the justification behind their pricing, not just how nice the cakes look. 

So when trying to build a clientele or business, I think some times you do need to charge less until you've built a good portfolio and customer base. 

So that's where your floor pricing comes in. You do have to take into consideration all costs including what you feel like your time is worth. Personally I sacrificed on the profits for several months till I had a large following and body of work to justify higher pricing 

Gingerlocks Posted 27 Apr 2016 , 8:23pm
post #7 of 17


Quote by @Misstiffanyjoy on 1 hour ago

 Their pricing can give you a guide to judge your prices by, but at the end off the day, you're baking out of your house, they're an established business baking in a commercial environment and adhering to health/safety standards, paying taxes, and licensed, etc etc. that's the justification behind their pricing, not just how nice the cakes look. 


There is no way you should be selling cakes to anyone if you  are not adhering to health and safety standards, tax regulations, a legal baking space (what ever that may mean in your area), and having all your licensing and insurance...that is the worst justification for having low prices I have heard.

Misstiffanyjoy Posted 27 Apr 2016 , 8:44pm
post #8 of 17

Lol well you can tell that to my hundreds of customers :-) They're more than happy to buy my cakes and I'm a home baker :-) 

Gingerlocks Posted 27 Apr 2016 , 8:48pm
post #9 of 17

Many people here are home bakes; myself included..that doesn't mean you are exempt from any and all regulation @Misstiffanyjoy 



SimplyIcedCC Posted 27 Apr 2016 , 8:51pm
post #10 of 17


Quote by @Gingerlocks on 1 minute ago

Many people here are home bakes; myself included..that doesn't mean you are exempt from any and all regulation @Misstiffanyjoy 



I agree with this. I am a home baker...I follow all the cottage food laws, my areas laws, etc. Unless you are following all of the laws in your area, it is illegal to sell your cakes and the like.

Misstiffanyjoy Posted 27 Apr 2016 , 9:11pm
post #11 of 17

I'm obviously not talking about cleanliness food safety, get over yourselves. I'm talking about all the costs related to an actual brick and mortar business compared to a home baker. Grow up

Nancylou Posted 27 Apr 2016 , 9:18pm
post #12 of 17

I agree too.  I am a home baker adhering to cottage food laws (health/safety standards), licensed, paying taxes, insurance, etc. 

Costumeczar's web site is very helpful, not only with pricing, but in all areas of starting a business.

Hang in there, we all get those one time callers ... like Gingerlocks said, it is par for the course.

Nancylou Posted 27 Apr 2016 , 9:25pm
post #13 of 17

Can't edit ... I meant to say, I agree too with SimplyIcedCC.

kakeladi Posted 27 Apr 2016 , 9:27pm
post #14 of 17

Most but not all business bakery owners started out as home decorators.  When I started selling from home I had many customers seek out a home decorator.  Some people seem to want that; others want a brick & mortar place

Misstiffanyjoy ..  please be kinder.  We don't need to chase away new bakers/posters on this site.  

costumeczar Posted 27 Apr 2016 , 11:47pm
post #15 of 17

Starting out with low prices is a good way to lose a bunch of customers when you finally raise them, so watch out. You'll get a reputation as the "cheap cake lady" and when you raise your prices they'll all be offended and go find the next cheap cake lady. 

Commercial kitchens do have different expenses than a home-based business, but they also benefit from the ability to bake in larger quantities and do more business that way. My expenses percentage-wise are comparable to what my friends with storefronts have, so it's not really accurate to say that storefronts charge more because they have to. I work from home but i'm licensed, inspected, insured and I unfortunately pay taxes. I also pay rent on an office space...Last year I hired my kids to do IT work for me when I was switching my website over to a new host, so I had the "pleasure" of paying employment taxes, too. That stunk.

Webake2gether Posted 28 Apr 2016 , 2:48am
post #16 of 17

I have a commercial kitchen in my home. I'm licensed and inspected insured all of that great stuff I pay taxes blah blah blah lol. Our prices are higher than anyone else where I am even a prior storefront. We are newbies as we've only been in business 7 months and we have a steady flow of orders and new customers. We initially started out being comparable in pricing with others and quickly realized that wasn't going to be good for us. We get people who inquire and then fall off the grid when they find out just how expensive cakes can be. That's business it happens. I know I've gotten quotes before for things and decided to go elsewhere or not do it at all. I don't take offense or feel that I should lower our prices to accommodate a small budget. I don't even get upset when people vocally balk at our prices they are what they are so we will remain a profitable business in the years to come. 

Even when we started out there was people who thought our prices were too high point is no matter what price point your in it will likely be too high for someone and that's ok :)

If you are quoting a price to a potential customer and then lowering it because they say it's too high is basically training them to complain a little to get you to come down they win you lose and they'll keep coming back bc they can talk you down on your price. That's something I would never want to start. However I do sometimes suggest something in their price range but that is something I've developed over time knowing which ones to try and work with and which ones just want what they can't or don't want to pay for. 

yjflores1 Posted 28 Apr 2016 , 3:54am
post #17 of 17

Thank you so much ! I started telling family that I was practicing on cakes so I would make them for free... Then it became a problem lol so I started charging for ingredients only ( close family) . Then people started noticing my work to I would tell them that the price I gave them was low because I was practicing and it would eventually change. Now that I feel confident enough to charge at a certain price it kinda scares me that they will go to someone Else . It's just a learning process for me ! Thanks again everyone all your comments were expremlg helpful!

Quote by @%username% on %date%

%body%