Please Read - How To Price To Stay In Business!

Business By Zmama Updated 12 Dec 2006 , 3:14pm by khoudek

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Zmama Posted 10 Dec 2006 , 6:53pm
post #1 of 16

So many people seem to have troubles with pricing and making money, that I want to share this. I found it for graphic design freelancing, but most of the principles translate to cake designing as well. It's the Pricing Bible for me!

Let's read and discuss...
http://www.allfreelance.com/payment.html

15 replies
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JanH Posted 10 Dec 2006 , 8:27pm
post #2 of 16

Thanks for sharing icon_smile.gif

I'm adding it to my favorites right now!

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Mamas Posted 10 Dec 2006 , 8:44pm
post #3 of 16

Me too! thanks for sharing.

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tracy702 Posted 10 Dec 2006 , 8:45pm
post #4 of 16

Thanks for the link, I am going to bookmark it and go back and read through it.

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jumbosgirl Posted 10 Dec 2006 , 8:51pm
post #5 of 16

Thank you for sharing!!!

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Zmama Posted 10 Dec 2006 , 9:37pm
post #6 of 16

Some of what I have learned:

To me, servings are a good base price, but not the total price, as most have figured out already. So, how do we make a profit at this?

I bake from a mix, and calculate 10 servings per mix. Mix plus added ingredients costs me about $1.50, or $0.15 per serving. (Others will have higher costs, this is the minimal for example). My basic buttercream costs about $2.50 per batch, but covers two mixes, so costs $0.13 per serving. Add in a bit for fuel costs, and figure $0.30 per serving.

At this (low) cost, a very basic quarter sheet with no filling that feeds 20 would cost me $6 plus board and box. Baking and decorating take about 2 hours total, and I want to make $10/hr. The price for this cake should be right around $28.50 with this formula.

Another formula takes cost x 3. My ingredients ($6) plus box ($1.50) and board ($1.00) is $8.50x3= $25.50 with this formula. My hourly rate for this (2 hrs) would be $8.50

Price per serving is another method. If I price at minimum $2/serving, a cake to feed 20 would cost $40. Hourly rate would be (2 hrs) $15.75

Your ingredients and costs are different, but you can figure out what gives you the best pricing formula with these same steps. A base price plus additions is usually a good start. I have low costs, so per serving works. For complicated designs, cost plus hours is better. Specialty ingredients (vegan/allergies/organic/etc) might be best with cost times a variable (2-4).

Most importantly, remember to price to make money, not to just cover costs. If your building and utilities for a bakery would cost $2000/month, and you need $2000/month income, you would have to make $4000/month PROFIT above expenses. You want to work 40 hours per week, 10 which are paperwork, 10 to customers and deliveries, that leaves 20 for baking and decorating. Your hourly profit would need to be $50 to satisfy that. Seem high? Thats why a lot of food businesses fail, and why a lot of decorators work from home.

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mypastrychef Posted 10 Dec 2006 , 10:19pm
post #7 of 16

I pretty much agree with your methods. I have a lot of overhead in a commercial setting and try to price so I make $100 per hour minimum. Some jobs are double and triple that. That is how I stay in business and have money to do other things.

Lora

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cakesondemand Posted 12 Dec 2006 , 4:31am
post #8 of 16

Very interesting any other feed back.

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SweetConfectionsChef Posted 12 Dec 2006 , 2:05pm
post #9 of 16

I guess I came up with my pricing in a similar way. I figured out how much I needed to run the business and that was my goal for the first year. Now, in the second year, after I have met my first goal, I raised my prices a small amount...like adding .95 to everything (hence $35.95 instead of $35) on the shelves and raised my cake prices by $5 per occasion cake and .25 per serving on 3-D and wedding...that accounts for my profit. Does that make sense??

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ang_ty95 Posted 12 Dec 2006 , 2:23pm
post #10 of 16

This is a great site, thank you for sharing!!!

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surfergina Posted 12 Dec 2006 , 2:32pm
post #11 of 16

Thanks for sharing! This really make sense, especially the difference between home based and commericial based.

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mom2csc Posted 12 Dec 2006 , 2:35pm
post #12 of 16

thanks so much for sharing, this is GREAT!

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OhMyGoodies Posted 12 Dec 2006 , 2:57pm
post #13 of 16

Ok now I have a question.... To those who order and buy in BULK for things such as boards and boxes... and even mixes or ingredents where do you buy these? If online could you post a link please? I have found a few places to buy boxes and boards in bulk but it doesn't seem like it's saving me anything with shipping charges added in it's actually more then what I'd spend buying the Wilton packs of boards at the local supply store and the boxes as I need them..... So please if you have a GOOD site that you purchase BULK supplies from please post it so I can use it! Thanks bunches gang!!!

As for my pricing, currently where I don't do many I currently price on a per cake basis. That way if it's for a family member or a friend I can cut them a SMALL deal on it if times are tight and they need a cake for a function. If it's for a co-worker they get charged full price. The way I figured my prices was calling around to the local stores that have bakeries and getting price quotes from them and also visiting their websites for the prices if available online. I factor in the cost of the board and box and delivery and inform the client/customer that the extra bit there is for delivery and packaging and set up and cutting and serving if they choose to have me cut and serve.

I have had success with this so far, except the few times I've had to purchase a special pan for the job. At which time I charge slightly more maybe half the cost of the pan, because I'm not going to use it just once so I won't charge them full price of the pan unless it's one I'll only use once. Character cakes I don't charge for them but I charge for the materials needed to make them, such as the pan, the ingredients, the board, the box, delivery, set up, cutting, serving, etc. I never charge for a character cake because it's not legal to do so, so I charge for my time and expenses ONLY. If they want a character cake I have them go buy the materials, the pan, ingredients etc. and have them bring them to me along with the remaining charges for time and delivery etc..... But only have them purchase the stuff if they are family or friend, if it's a client/outsider, I figure it all up to current shelf prices and bill them accordingly.

I did want to thank you for posting this info and wanted to thank you all in advance for any help you can give me on the buying in bulk for supplies and stuff icon_smile.gif

Becky

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simplysweetcakes Posted 12 Dec 2006 , 3:06pm
post #14 of 16

Great info, Thanks

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khoudek Posted 12 Dec 2006 , 3:13pm
post #15 of 16

Thanks for posting the site. I'm going to save to my favs as a reference.

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khoudek Posted 12 Dec 2006 , 3:14pm
post #16 of 16

Thanks for posting the site. I'm going to save to my favs as a reference.

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