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Almost ready to start business

post #1 of 40
Thread Starter 

of=52,96,96232323232%7Ffp83232%3Euqcshlukaxroqdfv533%3B%3Dwp%3E2398%3D5%3B%3A%3D%3A6%3B%3DXROQDF%3E2%3A6%3B2%3B5%3B7%3A23%3Awp1lsi232323232%7Ffp83232%3Euqcshlukaxroqdfv8789%3Dwp%3E2398%3D5%3B%3A%3D%3A6%3B%3DXROQDF%3E2%3A6%3B33546523%3Awp1lsi232323232%7Ffp83232%3Euqcshlukaxroqdfv6%3C67%3Dwp%3E2398%3D5%3B%3A%3D%3A6%3B%3DXROQDF%3E2%3A6%3B29799923%3Awp1lsi232323232%7Ffp83232%3Euqcshlukaxroqdfv%3B%3C34%3Dwp%3E2398%3D5%3B%3A%3D%3A6%3B%3DXROQDF%3E2%3A6%3B33546423%3Awp1lsi232323232%7Ffp83232%3Euqcshlukaxroqdfv9535%3Dwp%3E2398%3D5%3B%3A%3D%3A6%3B%3DXROQDF%3E2%3A6%3B33546323%3Awp1lsi232323232%7Ffp83232%3Euqcshlukaxroqdfv6%3A4%3C%3Dwp%3E2398%3D5%3B%3A%3D%3A6%3B%3DXROQDF%3E2%3A6%3B29799723%3Awp1lsi

Hi all,  I've been a hobby cake decorator and getting ready to start an at home cake business (according to Texas Cottage Law).  I know a lot of people are worried about pricing.  Do you think some of these cakes of mine are good enough to charge reasonable prices for?  Like $40 to $65 depending on cake?  Too low? Too high?  I was thinking of 40 for a 2 layer, goes up as you can see from pics.  Please be honest.  Mine are not those super outstanding cakes, but I don't want to undercharge either. Thanks in advance.

post #2 of 40

I can't see your pictures well enough to say.  Pricing a cake is nicely explained below by Jason Kraft. I put part of it in bold in order emphasize that market prices are what actually determines your price. But that doesn't mean that you compare prices of cheap cake ladies, you will have to discern the difference.   It can be best to avoid home bakers' prices and look more at prices by brick and mortar bakeries with comparable work. It's very tempting to undercharge. It's the easier way to go into "business" because you don't have to really learn what cakes should sell for, find the right customer and muster the courage to ask a fair price.

 

Keep in mind what you're going to charge for a cake is probably more than you can afford to pay for one, so your subjective ideas of "about what it should cost" are going to work against you.

 

But if you charge too little, you do a disservice to yourself and others who are trying to put food on the table by selling cakes.

 

To answer you specifically, I think $40-65 is not even in the ballpark for a 2 tier cake. Way too low. But I can't see the level of detail and whether the work is clean. I'm in your state and I average $225-$275 for a two tier 5-8, 32 serving cake.

 

Speaking of your state, beware of organized cake groups. I know of two Texas groups whose members pat each other on the back for undercharging. These groups are like the blind leading the blind.

 

By Jason:  Your profit margin is determined by market value both on the demand side (what the customer is willing to pay for your product) and the supply side (what competitors are charging). To figure out your hourly wage, you can look at cost of living and salary surveys to see what market wages are, but the market value of your product factors in here as well, as does your efficiency.

For example, let's say a cake has $50 in ingredient costs, $30 in allocated overhead, and will take 8 hours start to finish of hands-on time. Salary surveys indicate that cake decorators average around $15/hour, so a starting point for your cost could be $50 + $30 + ($15 * eight) = $200.

Now you factor in market research and see that your competitors sell a similar cake of equivalent quality for $250, so you can add another $50 to match that price and end up with a healthy 25% markup for profit (15-45% tends to be the norm).

If your market research tells you that a similar cake sells for $200, you may be able to adjust your wage downward slightly to $12, leading to a cost of $50 + $30 + ($12 * eight) = $176. To match that $200 price your markup would be 14%, which is on the low side.

However, as your skills improve you may get more efficient over time, so the same cake six months from now might take you 6 hours instead of 8, resulting a new cost of $50 + $30 + ($12 * 6) = $152, and a new markup of 31% to hit the $200 price point. Alternatively you could bump your wage up to $15, so the cost would be $170 with an 18% markup. Your markup will also increase over time as you start filling more orders, since the allocated overhead for each order drops if there are more orders to carry the weight of your total overhead.

If market research tells you that this cake is typically sold for $100 in your area, it's time to shift to a new market, a new product, or both. Or just keep cake decorating as a hobby.

post #3 of 40
Can you post your pictures individually? Upload them to your profile & we can look from there.

HowSweet's advice is excellent, also check out Jason's personal site & other forums about pricing.

State requirements aside, if you don't have your pricing structure in place then you are not ready to go into business. That's a difficult part for many people, especially as HS said, when you have the mindset that $150 or $350 is too much for a cake. You are making custom cakes, if you do not value your time then neither will your customers so please charge accordingly.

I won't go into a lot of pricing info since HS gave you so much to start with. However, I live in a rural community in IL and the prices you've stated are closer to Walmart (probably even less) then I would charge for a smaller, one tier cake.

It can be tempting to take any order because you want to get your name 'out there', you love decorating cakes, etc. this typically backfires and turns you into the 'cheap cake person'. That's no way to run a successful business.

Having a minimum order requirement, contract, recipes you can count on, a portfolio, etc. are very important things to have down.

Also, be careful about copyright issues-liscenced characters like Mickey Mouse & Brave are off limits without permission.

Good luck! It's great that you are asking for advise rather then jumping in. I've learned so much from this community.
post #4 of 40
Also, I recommend making/buying some sort of backdrop/photo box for your portfolio. It will help put the focus on your cakes.

From what I can see, your cakes look clean and your icing seems smooth-but if you want some real feedback on your cakes uploading them separately will make things easier.
post #5 of 40
Thread Starter 

Thank you all.  I will upload photos later today so you can see better.  I had a feeling the prices were going to be low, but I was basing it on tripling the cost of ingredients.  Just to let y'all know more info I am in a very rural area in Texas, population 200.  Neighboring town is population 10,000 where I would probably get most of my business from.  The cakes at Walmart are extremely cheap, like some of them $16 and then $24 for the larger ones.  

 

I will say a lot of my inspiration has come from a lady who did my wedding cake, look at her website if you want to get an idea of her pricing "The Best Little CakeShop in Texas".  And she does charge around $100 for a 2 layer beautiful custom cake.

 

I just worry that my skills are not up to par.  I've been caking for about 9 months.  Maybe I should wait longer but I have been doing them free for awhile for friends and family I was starting to think about getting paid ;)

 

But thank you--will upload my pics later today and see what y'all think

post #6 of 40

yoiks -- that's a super tiny area to build a business in -- best of  the best to you --

 

i think i'd wanna try some cookie packages--there's a lot to it to ship food products but it's a thought to widen your horizon--or pound cakes shipped out--or something like that maybe--

the only way to see the rainbow is to look through the rain

 

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post #7 of 40
Quote:
Originally Posted by Tessie2135 View Post
 

Thank you all.  I will upload photos later today so you can see better.  I had a feeling the prices were going to be low, but I was basing it on tripling the cost of ingredients.  Just to let y'all know more info I am in a very rural area in Texas, population 200.  Neighboring town is population 10,000 where I would probably get most of my business from.  The cakes at Walmart are extremely cheap, like some of them $16 and then $24 for the larger ones.  

 

I will say a lot of my inspiration has come from a lady who did my wedding cake, look at her website if you want to get an idea of her pricing "The Best Little CakeShop in Texas".  And she does charge around $100 for a 2 layer beautiful custom cake.

 

I just worry that my skills are not up to par.  I've been caking for about 9 months.  Maybe I should wait longer but I have been doing them free for awhile for friends and family I was starting to think about getting paid ;)

 

But thank you--will upload my pics later today and see what y'all think


 

On one 2 tier cake she shows a 3d palm tree, a huge 3d fondant giraffe holding a gift, 3d elephant with a party hat, a 3d lion and a waterfall and says she charges only $30 to add that stuff? That would mean she may only charge $105 for that cake like that? Let's hope not, but if it's true then:

 

1) If that's the best anyone can get for custom cake, then it wouldn't seem to be viable business in that area.  The cake decorator at WalMart makes more than that. A person could not support themselves on prices like that. I would be shocked to learn that this lady lived by herself and this was her sole source of income.

 

2) When I say a person could not support himself, I don't mean that you wouldn't be making a little money, I mean it would make more sense to get a job somewhere. The responsibilities and duties of running a business are greater than most people realize until they actually do it.  $100 may sound like a lot to you, but after you subtract your costs and all the time and effort spent creating your business and talking with potential customers, there's not any real profit left.

 

Is there no one with higher prices?

post #8 of 40

I don't charge the "high" prices I mentioned up thread to bilk my customers or because of a high cost of living, by the way. It's because I can't survive if I charge less.

post #9 of 40
Quote:
Originally Posted by howsweet View Post
 

I don't charge the "high" prices I mentioned up thread to bilk my customers or because of a high cost of living, by the way. It's because I can't survive if I charge less.

 

 

it's ok, cake buddy *&gt;:D< big hug we getcha--it's what we all have to do if our livelihood is dependent on this business--you're right and it's ok

the only way to see the rainbow is to look through the rain

 

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the only way to see the rainbow is to look through the rain

 

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post #10 of 40
Quote:
Originally Posted by -K8memphis View Post

yoiks -- that's a super tiny area to build a business in -- best of  the best to you --

i think i'd wanna try some cookie packages--there's a lot to it to ship food products but it's a thought to widen your horizon--or pound cakes shipped out--or something like that maybe--

Keep in mind you can't ship if you are a cottage food producer in Texas.
I'll never fit in a size 6 if I keep having cake for breakfast.
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I'll never fit in a size 6 if I keep having cake for breakfast.
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post #11 of 40
Quote:
Originally Posted by melmar02 View Post
 
Quote:
Originally Posted by -K8memphis View Post

yoiks -- that's a super tiny area to build a business in -- best of  the best to you --

i think i'd wanna try some cookie packages--there's a lot to it to ship food products but it's a thought to widen your horizon--or pound cakes shipped out--or something like that maybe--

Keep in mind you can't ship if you are a cottage food producer in Texas.

 

 

yes you're right of course--i had forgotten that part of op's post--and that's what i meant by saying 'there's a lot more to it' than it just even being a retail shop--but man, that's a sparse population to serve--

 

i think there's still regulations about even delivering fresh cakes across state lines not that they're enforced but anyhow--

the only way to see the rainbow is to look through the rain

 

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the only way to see the rainbow is to look through the rain

 

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post #12 of 40
K8memphis- yes, we can't cross state lines either.

OP - Is there a farmer's market in your area? We can sell at those, and it may offer a better opportunity to showcase your items to surrounding areas - bring cupcakes, cookies, and the like to sell, and bring your portfolio book to showcase your cakes.
I'll never fit in a size 6 if I keep having cake for breakfast.
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I'll never fit in a size 6 if I keep having cake for breakfast.
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post #13 of 40
Quote:
Originally Posted by -K8memphis View Post
 

 

 

it's ok, cake buddy *&gt;:D< big hug we getcha--it's what we all have to do if our livelihood is dependent on this business--you're right and it's ok


Thanks! :D

 

And maybe you don't share my opinion, but I strongly believe it's unconscionable and irresponsible to charge less than a person would have to charge to make a living. And those are the nicest words I can think of to use. Maybe the cost of living is cheaper 40 miles from the outlying suburbs of Houston, but by not half or two thirds. Which speaks to the point I was trying to get across. (The bakery mentioned was in La Grange, Texas)

post #14 of 40
Thread Starter 

Okay, loaded some pics in my profile.  Yes, I will start using a better back drop than the oven or a Sonic cup!  Took those pics when I was purely for hobby and just posting them on facebook for friends.  Good advice from all.

 

I will certainly go for a much higher price when I get ready to open.  In answer to some questions, the "Best Little Cake Shop in Texas" is the only at-home business I know of in this area.  The others are actual brick and mortar bakeries and most don't seem to list prices on their website except for Olde Town Bakery http://brenhamotb.com/ which quotes a $150 minimum on any cake order and are probably more along the pricing you guys are talking about.  Of course all of their cakes are more grand than what I can probably do. 

 

So maybe I'm not really "Almost ready to start business"  I wonder if I need to build my skills more before I start that.  But eventually I do want to sell my cakes, so it will be a matter of time and gaining some knowledge.

 

BTW on the gumpaste figure of "Dad" in my profile, I do see the wooden skewers sticking out of dear Dad but I didn't have time to fix it that time, and it was my own father and we had a good time with the cake, I wouldn't sell a cake with skewers sticking out.  My bald dad did love the squiggle of hair...

post #15 of 40

 

Quote:
 
Originally Posted by howsweet View Post
 
Quote:
Originally Posted by -K8memphis View Post
 

 

 

it's ok, cake buddy *&gt;:D< big hug we getcha--it's what we all have to do if our livelihood is dependent on this business--you're right and it's ok


Thanks! :D

 

And maybe you don't share my opinion, but I strongly believe it's unconscionable and irresponsible to charge less than a person would have to charge to make a living. And those are the nicest words I can think of to use. Maybe the cost of living is cheaper 40 miles from the outlying suburbs of Houston, but by not half or two thirds. Which speaks to the point I was trying to get across. (The bakery mentioned was in La Grange, Texas)

 

 

i absolutely share your opinion for retailers--and since texas has allowed cottage cake industry that just divides that already fractured retail pie into shards--

 

just like for example the jewelry business--we can get all the stuff we want at the craft stores and online -- put it together ourselves and sell it anywhere--but a diamond's still a diamond and gold is out the roof--so established jewelers have less inventory, fewer buyers and more competition than they can handle too-- etsy for example--but that's the way it is now--sink or swim--

 

~~~~~~~~~~~~~~~~~~~~~

 

i believe hobbyists are a different thing -- and i personally believe hobbyists often get a bum rap on here--people are still saying if you get paid you are a business--bullsh*t -- but it's just like the jewelry--hobbyists can charge anything or nothing or sky high--i'm not debating anyone--this is my belief--

 

~~~~~~~~~~~~~~~~~~~~~

 

anyhow i think it is an AMAZING thing (and i rarely use caps ;) that you exposed the low ball pricing fiasco in your area--wowzers--that was stun.ning and heart breaking too--borders on legalities--

the only way to see the rainbow is to look through the rain

 

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the only way to see the rainbow is to look through the rain

 

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