Needing Business Advice (Long)
Business By chrissysconfections Updated 6 Apr 2007 , 12:22pm by SweetConfectionsChef
I am planning on licensing my kitchen in the very near future and have even started some of the paperwork but I'm having the age old problem with pricing. I've read a good many threads on here and even downloaded several pricing matrixes but I'm not getting anything that is workable for my area.
I live in an extremely small community surrounded by other small communities. The bigest town is on average 20+ miles away. I'm trying to appeal to everyone price wise but I don't know how to do this. There have been serveral bakeries that have gone out of business in both the neighboring small communuties and the larger towns but I don't think it was the lack of interest but more a cost problem. I also know that there are lots of those "my sister's friend's aunt's cousin does cakes" type of things too and of course the local groceries and chain stores.
I called around to the chain stores and local produce places to see what they charged and then contacted the only other person in the area that I know who does it out of her home. The price range was from $1.50/slice (local)-$2.50/slice (chain stores and other at home baker).
I was thinking charging $1.75 till I got licensed and then bumping to $2.00 so that I can still under cut the competition but not lose my shirt too. Does that sound right?
As I said before I've tried the matrix and it has given me fits. I quoted $1.25/slice to a bride a couple weeks ago based on what I paid for my cake 3 yrs ago and adding some. She wanted a simple 3 tiered cake for 200 with fresh strawberries and strawberry filling....the matrix said I over charged her at $275 ($25 for delivery)!! Then I plugged in the info for a 12 X 18 sheet cake(bridal shower in my photos) and it said $66 and I only charged $25! I really need help!! 
I like the idea of having a set base price and adding to that for the extras but I can't seem to even get that right. I also tend to undercharge for friends and family becaused I don't want to discourage any business they may bring but that is back firing too. Now I'm starting to pick up the outside business through word of mouth and I still can't get my pricing right! The bride I quoted ealier said her cake was the last thing she had to take care of and the hardest because she couldn't find anyone who does them. She even gave my info to her florist because she is always being asked for cake references and never has any to give. I wasn't prepared to be doing so much so soon and am caught with my perverbial pants down.
I really need the wisdom of the more experienced here! 
TIA!
My advice would be to just pick a price and stick to it, not raise it once licensed. I'm having to raise my prices slightly and it's a pain. Wish I would have just figured it out correctly the first time around. Also, even though I raised them slightly I've heard some comments on "why did it change" I would say charge the $2 a slice right off the bat
For some reason, I cannot get that matrix to work for me...I'm sure it's operator error. 
I charge $1.75 for BC or $2.50 for fondant (these are for wedding cakes) and then I have a postcard for party cake prices that include your basic decorations: 8 inch - $25, 10 inch - $40 etc..... and the serving very from 8 inch: 12-16 and then I would use the 12 serving for a party cake and the 16 for a wedding cake.
I still have trouble charging people...which is stupid and makes no sense but that's why I had the postcards done so when my chicken-poop voice fails me, I can hand them a card - lol. I also will charge extra for elaborate flowers, basketweave or custom designs.
On a side note, if you are interested in advertising there is an online goldmine called vistaprint that has special and I got 100 color postcards (with pics of my cakes on the front and b & w price list on the back) deivered for only $5.50. It is the best deal I have ever seen in my life!
One other thing is I sat down one day with receipt, a calculator and my recipe box and figured what everything 'cost' me so I knew what my cost was for all my commonly used recipes. It helped alot to get an idea.
How far from Philly are you? I charge quite a bit more than that...and recently I found someone's website from about an hour or less north of me who charges even more than I do.
Whatever you do, make sure your hourly wage for your time (after expenses) is going to be worth it.
I was going to get licensed this year as well but then got OOPS pg! So I won't have the time to devote to the licensing and insurance and etc, as well as doing my current three children and new baby. Soooo maybe soon.
On a slightly unrelated topic, Tia, you have the BEST avator (sp?) ever!! I laughed myself silly when I saw it! 
Why are you pricing for everyone? The ones who think your prices are too high can go to stores. If you make a cake that taste better than the stores people should expect to pay higher prices. Even before being in the business myself, if I found a cake that tasted good, I would pay top dollar for it.
In the end if you charge normal prices, (I think even 2.00 is way too low) even if you make less cake, in the end you make the same amount of money and you don't work as hard.
I can't add much to the already very good advice you've already given.
The going rate in your market is a factor when setting pricing, however, you must also set your pricing to cover your costs. (My family is in the car business, so I do a lot of comparisons using cars as an example .... bear with me here ). I'm sure you have more than one car dealership in your town/area and I'm betting you have car lots that sell Saturns and car lots that sell Cadillacs. There's a big price difference because there's a big material difference in these two cars. Like I'm sure there is a big material difference between your cakes and grocery store cake.
Those who are going to buy a Saturn will never shop the Cadillac car lot. My years in (non-cake) sales jobs taught me that those who are price motivated cannot be swayed by any other attribute of the product. They are bottom line people....period. You'll never convince them. These are the same people who think eating INSIDE a McDonald's is a big night out on the town.
What I see on CC alot (a LOT!) is what I heard on the Food Channel one day as "seller's remorse". The vendor, i.e. cake decorator, feels "guilty" about the price and lowers it. The customer never said a thing about the price ... it was the cake vendor who "felt bad" about the price and lowered it just because. Dont' fall into that trap.
good point julz71. I am in the same situation chrissy. (small town around lots of other small towns, larger ones at least 20 minutes away.) i'm nowhere near ready to get licensed, but you don't want to be overworked and underpaid. everyone will hover like vultures around the lady who makes such beautiful, delicious cakes with bargain prices. i know it will probably be frustrating starting out, you will probably hear some complaints about pricing, but know that eventually word will get around that your cakes taste better and are worth the extra money. hang in there and stick to your guns. i know it will be tempting to go lower but i think you will be shooting yourself in the foot.
Thank you all for your advice.
I think I will sit down and figure out what I spend and then set one price and stay there!
...and once you decide on a price, make yourself a basic price sheet, but be sure to highlight these words somewhere on the price sheet - "prices subject to change" (someone on CC suggested this). I did this on my little price sheets (not that I really have any customers) just to cover myself if someone comes back several months later and I charge more.
deb
Honestly, you don't want to undercut anyone...certainly the other lady in town that does cakes! If your market will hold $2.50 a serv then you need to charge $2.50 a serving. Do you really want people to order from you because they feel like they are getting a deal or because they love the way your cakes look and taste?? And that "lady" will most likely send you her overflow if you establish a business repore (sp?) with her. I have a lady down the road from me who has been doing cakes for 20+ years and her "sorry, I'm booked that day" customers walk thru my door every week.
The grocery stores are NOT your competition....
Good luck to you and I just had to throw in my 2cents. Pricing was the hardest part for me also until I realized what I just passed onto you! 
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