OK, I'm pretty sure this will be my LAST post on CC, but I REFUSE to let this one go.....
I do this as a hobby, and I kinda resent the tone here. I don't appreciate being called suzy-hobby-lobby or whatever it was! I understand y'all's point about undercutting business, but I charge less because I'm not as good. Believe me, if I were good enough to charge $2 per slice I would..but that's not the point.
The point is, I'm not trying to "undercut" anyone. I am just trying to make my way just like you, so that someday I can raise my prices and have a licensed kitchen. AND my standards are NOT low, thank you very much! I use fresh ingredients, I have a list of scratch as well as box cakes, and although I'm not the greatest I'm better than Wal-Mart. I take pride in my ever improving work and I don't think I should feel the least bit sorry for charging less. Competition is what drives our economic system. I enjoy my hobby and if someone can pay for my ingredients and a little besides, then I'm happy.
There. I've said my peace. I'm sorry if I offended anyone.

I don't think you offended anyone, but I think you might have taken offense where it wasn't meant, but you have to look at it from the business person's point of view as to why they are upset when a hobby baker, which is what you called yourself, is advertising her prices that just cover costs and a little more. In the business world, that is undercutting. It may hurt to hear, but that's what it is.

Please don't stop posting on CC.

Please please please don't stop posting.. I think that it's a good idea to price yourself lower when you are skill building.. just let people know that this is why your prices are lower.. that when you feel your have reached the level that you set out to achieve that your prices will reflect that. Just don't set your prices to where you aren't making much of anything for the time you put into a cake.

BUT.. if you are doing this and getting paid.. it's more than a hobby I'd say.. especially if you are working towards getting licensed (which you should do before you really sell cakes for your own protection.. I am just thinking liability insurance and all that). I think as people in the biz we have all been burned by the "but she does it for $1.50/serving" because people don't tell them that their prices are low because they are just starting out and not as good as they would like to be. Either that or it is the lady/man up the road who does cakes illegally because it's fun and she/he doesn't care if she/he's not making money.

I have no problem with people skill building/portfolio building and charging less *IF* they make that clear. Because the general public has no idea why your prices are lower if you don't let them know. And I would never suggest that someone's standards for their cakes are low because of their prices are low.. I want more than anything for people to sit back and *really* think about what it costs them to make a cake and how much (or not-so-much) they are making for their hard work and time.

I am sure your cakes taste marvelous and are worth more than what you charge for them.. and THAT is my ultimate point.

Okay.. I just looked at your website and I must say.. you either need glasses or a bonk on the head because in NO way are you not as good as anyone. Your cakes are beautiful and well worth being priced competitively and beyond. Don't doubt yourself..

jam7, I agree with jkalman .... your work is wonderful and you should be getting top dollar for those cakes!

You are right that "competition" does drive our economy, but there is a law called the Robinson-Patman Act of 1936 that requires a company sell the same product in the same quanities for the same price to different customers.

Meaning if XYZ company and I are both buying 1000 lbs a week from a supplier, then the supplier is required by law to sell me that item at the same price as they sell it to XYZ company. The reason is to create FAIR competition. If XYZ company was getting 1000 lbs a week at $1.00 per pound, and I was paying $2.50 per pound, then you can see how my price would have to be higher to cover my costs and XYZ would have the competitive advantage. The gov't determined that this was unfair competition and actually restricted the growth of commerce.

Now in the case of me vs. walmart, if walmart buys 10,000 lbs a week and I only buy 1000 lbs a week, then the supplier can legally sell it to walmart at a lower price, if the supplier can show that the higher volume actually has a cost savings to the supplier (some of you will recall my posts on "volume discount pricing").

I had a job in which I was the resident expert on Robinson Patman and I traveled the country educating our customers on the law and why I had certain requirements on their pricing requests ... to make sure we were in compliant with Robinson Patman. I mean, I loved my customers to death, but I was not going to jail for 20 years AND paying a $500,000 fine just so they could save a dollar on my product!

Competition IS a good thing. But the key word is FAIR competion. And it must be FAIR competition, according to the law.

Ok, fine. I'm undercutting. (maniacal laugh here)...just kidding....
Believe me, in a perfect world I would be licensed. Mc Donalds can have cockroaches and mice, but my CLEAN kitchen can't be licensed because it's...well, my kitchen...We can't all fork out the cash to be "in the biz" from jump.
I do one...maybe two cakes a month for friends, family and the occasional outsider. I ENJOY it. I WANT to make cakes. and I'd LOVE to do it legally. But for now, it's my hobby and the people that I bake for know it. I mention that on my site. I can't just give them away, I'm paying higher flour prices too you know! So what's the solution? If I charged as much as y'all I'd be decorating for myself! If I charge less, then I'm a scapegoat for why legit bakers aren't getting business. Hmmm....seems a little skewed.
And btw...I still don't appreciate the name calling....''

I just scrolled down to read the previous post, and I saw that you posted again jkalman. Thank you for your kind words.....

jam7.. you are adding a tone to my posts that isn't there. I don't see the need for you to seem so defensive. I stand firm that people should get what they are worth. I am not telling to to charge what I charge.. just don't charge next to nothing for your benefit and ultimately other bakers in your area.

Please don't take my posts as an attack on you.. it all just venting in an open forum.

jam7,

I just wanted to chime in, I agree with jkalman and everyone else, your cakes are awesome. I love the deign of your website too. Please don't stop posting, it's a community and we all don't have to agree all of the time.

One way to charge less but NOT be "undercutting" is to have an invoice that on the first line states the price of the cake as you would charge it if you were licensed, as good as you want to be, doing it as a business, etc. On the second line you then show a discount. It can be an "introductory special", a "first time buyer's discount," a frequent buyer's discount, or just "happy Wednesday" if you don't have a good reason. The third line shows the total "special Price" due--what you really want them to pay THIS TIME. This shows your customer what the cake ought to be worth and also makes them feel really good that they got a "deal." Stress when you talk to them that you are giving them a deal, but that next time this probably won't be possible. When you are ready to charge what you feel you deserve, it isn't such a shock because they know more what to expect.

Side note: this is NOT a flame, it's business/econ reality learned at "The Culinary Institute for Hard Knocks Studies" course.

If you think for a second that "I can't afford to be licensed" you haven't looked at the price of good used NSF Restaurant/Bakery equipment lately because the market is absolutely being SATURATED WITH IT because of people not being good business managers (overspent when the market was good instead of putting money away for the bottom to fall out)! I'm watching 4 auctions right now and trying to decide whether to jump on getting my hood for $300 (not sure if I've got the truck to haul it home). That same hood would cost me, let's see, about $30,000-$60,000 NEW. It'll run me about $3,000 for all the installation that goes with it (and any parts I might have to fix), and let's do the math here... 15 wedding cakes at $500 each will pay for my hood which is arguably the most expensive piece of equipment needed in most states for getting a license, and it's PAID OFF, not gaining interest money for the bank. I just purchased my Hobart 20qt mixer for $300 and it works great (needs a paint job, but hey, $200, then an extra $300 for a new spare bowl/beater/paddle and I'm still ahead $1000 from what I would have to spend on a comperable mixer elsewhere (ebay, used suppliers, etc.)... It's about buying SMART and realizing that you don't NEED new for everything. I'll have my bakery back up and running for peanuts because I've been business savvy and learned to think outside of the box. I've purchased all of my small ware equipment for less than $5,000 over time. By the time I'm through purchasing my large equipment I'm anticipating it all to run another $8,000 then the cost of my building which is going to include that thing called sweat equity because I'm not afraid to hang NSF walls myself (I've already done this when I was in high school 13 years ago, it's not that tough!).. Am I ticking a lot of people off in the process, you betcha! OTOH, they aren't paying my mortgage and by buying smart, I won't be needing to pay it for long. THAT is how you get ahead when starting a business, buying low, maintaining a cash flow, and getting your name out there. As your profits increase you reinvest appropriately. It's nice to have the shiney new piece of equipment, but it's nicer to own it yourself (not the bank) and be able to stand on your own two feet through the downturns in the economy because of investing wisely.

I learned early on in my previous profession that if you're IN an industry you CHARGE LIKE A PROFESSIONAL in THAT industry. Regardless of this being your first day or first decade, you charge like a professional because you're doing a professional's job and you deserve to be PAID LIKE ONE. You aren't in business to lose money, you're in it to MAKE money, PERIOD. Undercutting because "you don't do this everyday" is a way to KILL the market for the pros that DO. In the other industry we can list off 2 people that killed a market for 15 of us because of this tactic. They went in and charged $350-500 for the same work that we were charging $1750-$5000 for. The people claimed that "I'm just doing it for the (exposure, name recognition, practice building, etc. excuse).." without realizing that they were hurting a PROFESSIONAL INDUSTRY. Just because you CAN charge less for your professional time doesn't mean you SHOULD. The reason I'm a bit strong about this is the first time I did this unknowingly in my first months in that profession, I got my butt ROYALLY chewed out to the point I'll never forget by my agent and mentor. Sometimes you've got to say no because the industry and your position there-in depends on it.

Besides, how much quicker can you find yourself paying for that commercial equipment if you're getting paid what the rest of the pros are getting paid??? Take the extra money you're going to now start to charge for your deserving work and put it into an interest gaining account that you're going to being using ONLY on NSF and professional equipment so when it does come time to move to a small bakery setting you've already paid for the stuff that's going to add up quick because you did it smart.

It's not about you, it's about helping the industry as a whole survive the transition.

okay, i hate to jump in but i was wondering... i really wanna be able to sell my cupcakes but to get breakeven i have to sell them at a certain price (in pesos) about 11 each, with frosting 15 each. In the bakeries here they sell cupcakes for 7.50 ea but they're not frosted (i don't think they're cupcakes if they don't have frosting btw) and they don't taste as good as my cupcakes (seriously, they don't) now these are the neighborhood bakeries, the somewhat high end bakeries DONT sell cupcakes at all and i really think I could open this market here in our town.

I really want to price my cupcakes the way I wanna price them and I guess i have to start pricing them right (a little bit pricey) or else I would never earn enough profit, right? is that what everyone's saying? I mean, i might be new to this, been only baking seriously for six months but my cakes are really good and i believe in them. i think i read in another topic that you have to charge what you're worth and my cupcakes are worth MORE than 7.50 ea.

That is the right attitude right?

jkalman....I was TEASING. Didn't you see the "just kidding"? I wasn't inferring any tone, I admitted you were right!
As for not affording to get legal, buying equipment is not the problem....
In my state, my kitchen would have to be in a separate structure other than the main house. That means I either convert my garage or build another structure on on my land. And I have a WHOPPING 1/4 of an acre within city limits. So I can try to get a construction loan (that at this point, one or two cakes a month won't cover) to turn my house into something weird, or I can go try to rent a retail space and be caught in a lease that I may not be able to afford. Or I can try to start with a business loan...I think we've all read the horror stories!
Don't you see the issue? What am I supposed to do? I have children and college to think about. Am I supposed to mortgage their future on my hobby? Have y'all read "The E Myth"? OMG! As much as I'd love to do it, we all know the statistics of starting a business....which brings me back to my "garage kitchen".....
I'd love suggestions on this. I've been struggling with it for a while...

I have no idea how much 11 pesos are worth in US dollars, but your attitude is right. You charge what your product is worth.. if it's good.. people will come.

Well angry faces don't promote and aire of jest.. But no worries.. I just hate for people to think I am attacking them.

I am extremely fortunate to be able to bake from my home kitchen. I totally agree with you that a lot of commercial kitchens are WAY worse than any home kitchen.. I've worked in more that a few. I'd love to convert my garage (right now it's just full of stuff and no cars ) into a kitchen too.. someday. I think surfing the web and locally for used equipment is the way to go. You can do it piecemeal when you can afford certain things.. ideally I'd like to do it without debt.. but I am realistic and know that's not likely to happen 100%. Nothing ventured nothing gained as they say. I think that's the big thing.. people who have shops have the overhead and they HAVE to charge higher prices or they'd go belly up fast. It really stings when they see people selling cakes for little to no profit because it makes it harder for them to justify their prices. For me.. that's not the case.. I have little to no overhead (just ingredients and time).. I just hate to see people not getting compensated for their hard work.

OMG that's like $0.26 LOL

You know.. I did a conversion on-line, but I wasn't sure which peso to use.. but I came up with $0.26 too.. I didn't think that could be right.

I charge $3.00 (USD) for basic un-filled (but frosted) cupcakes and $4.00 (USD) for filled cupcakes.

yeah that's about right. if i lived in the metro i could get away with prices like those but here in an itty bitty town, i can't. But you have to realize that ingredients here aren't as pricey as it is there.

i don't know how much you guys pay for flour but i can get 2 pounds of flour for less than $1.

Jam7--

I understand about the legal kitchen. I have been looking for something to rent with a partner that I did not want to be in business with. He's a bad businessman. I used to work in his restaurant (which is now closed).
Anyway, we were going to half the rent/utilities--he had ALL the equipment (it's in storage right now). Just did not want to get stuck with him.

Kept searching and finally found a kitchen to rent that is at a private school. I can use it at night and the weekends. I offered them $400 a month and they accepted it. Please do not get discouraged. When the time is right, all will fall into place.

jam7, I am in the exact same position as you--I'm happy making a couple of cakes a month for now while my kids are young, BUT I desperately want to do it legally! Unfortunately, my county doesn't allow home bakeries, the only option for me is to rent retail space but that would bring me to a level I'm not ready for. I'm kinda stuck in limbo land.

I have a question for you that's a little off the topic--Since I know I am proceeding illegally with my little business, I live in fear of getting caught (I'm a bit of a goody-two-shoes I guess). I've read so much great info on this site about being careful not to make my website or business cards appear too "businessy" because that could draw attention to me and lead to getting caught. Your website is lovely and your cakes are beautiful, but aren't you afraid you have too much info on there that indicates that you will sell your cakes? You explain on page 1 that you do this as a hobby from home, but then on another page you have info regarding cake flavors and placing orders...

I guess I'm just wondering if I'm being too paranoid...my site is set up with a brief 1 paragraph about how I make cakes for my family and friends and the rest is just pictures of things I've done. There's also a "contact me" link, but that's it. I'd love to include more info, but I'm afraid.

Maybe I'm speaking out of turn here, but I don't think the hobby bakers are really the problem. Now, if someone is unlicensed and baking out of their unlicensed kitchen and advertising, website, etc., yeah, that's a problem but I don't think that's the main issue.

People aren't going to go into Nordstrom expecting Wal-Mart prices but in Wal-Mart, they aren't going to get Nordstrom clothes either. If they want more affordable clothing, they go to Wal-Mart. If they have higher expectations, they're going to Nordstrom.

I think that is the same way with cakes. Some people would just never pay $3 a serving for cake. It's cake and it doesn't mean that much to them. If they know someone that can make them a nice cake that tastes good and looks good for a cheaper price, they'll do that, or make it themselves, or go to Wal-Mart. They wouldn't have gone somewhere to pay $3 a serving for a birthday cake regardless if there was a home baker or not.

In the past, I've made cakes for some friends and co-workers. It was all word-of-mouth and only for people I know. I don't think that any one of them would have paid $3 or 4 a serving for cake. They knew that they could get a cake from me, it would taste good, look pretty good and they would be happy with it.

I'm looking into the possiblity of having a bakery possibly in the hopefully not too distant future. Really, my husband and I are doing research to see if it's really practical for us. But, one of the main things I'm looking to is location and going after the higher end business - which means I really need to up my skill level, which I'm working on. I know that to really make it work, I want the customers that are competing with their country club friends and business associates for bigger and better, whether it's their 1 year olds birthday party or their daughters $50,000 wedding. They will be the ones that are willing to pay the price. I don't want to compete with Wal-Mart because I can't make any money competing with them.

I guess that's my 2 cents worth - 3 cents in todays market.

I agree that it's just not the hobby bakers. Like I said before, there are store-front bakeries charging practically nothing for their cakes (some only $1/serving) AND the hobby bakers. LOL! I'm going to look like the overpriced one if I go with $2/serving! Yikes! LOL! The one thing I have on my side (hopefully, maybe, fingers crossed) is I don't see anyone doing the fondant cakes that I want to do. In Cleveland, 30 minutes away, yes, and for up to $5-15+ serving.

I think it's also good to focus on something that is unique about your cakes and advertise the heck out of that. I was thinking of focusing on chocolate plaques and fondant because those are two things I just don't see in my area.

Actually, I'm terrified about it, and I have really put myself out there on this thread. Why stop now....
I'm like you. I goody-two-shoes about this, not that you can tell from my previous posts. I really, really WANT to be legal, and like I said I really stuggle with this. But no matter how I crunch it there is just no way that 2 cakes a month will pay the bills! It's such a shame that it has to be all or nothing.
My only relief is that I know that when my youngest in in school full time, that I am going to give this my all. I don't know where I'm going to find the money, but I will not be illegal forever. It's not right, and I'm not that kind of person. I practice something every day to get ready. I read about business management (which is really terrifying) and I just hope and pray that people will be kind enough to let me work my way up. You know? We all gotta start somewhere.
As for my site, I have no prices, no calendar, no links to business, no tips about cutting wedding cakes or serving hundreds, nothing that says that this is more than a hobby. Also, if you read my "about me" page, I state specifically that I bake for friends and family, and that I don't take on anything that will disrupt my family. Mostly because I don't even get enough orders to disrupt my family ha ha ha.... I can't just wait until that magical day that #3 goes to school and then open my doors and expect business to come. I guess I'm walking a fine line, but I don't really know what else to do...and I think that's why I got so hot headed before. WHAT AM I SUPPOSED TO DO??????? I'm a sahm, We're still paying off student loans from not only my own previous career, but my husband's professional school as well. And 3 kids on top of it. How can I afford to even convert my garage? You have to run water, sewer, install a furnace, ductwork, commercial equipment and the special electric outlets for that...it just goes on and on!! I feel so trapped! Sorry...that was a little tangent....

Thank you for all your kind words about my site and my cakes. I guess we are our own worst critics because when I look at them they just scream "AMATEUR!!" I mean, I have my Wilton Class III final cake on my front page for goodness sake! It's still on the cake carrier, I don't even think I put it on a board. Sheesh!

"They knew that they could get a cake from me, it would taste good, look pretty good and they would be happy with it. "

This is the problem (not necessarily you specifically, but as a generalization.. I don't want ayone thinking I am attacking them again). I totally understand doing it for friends on the cheap.. I don't charge my friends the same as I do the general public and I do cakes for family (and close close friends) gratis. Think about the future though.. you want to go after those high-end customers (me too.. that's what I spend most of my time marketing for) but right now you (the general you) ARE competing with Wal*Mart with prices so low and you will lose a lot of your current customers when you go legal and BAM your prices double or triple. Start thinking big.. it's bad business sense to start out with your prices rock bottom without a GOOD explaination and an indication on your invoicing of what their cakes SHOULD cost them and what a killer deal you are giving them. I think it's important to put on our business person hats from the beginning. I waited until I was legal to start up (granted it is easier for me in my state to do so, but I would have waited regardless).. and I never felt that I had to depreciate my worth to get my foot in the door. That's the mentality that will set you up to fail.

dupl

jam7, your last post indicates to me that you have some good business sense already, whether you realize it or not. (and let me repeat ... your cakes are NOT amateur!!)

You are correct in that 2 cakes a month or a week does not a business make. The same philosophy can be said of someone who wants to open, say, a bookstore. They may LUV books. They may buy them out the whazoo for themselves, for their friends. They may sell the books to to their friends after they are done reading them (i.e. garage sale). They may have a dream to open a real bookstore someday.

But they also realize that renting a store, installing bookshelves, paying for insurance, buying the inventory ..... so they can sell 3 or 5 books a week, just isn't a business. Books, that they just love, is just their hobby right now.

And you've done the same analysis. You realize that 2 cakes a week/month just won't pay for a store, equipment, insurance, etc. The price for the oven is the same whether you make one cake or one hundred cakes in it.

It's not just us or others in the food industry .... the same type of decisions are made everyday by folks wanting to open any kind of business. They have to determine if they have the volume to support their passion as a business .... or if they just keep doing it as a hobby.

And I double-second the suggestion of listing full price on the invoice then whatever discount you want to give them. They WILL tell their friends "It's a $75 cake (but she gave me a discount)".

Jam7.. have you looked into using a church kitchen (provided they are commercially licensed as all are not) or maybe talking to some local restaurants and offering a bartering situation.. you bake them x amount of dessert cakes/week and they let you use their facility? Just a couple thoughts.. there are creative ways to make this work. I wish you all the luck in the world on your venture.. your cakes are great and you coudl have a promising future in this.

Now as far as your site goes.. there are quite a bit of things that scream "please place an order today". Your entire "about my cakes" page for instance and on your "about me" page you state that you have branched beyond just doing this for friends and family. If I were looking at your site.. I wouldn't think you were just baking for fun. Just a thought. I would hate to see you get caught.

you know, that's a really good idea! I never thought of invoicing full price with a discount listed. I just charge whatever I think my cakes are worth (which I know is bad...you don't have to tell me). I don't invoice now, but I suppose I could start and just tell people "I'm giving you this invoice and charging you $X because I'm trying to get started..."
Hmmmm, I'm going to really consider that!
Thanks!

Yes, I have looked into a church kitchen. I'm telling you, I have considered just about every imaginable possibility. It's two cakes a month!!!
There are a million ways to run and start a business. I'm sorry that the way I'm doing it is so frustrating to you. Please be assured that it is not my intention to be this way forever. I have no intention of doing wedding cakes every weekend for $1 per slice and not following the rules. '' I have mentioned before that I think that's wrong and not in my plan.
Good for you that start up wasn't so hard! '' That's awesome, I wish I could do the same. Please understand where I'm coming from.
I'm just trying to make my way toward being legal. It would be great if you could give me some positive suggestions as someone who's "been there done that" instead of pointing out negatives.
I'd love to hear how I can go from 2 cakes a month to startup without being illegal. I really would!!! All the books I've read on business management are very discouraging. As someone who has the knowledge I'm seeking and has put it into practice I would be very interested learning. That's why I'm on this site. To learn from people better than me.
I don't know how many more ways or times I can say that I WANT to be legal.