You know it's funny bc I've realized that people will spend any amount on all other 'must haves' for big occasions and yet moan about the price of a custom cake. I have a friend who wanted a cake for her sons birthday (16th), we decided on a 2 tier cake with decorations that I said would come to 100. She said it was too expensive and said no. I felt bad and spoke to my husband about it but he said to me that they are spending 10.000 on their sons birthday (we are family friends) and if they can't pay an extra 100 then I should let it go but definitely not lower the price as it was low to start with.
I honestly think that people have no idea what goes into cake decorating.
I agree - I had a friend who asked me to make a UK Rugby ball shaped cake. I had designed it in my mind (hiring the shaped cake tin) and thought three hours work and how much contents were and then heard myself saying - tell you what its for your sons 18th party (to which we were going) I will do this as his present. I would never know what to buy anyway. As soon as I said it was a gift suddenly the cake had to be two cakes buttercreamed together, to make it a spherical cake with fondant icing covering the ball. The cake had to have his name on it - in run out (flooded icing) and also to look exactly like the ball that the England team play with - which included a run out icing emblem of the English Rose onto a surface that was at a 45 degree angle - pretty difficult, as the consistency of the icing had to be exactly correct in order not to smudge over the outlines. The cake which I had anticipated taking 3 hours - took 9 instead all just before New Years Eve when I should have been relaxing on holiday with the family. I think my friend had no clue as to the hours it takes to get their cakes looking nice. I never told her how much I really should have charged her - but it was upwards of £100 - and certainly more than I would have given for an 18th birthday gift. Lesson learnt - finish designing the cake - and then offer the quote and if they add on more difficult techniques - revise the price!!
My friends don't buy cakes from me. They did when I first started and I made everything for $30 just to help cover ingredients while I learned how to smooth a cake. But when I made the step to become a business and had real prices, they all stopped. Doesn't offend me, doesn't offend them. My target market is brides and high end parties. I recently did a childs birthday cake for $1,300. That is not my friend circle, but it's who my target market is.
Okay so here's a story... there is a lady in town that will make any cake for $1.50. She's been making cakes for like 40 years and I guess at some point in the 70's she stopped raising her prices. Anyhow she's old, and she's in the hospital this week. So I get a phone call on Monday from a bride freaking out that her cake decorator is in the hospital and now she doesn't have a cake for this Saturday. So she tells me what she wants, and I give her a price of $330 for 60 servings. She was like WHAT?! FOR 60 PEOPLE?! I was going to be paying $100 for my cake and I was hoping to stay there. I said, I totally understand that you're on a tight budget, but maybe the grocery store would be better suited for it than a custom cake designer.
My friends don't buy cakes from me. They did when I first started and I made everything for $30 just to help cover ingredients while I learned how to smooth a cake. But when I made the step to become a business and had real prices, they all stopped. Doesn't offend me, doesn't offend them. My target market is brides and high end parties. I recently did a childs birthday cake for $1,300. That is not my friend circle, but it's who my target market is.
Okay so here's a story... there is a lady in town that will make any cake for $1.50. She's been making cakes for like 40 years and I guess at some point in the 70's she stopped raising her prices. Anyhow she's old, and she's in the hospital this week. So I get a phone call on Monday from a bride freaking out that her cake decorator is in the hospital and now she doesn't have a cake for this Saturday. So she tells me what she wants, and I give her a price of $330 for 60 servings. She was like WHAT?! FOR 60 PEOPLE?! I was going to be paying $100 for my cake and I was hoping to stay there. I said, I totally understand that you're on a tight budget, but maybe the grocery store would be better suited for it than a custom cake designer.
IMO, no response is the best response to comments like this. If I hear something like this, I stay silent and just look at them and wait to see if they have anything else they want to talk about - usually they flounder about and change the subject. Never felt I needed to justify our prices.
You are charging way too little -- $2 per serving for a tiered cake in the Houston area is a steal. I rarely sell a cake for less than $6.20 in Houston. When i first started I was giving them away, but once you have pics, as you do, you can charge much more.
Gradually raise your prices - you will lose the freeloading "ladies" who are in-the-know that they can find a cake lady who works for nothing and you'll eventually connect with people who expect to pay for what they get. In the middle you will still have a lot of people who are splurging on the cake, but in the end you'll have repeat customers who easily pay your prices and there is less strain.
The customer who wants something for nothing is easiest, send them on their way. The worst of these is the woman patting herself on the back for how wonderful she is for always getting a deal on everything.
The customer who is splurging is a difficult customer who may need to take up a LOT of your time micromanaging the order. They are usually one timers.
Your best customer is someone who can afford your work as well as most people can afford a kroger cake. They are impossible to find while you're working your fingers to the bone at $2 per serving.
"I'm quite busy, actually."
"Business has been booming."
"Perhaps I'm not the baker you need."
Theresa 
I like the comments about cake decorating being artwork, your talent would naturally be more valuable than a stenciled/pre-designed/cookie cutter cake. I would EXPECT to pay more for the original Mona Lisa than I would a print.
Second, if you wanted to make less money per hour, you could just go to work at a grocery store type bakery - no baking (they are all frozen from a factory), little mixing (icing comes in tubs) and no hassles of actually discussing in depth what a customer wants (what we got here in the case is what you can have period, but I will be glad to write your name on it). Plus no hassles of delivery, maintenance, buying supplies etc. You could happily decorate cakes all day long for the money... but most of us on CC don't just do this for the money.
Third YOU and YOU alone set your value... if your cakes are too cheap then you won't be able to keep up with the volume without burnout, if they are too expensive you won't be able to maintain your overhead because you won't do enough volume.
Think about this... if it were so easy to slap some frosting on a block of cake and have something that tastes good and looks perfect then there would be no such thing as bakeries, everyone would do their own... but for now there are plenty of folks who won't pay for more than a grocery quality cake and plenty more that won't pay for less than a good tasting, work of edible art.
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