How Much Is Too High?

Business By Nazarine Updated 23 Jul 2012 , 11:32am by Nazarine

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Nazarine Posted 23 Jul 2012 , 4:23am
post #1 of 9

I'll be getting my license next month and will be able to provide wedding cakes. Up to now, I've been operating as a home based vendor and the Board of Health guidelines forbid delivery so I've steered clear of wedding requests.

I've been practicing some designs and getting my pricing straight. But I'm having a problem with the Tiffany glass cake in my gallery. Here's the issue. I'll be renting a licensed kitchen at $25/hour. To be compliant with the Board of Health, EVERYTHING needs to be done in this licensed kitchen. From cracking the first egg to the last brush stroke, this cake will take close to 20 hours. That's $500 already. Add supplies, gas, blah, blah. Then I keep reading that I should pay myself and add on a 25% profit margin to get the cake price. Well, that brings this cake up to $1500. No one around here is doing this type of hand painted cake so I can't call up a bakery and inquire. Does that sound like an awful lot for this cake? Or is it within the realm of reason? I do know that my neighbor paid $1000 for a 150 serving wedding cake. It was just 2 stacked squares with white buttercream and a red fondant bow. So maybe I'm not off by that much? Wedding cakes are just a new animal for me. I'm not sure if my pricing is cheating myself or too cocky! LOL!

8 replies
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Nazarine Posted 23 Jul 2012 , 4:25am
post #2 of 9

I should add that this cake is a 6/8/10 so it's only feeding about 75 people.

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jgifford Posted 23 Jul 2012 , 4:45am
post #3 of 9

I would check with your customers and see if they're comfortable with paying $20 per serving. If you quote that price to most people, they'll change their design.

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jason_kraft Posted 23 Jul 2012 , 4:50am
post #4 of 9

Your business plan should help you determine what the market price is for cakes in your area, and give you a general idea of how much people will be willing to pay.

Let's say this cake will take 24 hours (to be conservative), use up $100 of ingredients, and you have $40 in per-order overhead. If your wage is $12/hour and kitchen rent is $25/hour, your labor component will be $888. Add ingredients and overhead and your cost would be $1028. A 25% profit margin would give you a price of about $1300. If that makes sense for your market that's great, if not you have some room to come down, a price of $1200 for that cake would still give you a respectable 17% profit margin. (Plus delivery of course.)

Depending on your target market this type of cake may be well outside typical budgets, in which case you could suggest a simpler design with a lower labor cost.

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argylealice Posted 23 Jul 2012 , 5:48am
post #5 of 9

hi sorry cannot help with the pricing issue but just wanted to say that your cakes are beautiful.

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Nazarine Posted 23 Jul 2012 , 6:10am
post #6 of 9

Thanks for the input. I've been sitting here all night going over and over this, wondering why I'm flip-flopping. I think it's a confidence issue and maybe a case of nerves, more than a spreadsheet problem. So I went back to my comfort zone...the numbers. I know for a fact that $1500 is not an issue for my target market. These are people that live in massive homes with their boat out back in a private dock. I wasn't concerned over sticker shock. I think I was letting my nerves get the best of me that this type/design of cake wasn't in the league of that pricing. But it's current. It's interesting. It's labor intensive. And I know it's good work. So, I'm going to go with my original gut feeling and price it at $1500. I dissected this demographic for 12 years in my previous career. I know it inside and out. It's where I am most comfortable working, so now I just have to put on my Positive Polly face and trust in my business plan. I just wish my previous career had a cake component in it. icon_wink.gif

Thanks again for your input. It may not seem like it, but this helped trigger a thought process that brought me back to my original, unemotional line of thinking. Numbers and Excel spreadsheets are so comforting. LOL! Have a wonderful night and thank you again.

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Nazarine Posted 23 Jul 2012 , 6:11am
post #7 of 9

Thank you!!! I appreciate the compliment! icon_biggrin.gif

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MimiFix Posted 23 Jul 2012 , 11:21am
post #8 of 9

Just to add, customers like to have choices. When people see they can have one of your exquisite cakes for $1500 or a simpler design (for say, $800) it helps sales of the more expensive one.

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Nazarine Posted 23 Jul 2012 , 11:32am
post #9 of 9

Very good point! Perhaps a less expensive version would be a tier with a less intricate design? That's a definite possibility.

And when I was writing my reply last night at 2am, I realize that I edited so much that I left out a very important part! Serves me right for trying to think in a panic at 2 in the morning. I know that $1500 isn't the problem. But I admit $20 a slice is a rough sell. I was thinking of offering it in a 8/10/12 instead. This would not cost that much more to make, but can bring the per slice price down to $12.50/slice, which is an easier to sell.

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