How Have You Increased Your Profit Margins? Advice Needed!

Business By meringuecakes Updated 29 Apr 2016 , 11:31pm by costumeczar

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meringuecakes Posted 27 Apr 2016 , 2:20pm
post #1 of 2

Hello Everyone!

I have my first full year of selling cakes under my own business and I have learned a lot!  However, I still need to learn more especially when it comes to pricing, being very efficient with my food cost and waste, and learning how to get the maximum profit from my orders.  In my second year, my goals is to really fine tune my ingredient cost.  One of my biggest culprits of having high food cost is small orders. I make 100% everything from scratch and in small batches.  In fact, as I grow my business I would like to have a minimum purchase order for ANY custom work at $100.  My main focus is on wedding cakes.  I would like to grow my business to have be roughly 60% wedding sales, 20% wholesale to local restaurants/coffee shops, and then have the last 20% be holiday (homemade truffle) sales.  I cater my business to high end cakes and I do not promote basic birthday or other types of sheet cakes.   However, I am not hitting my goal in sales yet and I am still growing my business.  In the meantime, I am taking on whatever cake orders I can get because I have the time to take them and I feel like taking on any orders (even if my margins are bad) is better than taking on no orders.  Until goals are met I cannot afford to be picky...but I want to be the type of business person who works smarter and not harder :)

I know I need to make some obvious changes.  Firstly, when someone orders a small an order of under $100.00 I need to limit my flavor choices.  Until now I was offering up to 5 highlighted flavor options, but I think I need to get this list down to 2 options.  For example: If you want to order a $30.00 cake you would just have a choice between a chocolate caramel or a strawberries and cream.  If you want to spend more than $100.00 I can offer more flavors.

I am the most expensive baker in my area, but I am also the only one making things from scratch.  I think there is room for me raise my prices a little.

My question is: What small changes have you made throughout the course of your business that has helped your bottom line and helped you hit your target numbers?  I really want my second year to be a profitable business and not a hobby.  I know that it I need to take a lot of little baby steps that will add up to large changes over time.   I need your advice!  

Thanks! Jen

Here is my website 

1 reply
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costumeczar Posted 29 Apr 2016 , 11:31pm
post #2 of 2

Your website looks very upscale, so you're on the right track for being in the higher prices in your area.  The obvious places that you can save money is to cut costs by buying in bulk and going through wholesalers. Do you get your flavorings from the grocery store or have you shopped around? If you have a business license and/or tax ID you can get wholesale accounts with PreGel, Albert Ulster, Amoretti and other suppliers and that could lower your costs. It would depend on your storage area and how fast you go through things, I suppose...

The other way to increase your profits is to cut out the freebies. Do you charge for tasting appointments? It might be worth it to do that to recoup some of that time and supply expenditures. It also cuts down on no-shows. You also do free delivery, but is that something that you have to do because people can't pick things up? Or can you start charging for deliveries? 

I'd definitely impose a minimum order price for decorated cake orders. What's the most common cake size that you sell? If you sell a lot of 6" cakes you could make the minimum $50, which would probably make people order larger cakes if that fit within the minimum order size. but the increase in ingredients for a 6" vs an 8" is minimal, and labor time isn't that much, so even doing that would increase your profits a decent amount.

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