How Much Do People Think A Cake Costs To Make???
Business By TPACakeGirl Updated 23 Jun 2016 , 1:30pm by indydebi
To PeasNTatersMom - You could have avoided the hurt of some of the comments you read if you had just taken a few minutes to read a few other pricing threads on this site. It only takes a bit to see a common theme: people who completely under price their work and don't understand why they are attracting cheap customers who are balking at their below market prices.
As a previous poster stated, custom cakes are a luxury item. Not everyone can afford them. Try to read Jason's pricing blog, or download the Cakeulator app to help you appropriately price your products.
Liz
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Original message sent by Pyro
Walmart will be pissed, you're undercutting them with 3 tiers at 50$.
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Original message sent by PeasNTatersMom
Wow. I can't believe how rude some of you are here. I am just getting around to reading the comments here and I am very surprised. I guess I expected more guidance and support than shock, disgust and disbelief - not to mention being called "thick". I am new to this, beyond baking as a hobby. My work doesn't even compare to most of what you do. I learn more with each project I do. I feel that the practice I am getting is payment in part - and I'm covering cost of supplies and making a (very) little bit for my time as well. I do plan to adjust my pricing a bit - I am working on that now. I posted here seeking help and maybe a safe place to vent my troubles, where I thought people would understand. I posted a seperate thread and appreciate very much the kindness I received there, so to those I thank you. A little kindness goes a long way in making someone's day. :) Everyone else? I'll just say I wish you all the best.
You came to the wrong place if you thought you were going to get support for severely underpricing your cake.
"Thick" wasn't really a nice comment, but I think in all honesty...people on this board hate cake decorators getting taken advantage of. Seems like this was one of those situations.
I know how much value there is in practice cakes. I've learned sooooo much by doing them for friends and family. There is just so much sweat and tears that go into cakes, I hate seeing fellow cakers getting taken advantage of.
Aside from the "thick" comment, the posts were honest, rather than brutal. There are a lot of people on CC who make their living by baking and decorating and selling cakes. Cheap cakes take business away from them and misinform the public about the value of a custom cake. It also puts the "cheap cake lady" on you and makes it difficult to raise your prices later. Of course you need to practice - make them for your family and very close friends, who may subsidize your expensive hobby some - until you can sell a well-decorated cake to cover your ingredients costs, overhead costs (electricity and liability insurance aren't free), and a decent per-hour wage for yourself.
People here do get irritated by "what would you charge for this cake" posts because there are already more than 25,900 threads on CC on that topic, and I'm not exaggerating. If you put "cake price" in the Search box at the top right of the page and then click on Threads in the left menu, you will see. It is 1040 pages of posts on cake pricing.
I do wish you well.
Gosh how sensitive are some of you?
Now I wasn't calling you thick personally and I apologies if I hurt your feeling, but I did actually believe that you did not mean a 3 tier cake, but a cake with 3 layers as no one can be thick enough to price a 3 tier cake for $50. Seriously, I don't think you can even get enough ingredients for a 3 tier with $50. That is not even lack of business acumen, it's stupidity to price your cake at less than it costs to make in ingredients alone, simples.
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Original message sent by SugaredSaffron
Gosh how sensitive are some of you?
Now I wasn't calling you thick personally and I apologies if I hurt your feeling, but I did actually believe that you did not mean a 3 tier cake, but a cake with 3 layers as no one can be thick enough to price a 3 tier cake for $50. Seriously, I don't think you can even get enough ingredients for a 3 tier with $50. That is not even lack of business acumen, it's stupidity to price your cake at less than it costs to make in ingredients alone, simples.
Oh great now she's thick AND sensitive. Looks like you're just digging yourself a hole. Lol
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Original message sent by SugaredSaffron
Bad cruel cake lady, I'm going to break the internets! No but seriously it's general!
I know no one was being mean, just honest. I can't help but think of my mom who lives in Kentucky. "Thick" is a term they use there for large folk.
AI feel the need to step in and clarify here that thick in the UK means stupid, or dense. Not like thick in the US which means fat. Not that either are really OK, but you know, putting my intercontinental experience to use and all that.
To Peasntaters, practice cakes are for friends and family. Don't do $50 cakes for "customers" aka strangers. Not only is it potentially illegal (depending on your state), but you're just doing everything that was already said - undercutting the actual businesses in your area, teaching your clients that 3 tier cakes should only cost $50 and setting yourself up as the cheap cake lady that will never get market rate for a cake. Covering your costs and making a little for your time is not how you do business. You need to cover your costs, pay yourself a decent hourly wage (at least the federal minimum) and then make profit on top of that. If you don't think your cakes are worth market rate, don't sell them.
Wow, people and their opinions. The ingridients for a 3 tier cake do cost less than $50, depending on the size of the 3 tier cake of course.
You came to the wrong place if you thought you were going to get support for severely underpricing your cake.
Yeah, I'm sorry, but you're talking to a lot of people that make their living and put food on the table with custom cakes. As in, that's their income. So yeah, we may get a little huffy about someone undercutting our prices and therefore potentially dragging the custom cake market down.
I deal with this every day in my business, people telling me that they can get the cake they want for sooo much cheaper from someone else and questioning why I charge so much. I can think of a few very specific instances in the past few months where we all but had the signature on the contract and the retainer in hand, when suddenly the client found a cheaper option and went with them. So this is not just an imagined issue. It's real.
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Original message sent by LoveMeSomeCake615
Yeah, I'm sorry, but you're talking to a lot of people that make their living and put food on the table with custom cakes. As in, that's their income. So yeah, we may get a little huffy about someone undercutting our prices and therefore potentially dragging the custom cake market down.
I deal with this every day in my business, people telling me that they can get the cake they want for sooo much cheaper from someone else and questioning why I charge so much. I can think of a few very specific instances in the past few months where we all but had the signature on the contract and the retainer in hand, when suddenly the client found a cheaper option and went with them. So this is not just an imagined issue. It's real.
Not sure why you quoted me on that. I agree with everyone that undercutting is not cool.
Did I miss something?
Not sure why you quoted me on that. I agree with everyone that undercutting is not cool.
Did I miss something?
I believe she was agreeing with you that I came to the wrong place etc etc...which is obviously true. No worries, ladies. I won't make the same mistake twice.
Yeah, I'm sorry, but you're talking to a lot of people that make their living and put food on the table with custom cakes. As in, that's their income. So yeah, we may get a little huffy about someone undercutting our prices and therefore potentially dragging the custom cake market down.
I deal with this every day in my business, people telling me that they can get the cake they want for sooo much cheaper from someone else and questioning why I charge so much. I can think of a few very specific instances in the past few months where we all but had the signature on the contract and the retainer in hand, when suddenly the client found a cheaper option and went with them. So this is not just an imagined issue. It's real.
I understand the issue with this, and am very sorry to those of you whose cake businesses are suffering because of those who are underpricing you. Putting myself in your situation, I can see how that would be very frustrating and costly. I wish there were some "universal pricing guide" for all bakers to go by so that pricing would be the same, there would be no surprises, and people could then base their purchase based upon product quality.
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Original message sent by PeasNTatersMom
I wish there were some "universal pricing guide" for all bakers to go by so that pricing would be the same, there would be no surprises, and people could then base their purchase based upon product quality.
There is a universal pricing formula, it involves calculating your costs and adding markup based on local market value. This requires:
1. Accurate data collection 2. Market research 3. Confidence in the value of your product
If you don't have all three of these you will either alienate your target customers by overpricing or leave money on the table and cause economic damage to your local market.
In addition to what Jason said above, pricing requires what many who post here aren't interested in doing: some basic math calculations. You will actually have to pull out a calculator, a pen and some paper, and a clock. I know, many people think it is just easier to pull a number out of thin air, or come on here and ask "how much should I charge for this", but those methods just don't work.
Liz
Yeah, I'm sorry, but you're talking to a lot of people that make their living and put food on the table with custom cakes. As in, that's their income. So yeah, we may get a little huffy about someone undercutting our prices and therefore potentially dragging the custom cake market down.
I deal with this every day in my business, people telling me that they can get the cake they want for sooo much cheaper from someone else and questioning why I charge so much. I can think of a few very specific instances in the past few months where we all but had the signature on the contract and the retainer in hand, when suddenly the client found a cheaper option and went with them. So this is not just an imagined issue. It's real.
Placing the question of poor pricing aside for the moment, if you get huffy about undercutting practices one has to question why you are in business. In every sector of the economy businesses undercut each other routinely--it is part of doing business. I am in the market for a new a car and have 3 Ford dealers in the area all purporting to offer the best possible deal on a new car--fact is consumers benefit from this practice. I am sure everyone here has at one time or another gone to a different business for a product because a competitor is engaged in a pricing strategy to garner more customers.
Second simply because a customer found a cheaper option does not mean that you were undercut. Your business alone does not get to set "market prices." Because you feel your labor warrants x level of compensation, your ingredients cost you y, your utilities cost you z does not mean you get to set what market price is in your area. Indeed rarely will two businesses who sell the "same" product set the same price. That customers found a cheaper alternative could simply mean they have lower costs and can afford to charge less. Which means they did not undercut you, as undercutting is a deliberate pricing strategy in which a competitor is aware of the prices set by the competition and deliberately sets them lower.
This is the problem with Jason's "Magic Pricing Formula." His advice to mark up your product to market price presumes to create an economic situation that never exists--firms charging the exact same price for the same product. For example it does not account for the fact that the cakes produced will never be the same--put another way there is product differentiation between cake businesses--and it does not account for branding. The thread in this forum on using scratch baking and quality ingredients as a way of countering an established business in an area illustrates why even cakes are not the same. Add in skill of the decorator, artistry, etc and there are more than enough factors to ensure that no two products will be the same. Thus aside from basic market competition it is simply unreasonable to expect equivalent pricing structures among competitors. You do not think that there are bakeries charging less for wedding cakes than what Buddy charges in the area he serves in NY/NJ? Is he being undercut? No--there are cheaper alternatives because you are not buying his name and reputation.
How many of you shop at big box stores like Wal-Mart, Home Depot, Lowes, etc? You think when Home Depot opens a store in a new market which as only been serviced by local nurseries, local hardware stores, and kitchen and bath business that they raise their prices to match the prices of those local businesses? Of course they don't, nor should they. They are using the competitive advantage of bulk purchasing to provide the same products cheaper than the local businesses can. Nor are they leaving money on the table. If Home Depot set its prices to match those of the local businesses what incentive would consumers have to start shopping at the newly opened Home Depot? Oh sure they might have a bigger selection, then again I have yet to see a local establishment that has not promised to get me what I want if I need something they do not stock.
How about shopping online from establishments that do not operate out of brick and mortar shops? I am sure everyone goes to their local cake supply store right to buy their supplies--right? No one goes online to find cheaper prices set by competitors who use their lack of overhead to charge lower prices for cake supplies? Unless you shop entirely at local businesses anxieties about damaging the economy are rather uncompelling. Each big box store and online retailer that offer lower prices highlights how undercutting is part and parcel of a competitive market place.
I am not saying that people do not lose business to people who price their products poorly, however, simply because someone decides to go with a cheaper alternative does not mean you have been undercut (remember undercutting a deliberate pricing strategy). Nor does it mean that a business is leaving money on the table because they opt for a smaller profit margin to counter the competitive advantages of clients like branding, artistic skill, etc. And frankly undercutting is part and parcel of a competitive market place. The only place it does not happen is when businesses are colluding to keep prices at a set point and frankly there is no reason why the custom cake industry should be excluded from competitive forces that benefit consumers---as I am sure those in that industry have benefited from this practice in other industries.
AI don't think the problem is undercutting in general, it is undercutting to the point where you pay yourself below a reasonable wage. That's not economically sustainable, and is especially damaging when done by someone skilled at baking and/or decorating.
Regarding your comment on market value, that's why I wrote in my article that you need to research how much similar products are selling for. If you are making custom cakes no one will ever have exactly the same product, but it's important to know what the price points are for what you're selling based on an objective comparison of relative quality between you and your competitors.
If you are in a small market with limited competition, you have to use what data is available and adjust accordingly. For example, let's say you are starting a midrange bakery with a cost of $2.50 a serving, and the only other bakery in the area makes higher-end cakes than you at a price of $6/serving. This does not mean that the market value of your midrange cakes is automatically $6/serving, but depending on demographics it may support a higher markup for you, say 40% ($3.50) instead of 20% ($3).
Now let's say this high-end bakery is instead selling at a price of $3/serving. This means that the market value of your midrange products is probably lower than your cost, so you need to reduce your costs or move to the higher end of the market in order to succeed. Without researching market values in advance, you would only find this out after you launched your business and didn't get any customers.
I don't think the problem is undercutting in general, it is undercutting to the point where you pay yourself below a reasonable wage. That's not economically sustainable, and is especially damaging when done by someone skilled at baking and/or decorating.
Exactly. When I say undercutting, this is what I am talking about. I realize different businesses will price differently based on their expenses, and I am fine with that. That's business. What I have a problem with is the people who grossly undercharge and therefore cause people to think that we grossly OVERcharge, when we are just charging what we have to in order to survive.
I never said that my business gets to set market prices. We price according to the already set market prices for our area, so if someone is charging significantly less than what we charge, they are dragging the market down for all of us.
No one here is advocating for price setting or collusion. They just don't want amateurs poisoning an entire market segment with pricing that would pay poverty wages at best.
And as a small business owner, I regularly shop at my local True Value hardware store, and as many other small local businesses that I can. I patronize their shops, and they patronize mine. I avoid Wal Mart like the plague, because I am not interested in supporting the economy of China in the name of low prices.
Just wait until cake comes in frozen in shipping containers from China . . .
Liz
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Original message sent by liz at sugar
No one here is advocating for price setting or collusion. They just don't want amateurs poisoning an entire market segment with pricing that would pay poverty wages at best.
And as a small business owner, I regularly shop at my local True Value hardware store, and as many other small local businesses that I can. I patronize their shops, and they patronize mine. I avoid Wal Mart like the plague, because I am not interested in supporting the economy of China in the name of low prices.
Just wait until cake comes in frozen in shipping containers from China . . .
Liz
Just wait until cake comes in frozen in shipping containers from China . . .
Awhile ago I remember reading a thread about Australian cakes for the film " Cars " coming from a country in Europe ? In supermarkets obviously.
But to stick to the thread, I believe when people on CC talk about undercutting, they are NOT talking about the price difference between bakeries for products like cakes and such ( which is normal ) but the gross under-evaluation of the products in any market.
Like Jason pointed out, this usually happens when people are ignorant ( uninformed ) about their true cost to provide a cake because they have not researched their overhead, ingredient costs, profit AND paying themselves an actual living. Basically giving away the cake to the customer. This happens because people think this new venture they are getting into is easy since they get a lot of compliments on their work, they jump right in and have a " business suicide ". They will be around until they go into massive debt and bankruptcy, get a burnout or get into other legal problems. Others are just lazy and want strangers to do their work and some just don't care about the legality of anything they are doing. They just want to bring some $$$ in now.
The time it takes for these businesses to go bust ( and they all do ), they hurt other businesses around them. And when they are gone, there's always 3 more who just popup doing the same thing. We all started ignorant, that's why you seek legal advices, you do market research to know your competition and what the market can sustain ( you won't make a living selling 2000$ cakes in a farm town ), you do menu development to know your real costs, seek out vendors and wholesalers. That's how you know that your dream is plausible. Maybe you have to move to your target market, maybe you have a CFL that will help you start out or you will have to get some type of storefront. Now I'm just rambling. But you can't just price stuff willy-nilly.
To bring back the car analogy, I don't even need to know which car or maker or model you're talking about if you're telling me you sell new cars for 5000$, I know it makes no absolutely no sense. And maybe we all missed the mark when the poster said 3 TIERS, maybe he/she meant 3 LAYERS. But that was never " corrected " so it was most likely tiers.
Either way, anyone who can produce and sell a cake cheaper then Walmart ( who uses the cheapest ingredients, as wholesale power, mass produced, machinery, preservatives to reduce loss and whatnot ) as a wonked business. Walmart will NOT sell you 3 Tiers for 50$.
If you make under minimum wage, go work at Mc Donald or Walmart, seriously, save yourself the aggravation of running a business and bring more money to your family.
AThe biggest problem we seem to have with undercharging comes from people who say they're doing it as a hobby, when in fact they are trying to sell their cakes, but not doing it in a professional manner. That doesn't make it a hobby. That makes it a very poorly thought out and possibly illegal business. Your business can be a hobby, but you still have to run it like a business. That means charging prices that make good business sense.
Wanna make cakes for fun and not charge for your time? Go ahead, but don't do it for strangers.
Wanna make cakes to make a few extra bucks on the side? Charging a price that will actually make you a few bucks instead of leaving you in the hole would be a good place to start. One cake that pays you $25 an hour for 8 hours pays more than 10 cakes that pay $1 an hour and take you all weekend. You don't need to find 10 people that are willing to pay a fair price, you have to find 1.
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Original message sent by kikiandkyle
The biggest problem we seem to have with undercharging comes from people who say they're doing it as a hobby, when in fact they are trying to sell their cakes, but not doing it in a professional manner. That doesn't make it a hobby. That makes it a very poorly thought out and possibly illegal business. Your business can be a hobby, but you still have to run it like a business. That means charging prices that make good business sense.
Wanna make cakes for fun and not charge for your time? Go ahead, but don't do it for strangers.
Wanna make cakes to make a few extra bucks on the side? Charging a price that will actually make you a few bucks instead of leaving you in the hole would be a good place to start. One cake that pays you $25 an hour for 8 hours pays more than 10 cakes that pay $1 an hour and take you all weekend. You don't need to find 10 people that are willing to pay a fair price, you have to find 1.
This really helps me! I raised my prices but then looked at craigslist in Cincinnati and searched "cake" and see people.advertising cakes for $1.25 a serving. One girl has cakes with just sloppy stars all over them and thinks they're saleable.
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