I have a Commercial Kitchen, converted a 2 car garage. I do check prices around my area, (hadn't checked since I first was almost legal, a couple years ago)  and besides for overhead, labor, and costs and profit, I want to be competitive, and get paid as much as I possibly can (duh!) I was using the an average between Wilton, and Earlene's charts , but I recently looked at some serving charts of bakeries in my area who participated in a bridal show, and saw they all use the Wilton Chart, so for ease of comparison, I switched to Wilton.  

 

I also noticed that prices had gone up in my area, where one had been $2.90/ $3.75 fondant/buttercream was now $3.50/$4.50. And another who doesn't have prices posted (I got her brochure last year and this year) has gone up from $3.75/$4.50 to $4.90/$5.50. 

 

Another's website expired 3 days ago (LMAO!) but their prices are $5 for swirls, dots, and minimal piping and $6-7 a serving for everything fancier. I was on their Facebook and they mentioned in comments that Cupcakes are $5 each, undecorated.  and an 8" cake is $150 

 

My prices are $2.75/$3.50. and frankly, I wasn't impressed with any of the cakes on their Facebook, save 1, but it wasn't really anything that most people would want. I hold my own with all in the area, some are better, some are not quite as good. ( and we all have our off days.)

 

I have a commercial kitchen, and not a store front, it is JUST ME, and no employees, so my over head is much less, so I figured I should keep my costs lower, but I have had several consultations in the last month and a few people were like "THAT'S ALL?" and "everything included??"  and other general shock that the prices are so little, so should I raise them? Maybe raise them, and see what happens? lol. I know the higher priced bakeries are booked every week, while I am not.  I make enough, when I make them, but I am thinking maybe my lower prices are being perceived as less quality.

A

Bingo. If you provide a product on par with competitors who are charging 30-70% more and your competitors are constantly booked, you need to reevaluate the market value of your products.

What percentage markup are you using for your profit?

AI don't use a percentage, because it varies per cake, as do my hours for each cake, plus I work from home, so I take lots of breaks, so an hourly pay is useless to figure. My cakes cost between .67¢ and $1.27 a serving, I have about >$200 a month in overhead, and I put the rest in the bank, and use it for future supplies, and taxes and equipment. I spent $17,000 ish to build it and stock it with cake pans, oven, luster dust, and tables and everything. We are still fixing it up, I just bought $87 worth of shelves.

I really only pay myself when the bakery has $1000 in the bank. I have all monthly payment items that don't fluctuate paid for 4-12 months in advance, such as website, insurance... We still owe ourselves the money, since we paid for it all out of pocket and didn't use credit.

AWithout knowing the labor and overhead cost component for your products (or the market value) it's not clear how you've set your prices. Once you have this information you can determine what your markup is now -- it's probably lower than you think -- and see what makes sense in terms of your local market.

You should be able to point to any of your products and explain (to yourself, not to customers) how you set the price. For example, if basic cakes are priced at $4/serving, $0.75 may come from ingredients, $2 from labor, and $0.50 from overhead, leaving a cost of $3.25 and a markup of 23%. Generally markup will be in the 15-45% range.

I agree with knowing all your costs, of course!! But it's not so easy to do a straight mark-up as percent. I think your mark-up per item is up to you and it can fluctuate from one product to the next. Just like pricing varies from one regional area to another. I think you have to price your products for what your market will bare and what your competitors are charging for similar. I charge more for items I don't make regularly. It's more profitable to do similar items then to change up your production and or ingredients.

 

When I go back and read your post it's clear you already know what you should do and you've already done your homework.

 

I originally priced my work "attractively" hoping that would attract more business, to grow my business faster. But instead, it backfires and gets the wrong clients.

A

Absolutely correct. It would be a pretty big coincidence if all your products had the same markup percentage, it will vary depending on your cost and market value for each type of product. But you should still know what the markup percentage is for each product, otherwise how would you even know if you were profitable?

I charge more for items I don't make regularly. It's more profitable to do similar items then to change up your production and or ingredients.

This should be captured in lower labor and ingredient costs for products where you have higher volume and have worked on increasing efficiency, assuming market price is constant this leads to a higher markup for those products and more profit.

in all actuality, it doesn't matter what they are for this question. With all my blathering, the real question is, can a home-based commercial kitchen realistically charge what everyone else is charging when customers drive to their home? I have a very modest ranch style home, nice clean neighborhood. I am just a couple turns off of a main road, in a culdesac. We have a basketball goal at the end of the driveway, sometimes our grass is long, my husband's work van is ugly, dented and leaks all over our driveway. (I have cleaned the stains a dozen times, but the damn thing still drips! And there is no street parking in the culdesac, and I can't ask him to go leak in front of the neighbor's house, up the road, he works his butt off and it seams ungrateful and disrespectful. )

 

We have a half-pipe (a big 27'x12' skateboard ramp) you can see in the winter, but is hidden by a funky shaped tree that was hit by lightning. My kids will often leave their abundant junk and bikes in the yard, you can see the huge playset they have, and our landscaping is nil, though we have a very nicely shaped tree in the front yard (that has white flowers in the spring that smell very "fertile' :-P ) .... I am just afraid that the customers will think I am too white trash to have higher prices, and am afraid they are thinking, "What a dump, at least it's cheap,"  and after they try them, "they really are great cakes, too bad we have to drive to this dump to get them!" 

 

Landscaping is a goal, as is a privacy fence in the back yard, but we don't have the money, or time and energy for that right now. 

AI'm home based and I meet people at a local coffee shop. Photographers, florists and other wedding suppliers often meet customers in cafe's or bars, why would I want strangers that I've just communicated via email with in my house? I know some people argue that people want to see where the cake is baked but I don't think it's a good argument. If you're clean and your portfolio is clean, why would they NEED to see your kitchen unless they have OCD, they can see my health and safety certificate and hygiene rating anyway.

Most people when they book an appointment think I have a shop and I tell them that no I work from my approved kitchen and they are fine with that. It doesn't mean you can't charge as much as someone who has a store front, provided your cakes are as good as them. A basic 6/8/10 with no decs apart from a ribbon for me is £380/$600 which for London is competitive and this is my 2nd year. I don't charge as much as the high end bakeries, which are easily double my prices but I charge more than other bakeries and home based cakers. It's about what works for you, don't sell yourself short, but don't pretend you're ron ben israel either!

ALike it or not, the impression given by your property can influence customers. As mentioned above, you can mitigate this by conducting tastings at a third party location or even holding tastings at the customer's home.

Having an accurate picture of your costs absolutely matters if you want to know how profitable your business is, otherwise you're just guessing. And it's essential for paying income tax since you only owe tax on your net income.

A[IMG]http://cakecentral.com/content/type/61/id/2918138/width/200/height/400[/IMG] How bad is it? The doors will be painted, but I haven't decided on a color.

I think it's nice looking, and I would not be concerned if I was a customer and saw it when I went to pick up a cake.
 

AThank you! The double doors with side lights are the bakery. There used to be a garage door there. Now, in the winter, the grass is yellow, and the trees have no leaves. I have been considering the color of the doors, and the brick has a deep plum and a deep reddish plum in them, so I am tempted, but afraid they may be too dark. I don't want more brown, though.

A

Agreed, I don't think there's a reason for concern based on that picture. If your zoning laws allow for a small sign it might be a good idea so people know they are at the right place.

AI am not allowed a sign, but I have a new van since the picture, that has a window sign on the back that is visible from the street, and when I have a consultation, or new client coming, I have a yard sign I move out to the end of the drive way. I have to pull it up each time to avoid a fine, lol.

No matter where your business is located people do judge you and your product by its appearance. Your look needs to be really kept up just like you'd have to do if you owned a store front business. Because it's your home you'll have to put in even more time keeping it more tidy then a store.

 

The grass has to be mowed, the weeds killed and flowers planted. Keep your house freshly painted, mail box looking new.........etc...

 

Do all those things they tell you to do as if you were trying to sell your home. Add some charm/decor and take away alot of personalization....neutralize it. I do worry about the beat up work truck. That's an eye sore, but I don't have any solutions for you, I'm sorry. If you had a store front you wouldn't want someones beat up vehicle always parked in front of your door.............could you put a inexpensive driveway around the back of your house where he could park it?

AStitches, I agree totally. The house was painted 2 years ago, I probably could use a new mail box, and I had the thought of him parking it out back, but our house is so small, there is no where to hide it! Plus, the right side, where the bakery is, is super long, (the bakery is 22' long, and then there are two bedrooms and a bathroom on that side, so the driveway would have to be about 60' long to clear the side of the house. The other side, and he'd have to drive through the front yard.

urg........that is a stick thing. (Just so ya know, my hubby drives a company truck also. For years he had the worst looking one they owned.........so I get it. Plus he was pretty unhappy himself having to drive that junk.) Just do the best you can, keep it clean inside and out, even if it is ugly. Don't park it up close to the house.......it looks more like a visitors if it's parked lower in the drive.

 

Just try to see things as a stranger would.....

 

If you can afford it, I think some classic urns with seasonal 'greens/flowers' by you company door would look nice....sort of highlight where you business door is. Splurge on this, buy something that looks really expensive.

AThanks Jimmy. That is a thought. I suppose he wouldn't have to park it there every day, just when he is here on consultation days. He goes to work at 6am, so it would be such a hassle to get out of the van to open and close a gate in the morning and evening. Though the kids could be made to do it in the afternoon :-D

AI used to wear business casual clothes for my tastings, but have started wearing a pink chef coat, and black work pants, and my black tennis shoes with pink and black checkered laces. I have a beautiful bakery, and a pretty consultation area. I think some transparent cake signs would be be nice.

I don't know, I think the white sticks out like a sore thumb.

AI like the white. White evokes clean. I would paint the trim white.

AWell, that's where my husband parks his hoopty. Yeah, right in front of the door.

I think they look unfinished. I don't know about pink, inthinknit may clash with the brick. everything inside is pink, black, white, stainless steel, and teal. I live outside city limits, and were pretty conservative about telling people what to do and what they can't do. House paint isn't regulated. I am going to paint the front door a rich violet purple, to make it stand out. (I have been holding out since I found out it was a $1,200 door!) it is beautiful, but it is wood grain painted steel and fiberglass door. I want it to stand out.

A

Hmmm, yeah, but I am always washing them. We have geese around here and it looks like they aim for the door. Plus, the airport close by leaves a sooty black film on everything.

I have an argument for everything, but I am an over thinker, and have been considering this for 2 years now! Thanks for all the help!

A

I missed this before! We posted at the same time, and I am a slow typist. I think the urns are a great idea. We actually have more money in our bakery account than our personal account right now, so I think that would be a great splurge. I kill plants left and right, I am so lazy about planting, I could stick some silks in, lmao, I am kidding... But with just the two, I could find the time to do something with them.

Now, what to put in there? We have winters that are pretty much in the 20°-50°, so not too harsh, but everything turns brown.

I am so lazy about yard work, as is my husband, that I looked into getting the grass that only grows 3" and stays emerald green all year. I think the quote for the front yard alone was $5,000!