Some Questions About The Business
Business By nancylee61 Updated 3 May 2013 , 11:42pm by BakerBee7468
AHi all, I have been absorbing all of your expertise, and am astounded at your talents here! Wow! The cakes here are beautiful! I am hopefuly going to be making cakes when I retire from teaching in a few years, and would like to put recipes I find in one central location. Do any of you recommend an app or program where you can easily store and find recipes? I don't want to use Word because I don't want to have to hunt for the folder, hunt for the recipe. I want something specific to recipes. Thanks for any ideas.
Now a salary question. I had a shop in which I would get a item for 2 dollars and double it to 4 for sale. That is the traditional way of retail. Out of that profit came the rent/mortgage, heat, insurance, phone, etc., hopefully leaving a real profit. So if a cake costs 100 dollars in ingredients to make, and 5 hours (neither of which may be reasonable, I am just throwing out numbers) then you have your electric, gas, pans, utensils, wear and tear, etc., what is a reasonable profit to make from the cake of 100 dollar ingredients? I see lots of people here say "Pay yourself for your time," and others here saying they maybe make 5 dollars an hour at the end, and I think that is unreasonable. With the skill level and time the cake took to make, I would think $20 an hour is reasonable. Does it come out to a reasonable salary for yourself generally? Thanks for any help. When I am ready, I want to run my business professionally ,and pay myself a reasonable rate, and there seems to be a lot of people who don't charge enough for their time. Best, Nancy
I see lots of people here say "Pay yourself for your time," and others here saying they maybe make 5 dollars an hour at the end, and I think that is unreasonable. With the skill level and time the cake took to make, I would think $20 an hour is reasonable. Does it come out to a reasonable salary for yourself generally?
The reason why many people don't "pay yourself for your time" is because the customers aren't willing to pay alot for cakes. There is a gluttony of cheap cakes in the consumers market, at grocery stores, discount store, etc.... I'd be willing to bet that almost everyone here would LOVE to charge $20.00 per hour or much more for their labor. The problem is, purchasers don't want to pay that to decorators when cheaper cakes are available.
The point behind everyone always writing "pay yourself for your time" is an effort by the majority of cake decorators to get everyone to charge a decent wage for their cakes. As things are now, amateur cake decorators are charging less money then professional cake decorators. Amateur decorators or under-charging decorators devalue the whole industry when they sell at prices below a reasonable wage.
Think of this as unions and why they were formed.
I had a shop in which I would get a item for 2 dollars and double it to 4 for sale. That is the traditional way of retail. Out of that profit came the rent/mortgage, heat, insurance, phone, etc., hopefully leaving a real profit. So if a cake costs 100 dollars in ingredients to make, and 5 hours (neither of which may be reasonable, I am just throwing out numbers) then you have your electric, gas, pans, utensils, wear and tear, etc., what is a reasonable profit to make from the cake of 100 dollar ingredients?
Restaurants in general take the cost of the ingredient and multiply it by 3 to come up with their retail price. So if the French fries cost $1.00,they charge the customer $3.00.
Restaurants food is generally less labor intensive then baking. So because bakers spend more time making their product most prefer to take their ingredient cost and multiply it by 4 to reach what they need to charge to make a profit. Here's the problem often we have more hours of skilled labor then what fits into that x4 mark-up. That's why many of us believe you need to charge x4 for your ingredients PLUS charge additional labor for time consuming items.
Then the real hard part is getting your costs/overhead down low enough that your retail price pays for them. Good retail locations charge more money then most bakers can afford. Good bakers want to earn more then a new employee. Good decorators want to get paid more then a decorator with less artistic skills.
When a person walks past a cupcake shop and they freak out because the shop is asking $5.00 per cupcake....they fail to understand how much all that overhead and great location costs the shop owner. The shop charging $5.00 per cupcake might be making less of a take home profit then a shop charging $2.50 per cupcake, depending upon the burden of the overhead. The customer wrongly thinks eggs, flour and sugar are cheap, so all cakes should be cheap. They fail to recognize the great amount of skill and time it takes to bake and decorate a cake PLUS all the decorators overhead (location, electricity, telephone, insurance, etc...).
You can't educate every prospective client that walks past your store why you charge what you do. They really don't care about your burdens. So cake decorators have to rely on those few people who are willing to pay a fair price for a cupcake or cake.
AHi Stitches, Thank you for all of that information. I make pottery and jewelry and see the same thing there. Beginners charge 6 dollars for a bowl that a skilled potter charges $20 for, thus devaluing the market. It is a real problem. You are very kind to take the time to enlighten me, Best, Nancy
Where a lot of the problems come from is a lot of cakers start out as a hobby. Friends and family say "that is so great, you should sell them". They mean this as a compliment but then the caker thinks, sure, I can make some extra money. So all of a sudden they are selling cakes with out having given any thought to the fact that selling cakes is a lot more involved than baking and decorating, they miss the whole business side of it. If you want to get into it, do your research, as you are already starting to do. Do a business plan. And mainly, figure out what your costs actually are. Exactly how much each batch of cake and icing cost you. How much each cake board, box, add to the price of the finished product. Also start keeping a time log of how long everything you make takes. So you will know that it takes x amount of minutes to prep, mix and clean up for baking. How long to prep, make and clean up for your icing. Start logging how long to apply buttercream, fondant, etc, etc. THen you can more easily and accurately your cost of time and supplies for future cakes. The majority of people asking how much to charge have no clue what their expenses are for money nor time. So they pull a price out of the air and think they are making some money when actually they are making very little yet taking valuable time away from family and kids. There are a lot of business related threads that you can read and learn from others questions and answers and mistakes. You are doing a good thing by thinking of this well ahead of time.
AThanks denneteb, Yes, I have already made my business maid takes, while I have time, I need to figure out all costs, labor, etc. and also get faster at everything. My friends and family are going to all be eating a lot of cake in the next 3 years! I can see a hobby baker practically giving her cakes away, because it is hard to figure out how much things like electric, cake boards, new spatulas, etc. cost. So thank you! Nancy
you are doing, what i am doing and it's the best way to go i think. I'm also researching every aspect of the starting a business, not just all the important legal
business stuff but the costs of everything. costs of the ingredients, baking supplies such as boxes, cupcake cups, my time. now i wont figure out how long everything takes me until i start doing test batches of product and can test out my products and time how long it takes. I do agree with stitches that so many customers want a cheap product but many also want a quality product and those don't go hand in hand. Quality ingredients costs money but it's everything else that factors into it that makes our costs go up. Insurance, utilities, rent. There is that problem of devaluing the market where one baker doesnt charge enough so the ones that do seem like they're charging to much, but i don't think this is always on purpose. I think it's a lack of knowledge on the part of those just starting out and maybe they didnt do enough research, they're only doing it as a hobby so they're not trying to make a profit, they don't factor in alot of things into their price, but also i think it's also that the many customers are uneducated as to what goes into making a quality product as well as the costs, and many are comparing grocery store cake prices to bakery prices, to custom cake prices and it's not apples to apples. We certainly can't educate every customer about all the goes into our price but we can attempt to educate a few on the basics. Like we could say that "our price is not based on just the cost of ingredients". If you live in a state where you can bake out of your home then your costs go down significantly in terms of overhead. Rent and/or mortgage is something you'd already being paying and you would just be able to deduct some of it on your taxes for business purposes.
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