A lot of people who are inquiring about buying a cake or cupcakes from me (London Ontario) gawk at my prices. To me, they're fair - I think ..... Are my prices unreasonable? Or are my prices inflated? I can't figure out how to tell. I'm a baker just starting out and I'm trying to put together some extra money to have on hand when I open my little bakery - but I don't have orders.

If I cant make money now, how is my bakery supposed to run smoothly?

Recently I called all the local home-bakers and bakeries in my area and asked a simple question. What they would charge a large 12", 9", 6" tiered cake, with fondant, and a teddy bear cake topper. I got prices anywhere from $60 (what are they making the cake out of? dirt?) to $230. I currently charge $140 for the cake described.

I'm unsure if I should change my prices, or keep them as they are and wait for some customers who are used to purchasing specialty cakes which are of a hefty price tag.

I mean I feel like telling some people, if you want a $20 cake, go to Costco or Metro.

*Mod deleted per member request

AYour prices are most likely way too low. At your current price, how much of an hourly wage are you paying yourself and what is your profit margin (after taking into account ingredients and allocated overhead)?

What are your competitive advantages? Who is your target market? What is your current marketing strategy?

I honestly don't give myself an hourly wage just yet. All I do is calculate my costs, and multiply by two. I figured that a 50% profit would suffice.

My dream target market is brides. I'd love to craft beautiful wedding cakes - but the only orders I've gotten are for birthdays and showers, etc.

As for marketing, I've just been utilizing Kijiji and facebook, plus my website and word of mouth advertising. I've gotten in touch with a local wedding planner in hopes that she could introduce my business to some of the brides that she works with.

I really would like my business to succeed, and I need more practice with my cakes, I've been practicing making cakes and donating them so that I can have extra photos of my work, but I can only do so many free cakes ..........

A

Setting appropriate prices is the first step, before you do anything else. In fact I would recommend not accepting any new orders (and taking down your existing pricing page) until you have reworked your cost structure, since every order you take at your current pricing level is leading you further away from where you want to be.

When you are pricing cakes, the labor involved is a critical component. If you are not as efficient as you would like to be that's fine, but you need to pay yourself something...doubling your costs only gets you 50% profit if your time is worthless and you have zero overhead.

Read the Pricing Formula link in my signature below for more details.

AOkay, in your poll I chose 25-35, but I would like to point out that a plain, 2 layer cake would never happen with me. I always do three layers and there is always some decoration, so although I voted 25-35 in your poll, I would never actually sell a cake for less than $35.

A

I just feel that if I actually price my cakes "properly" that they will be so expensive that nobody will want to order any cakes from me! I just want to make nice cakes and make people happy. I could be really good if people gave me the chance.

Thank you Jason, for that advice. I will certainly utilize your pricing formula - however if my competition has such low prices, I fear that I will never get any business.

Although to some degree I believe that when people see a big price tag they immediately associate it with quality, I want to attract customers.

Oh goodness I should stop rambling. Getting in over my head again.

It's probably useless to call most home bakers to see what they charge as odds are they are undercharging and not business experts. Someone who makes his/her living in the cake business is more likely to know what fair prices are for cakes. You should have better luck comparing your prices to what bakeries charge. Jane Asher's prices are on her website. You don't even have to call her. From what I've seen, it's not that uncommon for UK bakers to list their prices.

AI checked out your website, your cakes are nice. Before I start babbling I wanted to tell you that I practice on styrofoam cake dummy's all the time, if I want to practice a new technique, pad my portfolio, etc. some I keep, some I tear the fondant off and practice something different (I can't remember which member it was but they suggested decorating one side, taking a picture, decorating the other side in a different design, take a picture, tear it off and repeat) so that should help you gain experience without giving cakes away every time you want to practice.

I think having your prices on your website will save you time, and help 'weed out' customers you don't want-like the woman who wants a 5tiered cake for $100. However, Jason's suggestion is right on (check out his website). The first thing I did was check out the other decorators in my area, even Kroger, and found out their prices-just to get an idea of what other people were charging and make sure I wasn't undercutting anyone. But then I realized a lot of the decorators in my area specialize in sheet cakes or the old school fur-type piping (I have no clue what it's called) while I focus more on detailed cakes, fondant covered or buttercream, stacked or carved cakes.

Anyway, I looked at your pricing and for the 6/8" you charge $1.67 per serving and the 12" $1.07. Your example of the 6,9,&12" tiered cake covered in white fondant equals about $1.40 per serving (not taking the teddy bear) that's so inexpensive! I live in a small, rural community and I charge way more than that, for a bare bones cake. Especially, if your baking from scratch I just don't see how you will be able to make a profit that you won't end up resenting. Please don't think I'm being rude, I just think your cakes are worth more than that and you should too!

There are several ways to put yourself out there and advertise but having lower prices shouldn't be one of them. You can donate cakes to charity events, sign up for bridal shows, rent a booth at your local farmers market, take samples to other small/large businesses in your area and pass out cards...but I really think you should rethink your prices before you proceed

ARemember that you are not your customer. Most of us can't afford our own cakes, but the sales guy at the Porsche dealer probably drives a Ford home too. Don't price at what you would pay, price at what your cake is worth.

Nope, you're not charging enough.  Don't be afraid to have the confidence to raise your price.  Think about the fact that people will pay twice what a diamond is worth just to say they got it from Tiffany.  (Blue Nile rocks my world, they totally undercut Tiffany!!!)  So if people will do that they will certainly pay for a cake.

As for weddings, all you need is just one bride and others will follow.  Tell everyone you make cakes. I won't ever do a wedding cake, but the painter who did an estimate at my house saw my chocolate clay flowers and asked me to bake his daughter's wedding cake.

I said no thanks....I just can't handle it.

A

I totally understand where your coming from, I had the same mindset when I started. It takes time to build a successful business, it sucks, but it's true. However, if you want to build a business that will last you have to charge appropriately otherwise you'll get burnt out quickly! If you value your work, eventually others will to!

Thank you everyone for the great advice. I think I'm going to seriously rethink my pricing, and my means of advertising. Balancing a cake business with university is no joke... I thought it would be so much easier! Not easy, just easier

I forgot to mention - your cakes are lovely.
 

Yes, your cakes are beautiful and I like  your website a lot.

Thank you very much!

My price for the cake you described would be $460.  Just sayin'.

I have reassessed my business plan, come up with a base cost, overhead fee, and labour cost and added a small profit margin and I think I'm okay with having my cakes at $2 a serving (for now..). However, this puts my 12" buttercream cake at $110 ....Yikes. I hope that I can prove to my clients that they truly get what they pay for. I feel more excited to fill an order if I'll actually be paid decently for it.

Just a side note,

do you charge family?

I have an order for a close cousin's engagement in a week or two (60 cupcakes, individually wrapped), I feel bad for charging a family member, but those cupcake boxes sure put a dent in my wallet

BTW, designed my website myself so thank you for the nice comments!

AWhen telling someone what their cake will cost I find it helps if you give it to them first as $/serving and then the total. So in your case when someone orders a cake to serve 55 people you tell them that they will need a 12" round cake and that you cN provide that for them for $2/serving which will come to $110. It just seems to help tonpoint out the per serving cost with some people. As far as family goes, that is really up to you. Only you know what that relationship is like and whether they are likely to take advantage of you. Personally, I would give family a discount but I would make it clear that I am doing so. Hope you do well with your business! I am in Ontario too. :)

If I was telling customers that i was going to give them cake for $2 a serving, no doubt they'd be thrilled. I'd have to say something more like $6.50-$10 a serving and that doesn't go over as well. How can anyone make money selling cake for $2. Sounds more like a donation to me.

as you wish, thank you so much! I wish you all the best as well.

howsweet, I think my clients would walk right out of the consultation if I gave them prices like that!

Goodness, you cake decorators have amazing work, but how on earth do you find people willing to pay for cakes like that?! Nobody seems to understand the value of an expertly crafted cake. I want to shake up London Ontario and give them a little wake up call.

You prices are a little low, food cost in restaurants/food businesses are usually below 30%. You'd do better to target your food costs at less then 25% of your retail price. But there are people here who's pricing is so off the charts high, that in my area that they'd never get business at that rate. So you have to know what your market will bare. You need to be above the price of cheap stores and below the most expensive (based on your skill level) bakers.

If your 'per person' charge for a decorated cake is $2.00 than what do you charge for cupcakes?

The reason I ask, is once you set prices on other items (lots of items) you realize in order to sell cheaper items (like cookies, bars or cupcakes) the more expensive items need to be higher priced. So then you re-evaluate your decorated cake pricing because there's far more work in a decorated cake then a swirl on top of a cupcake or cutting a bar cookie. It's all relative!

I just have to say that an 8" cake for me would be a bare minimum of $78, and most likely more.

A

AIf you think people will balk at per serving prices, then don't sell them that way. I personally don't until I'm dealing with cakes that are around 50 servings and higher. It's easier for people to swallow a price for an entire cake rather than hear each slice is $xx. I certainly don't tell people a baby grand piano is $30 a serving, because that would make them cry. But $1000 for an authentic to scale replica baby grand piano with tufted bench, sheet music, wood paneled floor, hinged top, individually placed.strings, correct number of keys, gold detailing, etc. etc, all completely made out of sugar....it softens it up a bit. Not that I've sold more than one, but that's beside the point, I'm not going to do that work for any less.

AOh, and I am in a small town near the border, with a crazy high unemployment rate, rampant welfare abuse, and the fanciest store we have is Dillards. So it's not much to do with where you live either, to a point.

So, stick to my guns, practice, study cake, practice, study cake, repeat? Wait until a paying customer comes knocking, and then hope for more?