Learn How To Price Your Cakes

If you want to learn how to price your cakes you need to know what your competitors are doing, and what your real costs are. It’s vital to your success to price your cakes right.

Learn how to price your cakes

What if your competition was selling their products so cheaply that they aren’t even making a profit? How will you compete with that? You can’t! Instead of fighting a losing battle to be the cheapest cake decorator around, find out what your competitors aren’t doing well. Don’t compete for the least profitable items, focus on your most profitable products. Own the market for those products!

Here’s my real life example:

In my area, most of the decorators specialize in children’s cakes. Not one of them feature wedding cakes or adults birthday cakes on their web pages. I deliberately chose to market wedding cakes and expensive adult birthday cakes. I didn’t want to compete with them for the same group of buyers. I also wanted to focus on selling the most expensive cakes, where I could make the most profit and the least amount of competition. As a side note; later on those brides came to me for other cakes. Having loved their wedding cake, they then went on to call me for baby shower cakes and first birthday cakes, etc.


What does your market want, and how much will they pay for it?

You have to appeal to potential customers by selling the products they want, at the price they are willing to pay. If you don’t have the right products at the right prices, customers aren’t going to buy from you. You won’t be able to sustain your business. I know many other websites will tell you “if you market your work well the buyers will come,” but my twenty-five years of caking experience has taught me that simply isn’t true!

One day when I dropped off my tax information at my accountant’s office, she pulled me over and told me about her experience at the local cupcake shop. She began laughing as she told me she had attempted to buy a birthday cake for her granddaughter, but the cupcake shop wanted well over $100.00 for a tiny cake!

My accountant could easily afford a $100.00 cake, that wasn’t the issue. The cake she wanted was ONLY for four people, and she specified that she didn’t need or want extra cake or a custom design. She only wanted a simple little cake. She asked me, “is the cupcake lady crazy or what? Who’s going to pay $25.00 per piece of cake?” “Does she think she can build a successful business in this town with THAT kind of pricing?” She told me all her country club friends have similar stories about the crazy cupcake lady.

Your bakery/food business (whether it’s home based or a store front) is not any different than other stores. If people enter your store physically or virtually and you blow their mind with your pricing, ignore them or confuse them; they may never return. First impressions matter. Be prepared and professional before you open your business door and sell what they want for a price they can afford.

(Currently, the cupcake shop now sells whole cakes for $10.00 each on their FB page. First, she priced her product too high; now she can’t give them away.)


How do you price your baked goods

How Do You Find Out Your Competitors Prices?

Go shopping! Buy some items from them. Ask for their price list and menu. Shop like everyone else. (Don’t convince yourself you can’t afford to do this. Sometimes you have to spend money to make money.) If you are uncomfortable calling them, email them. Create a second email address using a different name to hide your identity. Find out what they are doing well and what they aren’t doing well. Seriously, do you think that Apple doesn’t study what Microsoft is doing and selling? Business is business, and you need to take a professional attitude and stance to succeed also.

Ideally, enlist the help of a close friend or relative; it’s helpful to have an independent opinion and not just rely on your interpretation. Ask your friend to pick up your orders and have them pay with cash. Your competitors won’t have any idea that you’re eating their food.  You need to know more than just their prices; you need to taste their products too.

After you’ve made a small purchase, later on you can contact them asking for prices on higher end items. Tell them someone in the family is getting married and is looking for a wedding cake. Don’t get into specific details or waste this bakers time; all you need are some basic pricing guidelines from them. A day later, email the baker a brief thank-you note telling them you passed on the information.


Find out your costs, so you can establish your prices.

Did figure out your costs? Here’s my tutorial teaching you how to cost out your recipes: http://www.fearlessbakers.com/how-to-cost-out-your-recipes/  (To your cost calculations you still need to add items like overhead, labor, advertising, accountant fees, etc.)


Detailed Graph of Competitors Pricing

I gathered a larger sample of prices than many of you need to do. I did purchase products from many of these businesses, but not all. Most of them list their menus and prices on their websites, which is very helpful.

What you want to learn is the PRICE AVERAGE column, that’s where your prices should be.

To charge more than everyone else you’ll need to create more value or desire for your product. That is another topic we need to explore in-depth, in the future.


 Learn how to price your cakes from the world around you.

You need to learn what your competitors are doing. Learn what your local market wants to buy and how much they are willing to pay by examining what everyone else is selling.

  • Create a pricing chart to compare everyone’s prices (as shown in my chart above.)
  • How was their presentation?
  • Were they prepared with their pricing?
  • Do they have prices posted?
  • Did they give you a receipt or an invoice?
  • How was their packaging?
  • Did they take a deposit?
  • Were they professional or disorganized?
  • What did you like about them?
  • What didn’t you like about them?

Learn what they are doing well and what they aren’t doing well. Be better than your competition! Sometimes being better only requires a better recipe, a cleaner design or a simple pot of flowers at your front door.

In the future, when a client is pricing and comparing your work to your competitors; you can speak with knowledge, and highlight why your food and service is the best in the area.

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How To Price Your Cakes

Learning how to price your cakes so you make a profit can be confusing. Selling cakes and desserts requires skills like; accounting, marketing, project management, human resources, negotiating, financial and business planning.

Learn how to price your cakes at Fearless Bakers

Learn how to price your cakes for profit

“Selling cakes isn’t that complicated, I can handle that,” but almost every day I see someone asking for help with pricing their food product because they aren’t making a profit. They mistakenly believe that purchasing a cake pricing program will fix all their profiting issues. Unfortunately, it takes more knowledge, and business skills than any of those programs provide to become a profitable and fruitful business.

To succeed in business, you must know your costs and overhead

Whether you are a stay at home mom looking to supplement your income or a bakery owner, you can’t make money unless cover your costs and add a profit margin to it. If you are selling your work (even if it’s only to friends) you are ‘in business,’ and you need to learn how to price your product. Be respectful of other businesses and never underprice your work, which lowers the prices for the whole industry and hurts everyone.

You are more than the crafts-person making a product; you need to be the CEO too. That means; you must know how to cost-out; your ingredients, recipes, labor and overhead. If you don’t learn those skills, you can’t develop a profitable business.


Why are you making cakes?

The very first thing you must do; sit down and look yourself in the mirror and get brutally real with yourself. Ask yourself; Why are you making cakes? I know what you’re going to say, “I do this to make money!”

O.k., tell me how much money you spent and how much you profited last year? If you can’t answer this question quickly, you’re probably not in this to make money.

If you want to make money you have to keep track of it; it needs to be your primary focus!


Know That Your Work Is Valuable.

Prioritize your time and attention. Get away from the girls in the cake decorating forums and concentrate on your business and your life.

Most of us selling cakes, cookies, apples, etc. are females. Women like to help and nurture; I believe it’s in our DNA. We cook and bake because it expresses our love and brings others happiness. I wonder if it’s because so many of us are working out of our homes, that we become emotionally attached to our food that we don’t place significant prices on our time and skills?

Selling food products from your home is not any different than any other professional artisan working from home. Crafting your product requires; skill, knowledge, and expertise. You are making and selling a custom product, and you need to put the proper price tag on your product.


What Does Your Market Want?

When your market doesn’t support designer cakes, then you need to change your product to be what YOUR market wants. You can take every class, learn every technique, own every cake mold  and bake like a goddess; but if your area isn’t willing to pay for those skills, you’re wasting your efforts and developing the wrong skills.

When all of the cake decorators in your area are selling cakes for $3.00 per serving on average, you can’t expect your cake to sell for $8.00 per serving. No matter how many upgrades it has. You can only sell your product for whatever your market will bear. If your food is priced too high where the local market isn’t buying (and you hear complaints about your pricing) from you, or too low that you can’t pay your bills, you’ll be out of business soon enough.

You need to adjust to what your market is willing to pay; they will never adapt to you.

  • Find less time-consuming products to sell.
  • Learn how to cut your costs making your product.
  • Increase your production.

Develop a robust client base. Later on, you can phase in more expensive products for people who support high-end craftsmanship. However, the majority of your customers may still not be interested in that high-end product. Understand that selling food isn’t different than other businesses.


Location, Location, Location. What does that mean to you?

Does your home base (geographical area) currently support custom products like; party planners, expensive brands of cars, fine art stores? For the few food businesses owners living in those types of areas; yes, they probably could and should market expensive one of a kind cakes. For the majority of us, that’s just not the case, and we need to adapt to attract as much business as possible.

Sara in San Fransisco makes a ton of money only selling one of a kind, expensive cakes. She tells everyone that’s what they should do also. It does sound better than working harder and making lots of cakes. But if you don’t live where Sara lives, and don’t have enough customers that will pay for one of a kind cakes all year long, you can’t model your business on what she’s doing. You have to sell what your area wants; you don’t live where Sara does.


Who Is Your Market?

Too often I see well meaning experienced decorators give pricing advice to new decorators like; “You (and your friends) are not your ideal customer” or “I couldn’t afford to buy cakes from my business, I’m not my target customer!”

What that advice is completely ignoring, your geographical area!

Your market is only a few miles around your home base, in the food business. Your market isn’t wealthy people that live an hour away from you. There is a ton of competition and unlimited options for that rich client who will pay more.

However, I do agree you should develop a unique product for your business; something people will travel for. But don’t rely on that to get your business off the ground. Becoming well known to potential clients who live hours from your area; takes time, and a lot of marketing.

Your market is the people living near you!


how to price your cakes for profit

Establish Price Points

When you are designing your menu with diversity, definitely consider having multiple price points. There have been many business studies that show how this can work to your advantage. Let’s look at Starbucks, the difference in price between a tall, grande and a venti is so small that it drives people to buy the next large size because it represents more value for their dollar. Those sizes were not an accident; they were thoughtfully developed.

You can do the same thing with your products. Give your clients different price points and let them choose what they want. Keep the prices between your simple items and expensive items relatively small, so the expensive product looks like a better value. People love the value and upgrade often.

Having a written menu with established prices saves you the headache of dealing with the bargain shopper. So they can choose which price point is right for them, or eliminate themselves from being your customer. When you don’t have a set price list, it allows customers to contact you repeatedly giving them quote after quote, all to save them a dollar or two. While they are saving a buck or two, you as a business person are losing money every time you have to give more than one quote to the same person. If you give customers have a price list, they can look at it for as long as they want and it won’t take any of your time.

Set up price points and show people your prices, this saves you an enormous amount of time.


Appeal to as many buyers as possible by having a selection of products

Have you ever noticed that your local Chinese or Mexican restaurant has hamburgers on their menu? They do. Are those the food items that supports those restaurants, no. Well, why do they sell them? It’s because they need to offer something that pleases the entire clients family. If Mom & Dad can’t get a meal for Junior at the restaurant, they probably aren’t going to eat there often. If you limit your product line too much, you limit your potential client base.

Please understand, I’m not telling you to sell anything and everything. Too much product diversity is the death of many food businesses. Instead, you need have a smartly limited menu; that offers something for everyone. Discover which products are the most profitable for you and make this the cornerstone of your business. Then adapt that item, so you appeal to as many people as possible.

Look around your town to see if there are any untapped markets. Is there a large elderly population in your city, learn how to make cakes (or whatever your product line is) that appeal to their tastes. Is there is an ethnic group that’s not yet buying from you? Don’t be afraid to learn how to make foods that attract and bring in everyone in your geographical area. The narrower your product line is, the more people it excludes from your market area as being a potential client. You have a finite number of buyers in your area. Why not target all of them instead of a few of them?

 


Too Much Diversity, too many products

Sell items you are good at, diversify your product line to attract as many different buyers as possible, but don’t sell anything that isn’t spectacular. It takes some time to perfect a new product; develop it before you start selling it. Every time you sell something inferior; you kill off a bit of your potential business.

When cupcakes shops became popular, it was a great selling craze. There aren’t many cupcake shops around anymore (for SO many reasons I can’t begin to mention without derailing this article). There’s a cupcake shop in my general area, who’s marketing shtick is how many hundreds of different flavors they make. The only problem is they didn’t think about production before they advertised having all those flavors. Their menu was unrealistic in every way. Half of their product line can’t be displayed without refrigeration, and they didn’t have any refrigerated showcases. The other half of their products have too many different components to prepare every day. You should read their Yelp reviews, customer talk about what a let down the bakery is. Their clients came for a particular flavor, and the bakery doesn’t stock that flavor. They hurt themselves by not thoroughly thinking about what they were selling and if it can be achieved realistically.

Too much product diversity requires more space to store more ingredients; more freezer space, more shelf space, more items for customer representatives to memorize and explain, more tracking, more lead time, more capital to buy everything, more skilled employees to make them, more money in inventory, more EVERYTHING! Instead of offering everything and the kitchen sink, craft your menu wisely (I’ll talk about that in another article).

 


How To Price Your Cakes to make a profit:

  1. Focus on what your market wants.
  2. Learn how to make those items.
  3. Price out all of your ingredients and cost out all of your recipes, know all your overhead and costs.
  4. Feature the products that make you the most PROFIT. Stop selling products that aren’t profitable.
  5. Determine your prices, write them down and stick to them.
  6. Create enough diversity to attract as many clients as possible, yet not so many that you can’t put them into production realistically.
  7. Create multiple price points. Be prepared for the bargain shopper and the window shoppers.

Did I answer your every question and tell you everything you need to know? No. But you and I have to start somewhere, and I’m glad you took the time to read this and think about your objectives.

Don’t forget to leave your comments or a simple “o.k,” “thanks” “I read it” remarks below, so I know you your thoughts. Thanks!

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Learn The Cost Of Your Ingredients

Know The Cost Of Your Ingredients

Learn The Cost Of Your Ingredients

Learn the cost of your ingredients so you’re buying wisely. The cost of ingredients fluctuate seasonally, and they vary depending on where you live in this world. We have free tutorials showing you how to cost-out your ingredients and how to cost out your recipes. Feel free to use our chart (below) as an example. You can save a lot of money knowing which store to buy each ingredient from; and learn how buying in different volumes can drastically affect your cost.


Be Aware Of The Differences In Prices
  • Look at the very first ingredient on our list, almond paste. There are three examples of the same product, American Almond brand almond paste sold at three different stores. If you purchase it in a seven pound can from Restaurant Depot it’s only twenty-four cents per ounce. But if you buy it at your local grocery store like Meijer it’s more than double the cost. Meijer sells American Almond, almond paste for fifty-four cents an ounce.
  • Fresh raspberries are twice the price of frozen IQF raspberries. If you are making a raspberry sauce or mousse, you’d be foolish not to buy the frozen berries.
  • Fresh strawberries and other berries purchased at Aldi are approximately half the price of all other retail stores. They are even cheaper than the big wholesale club stores.
  • Semi-sweet chocolate from Trader Joe’s is $3.19 per pound versus $4.93 from Sotiros (a wholesale bakery distributor in Chicago).
  • Dark sweet cherries from Meijer is twenty-two cents per ounce, but the same (if not better quality) cherries are sold at Trader Joe’s for twelve cents per ounce.

Learn the cost of your ingredients. It varies from brand to bran.

Take a photograph of your price chart and keep it on your phone when you go shopping. It helps you decide while your shopping if something is selling at a good or bad price.

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Smart Bakery Pricing Strategies

All of your costs determine your pricing. Smart bakery pricing strategies include a profit, and it must pay a living wage to the people making it. You can’t survive in business and not understand the business of selling your product.

Smart Bakery Pricing Strategies

Before I started my business Real Cake, Inc. I immersed myself in books and online tutorials. My goal was to succeed where I had seen others fail. All the articles insisted I create a formal written business plan. But as hard as I tried, I couldn’t forecast which products people would want to buy from me or how many sales I could have in a day. I couldn’t do a ‘market survey’; nor did I know who in the world I could call to do this; and what it might cost. I didn’t know how to price my desserts, what my rent would be, utilities, insurance, equipment and everything I might need. As much as I wanted to, I didn’t know enough to write a business plan. Continue reading

Costing Out Your Recipes

Costing Out Your Recipes:

This is a recipe from one of our readers, who asked for an example of costing out your recipes. If you have any questions feel free to ask them in the comments area at the end of this article.

Regina’s Chocolate Cake Recipe

2 cups of sugar
1 & 3/4 flour
3/4 baking cocoa
1 & 1/2 teaspoons baking powder
1 & 1/2 teaspoons of baking soda
1 teaspoon salt
2 eggs
1 cup milk
1/2 cup veggie oil
2 teaspoon of vanilla extract
3/4  to 1 cup coffee

Step 1:
  1. Start a blank recipe file.
  2. Fill in the ingredients and their imperial measurements (imperial measurements are cups and teaspoon measurements we use in the United States).
  3. I look at my master ingredient chart and convert my measurements (cups) into weights.

Regina's Chocolate Cake Recipe Photo


Step 2:
  1. I need to figure out how much each ingredient costs; per ounce or per egg, per teaspoon, etc.
  2. Using a calculator to do the math, determine how much each ingredient costs. (We’ve included a column to show the math used for each ingredient. You don’t need to show this detail in your own recipes.)

Examples:

  • 14 oz. of sugar x .04 cents = .56 cents.
  • 1.5 tsp. of baking soda costs my cost less than 1 cent, but I do add one penny to my ingredient costs.
  • 2 eggs that are .13 each = .26 cents
  • 1 cup of oil is .48 cents, but I only need 4 oz (1/2 cup). 1/2 of .48 cents is = .24 cents

 

Costing out your recipesOn the bottom right corner you can see that this recipe cost $2.58 in ingredients. If the ingredients in Regina’s town cost more, than this will cost her more. That’s why everyone needs to create their own price sheet.

  • Regina also needs to determine how much cake this recipe makes (and record that). Is this 1, 9″ layer cake, or 24 cupcakes? If this recipe makes 24 standard sized cupcakes, each cupcake costs .11 cents PLUS the cost of the frosting, cupcake liner, box, her time, her overhead costs, etc…
  • It’s important to know your yields for each recipe you use. Learn how many batches go into making one product to calculate your per product ingredient cost.

Here’s Another Example: Patrice’s Red Velvet Cake Recipe

 This time I worked out the prices right away and didn’t show you the math. Patrice's Red Velvet RecipeYou can do this too!!

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