Cake Pricing – How much to charge for your cakes
Cake pricing or how to price your cakes can be the most challenging and intimidating question to most beginners in the cake decorating world. In this post I have shared how to analyze, the methods I use as well as how to calculate the final price.
One of the most scary questions as a beginner for me would have to be –
how much would you charge for this cake?
If I didn’t quote the right price I’d loose the order.
or if I over charge; the customer will go somewhere else,
and I charge less then I will not make any money.
I’ve done calculating the same cost a zillion times to make sure I was doing it right. I’d try so hard to bring my price down so that I could bring my cost down and then charge less which means I’d get more orders.
Often time, I’d look at the price and say – I wouldn’t pay that much for a cake! How can I charge that?
Does that sound like you? I use to be that person above!!
(yup hiding face in palms here)
Some of the most common questions I get asked or messaged today from beginners are these. And it’s so resonates with me cause I’ve had the exact same questions in my head all along.
- How should I price my cakes?
- Can you share your price-list with me?
- What is the right price for a beginner?
- How much should I charge for this type of cake? etc.
As much as I’d like to say, this is what I charge and you can charge the same; that’s not possible. So I thought I’d write a little post on Cake Pricing – (well, I planned to write little but … it’s long lol )
How much should you charge for your cakes? I’ll Share with you what I do and how I go about doing my own pricing.
Now, Having done two degrees and an MBA in marketing – you may find that my method sounds very geeky or rather from the book; but trust me books ain’t wrong and it’s how you apply that knowledge to the practical things that makes a huge difference.
So, hang in there – I will try my best to make it as simple as I can for us all to understand. In fact I’ve given you more than one option on How to price your cakes so grab a cuppa Joe and breathe.
Of course I’d love to know what you think not just about this post but about cake pricing, about your fears on cake pricing, may be I might update this post and include some those to address those specific questions. Just write a comment below and I’m happy to address those questions.
Now, What you charge for your cakes is based on many factors around you. Before you begin to calculate the actual numbers.
In this post I’m going to share with you my own experience, explore some of those factors using my own market, then use some rough figures as an example to show you how to go about it.
Some of the most important factors for cake Pricing today. (Cake Pricing)
- Where are you located and how much is you community willing to pay? –
For example the price for a cake in New York is not the same in Texas? (and New York and Texas are both in the US)
- What clientele are you serving? (middle class kids birthday cakes? Elite Wedding Cakes?)
- What is your expertise? Or what unique value you offer?
- What is your reputation and demand for your product?
Let’s explore these factors shall we?
1 & 2 – Where are you located and how much is your community willing to pay? What clientele are you serving?
I’m going to use myself as an example so it’s not so geeky.. (wink wink)
My current location – When I first re-located from the US; I regularly made cupcakes, cake balls and cake pops; but it wasn’t very popular here in Israel and to some it was something new and fascinating.
As a kids, I grew up with a cake for every birthday, weddings and holidays. But; here in Israel custom decorated cake was a luxury item and very rare to find. It was not one of the items listed for a birthday party. The birthday cake was not even on the budget! I was always surprised, some weddings I attended did not have a wedding cake and it was not even missed.
Most birthdays my son attends; have no fancy birthday cakes. What they often had was a simple cake that grandma made in a baking foil, poured some chocolate sauce over and sprinkled some sprinkles around.
So custom decorated cake in 2005 was not part of this culture and it never bothered anyone except me.
Much has changed since then in these last few years but not as much as it is in the rest of the world. And yet this is where I choose to start my business. So as you can see; the level of cake awareness and as a result the value for decorative cakes in my market which eventually affected how much I should charge for my cakes. I knew I had to focus on finding the right market and cake awareness.
Now do the same with your location. Find out what is the trend. What types of cakes are more popular. What are people willing to pay for? In some places sheet cakes are very popular while in some places like here in no one cares much about them.
Cake Pops are bite size pieces of cake on a stick but they take a long time to make; there are some who consider spending on them a waste of money but there are some who will value the work and effort put into it and are ready to pay for that ball of cake on a stick.
3. What is your expertise? Or what value do you offer? What is you unique value?
It is true that anyone who starts a business wants to make money; how much is based on expertise and the value you offer.
Supermarkets cakes vs Homemade cakes
One of my mom’s friends use to take the price-list of a local bakery, mark it up by 30% and use it as her price list. As a kid I was amazed at how easy pricing was, But after doing my MBA – ah not so impressed.
Never ever compare your product to a supermarket, not even if you are at a basic level of cake decorating.
This is not a good price guideline; why? Because supermarkets have a very different business model than ours.
- A bakery sells something about 300 to 600 cakes a week
- They purchased ingredients in bulk and at fraction of the price that we buy from the super market!! So the flour that you pay two dollars for; probably cost a few cents for them.
- They deal in quantity and bake for the masses. We deal in quality and custom orders. There is not comparison – right?
As a home baker you use top quality ingredients as compared to generic supermarket brands, you customize each and every cake. While supermarket cakes are flash-frozen; you offer freshness, consultation, designing and much more. Don’t you?
There has got to be another home baker not far from you. Check out her cakes, see the value she provides – compare those to your skills and values.
If someone chooses to buy your cake over her – why would that be? You definitely do not want people coming to you because you are cheap? Do you ?
Expertise and value
Identify your expertise and use it as your value.
While cake decorating was a new venture for me; baking on the other hand is my expertise. I have been baking for more than 20 years and take pride in the fact that I make the best tasting cakes from scratch.
In my present community baking a cake from scratch is considered very unique and valuable, so I use it to my best advantage.
4. What is your reputation and demand for your product?
- Do people know you?
- Have you built a reputation?
- Does your product have a market presence?
- If you have a good reputation; your cakes will be in high demand and so you can charge based on your demand.
Personal example – Most of my business is word of mouth. I do not advertise. As such every client that comes to me, comes thru someone I know or has tasted my cake at an event.
Because I deal with a price sensitive market this was the best way for me to build my business and reputation.
Once people hear about you and your skills from reliable sources their attitude to pricing changes. I have seen that in my price sensitive market people are still willing to pay for good reputation.
All the above factors are good considerations toward the next step which is the actual exercise of counting numbers. (Cake Pricing)
- Call your local bakery, home bakers and get an estimate.
Most cakes are sold per slice while some novelty cakes are sold per cake.
Say for example the local bakery might say they charge 35 dollars for an 8 inch cake, while the home bakers charges 70 dollars. Keep that on your reference booklet.
Calculate your direct cake cost.
You do not need to do this for every cake recipe. Just pick one that falls in between your costing.
Say for example your —
flour, butter; eggs, milk, buttercream, fondant cost you – 20 dollars to make an 8 inch cake. Keep that on your reference booklet.
My Practice – I divide my cakes into three groups depending on the cost. A B & C and set my price per cup for cakes, buttercream and fondant.
For example – I might need 5 cups batter for an 8″cake plus 2 cups buttercream plus 500 grams fondant…calculate! I can then just change the amounts based on the size of the cake. When I have a client I just refer to my folder and be it vanilla sponge, caramel or rum cake; I have my basic pricing and can give a quote instantly.
Calculate the indirect cake cost.
This would include the oven, gas, electricity, even your tools and extras such as luster dust.
All cost that you associate with your business but are not used directly on each cake are considered indirect cost.
Even your business cards and advertising are part of your business.You can take a rough estimate of how much you think you should charge for this. Or to be more professional make a more detailed analysis like this.
Let’s take electricity for example – take an electricity bill of October before you started your business and a bill of October after you started your business. (this is assuming all other conditions are the same)
Now see the difference in price and check how many orders you had for the month of October. Divide that number by the number of cakes.
Keep that on your reference book. Say for example you said your indirect cost is about 10 dollars.
how much do you think you should be paid for your time, effort and expertise? This is where your earlier analysis of comparison between the local bakers and home bakers comes in.
Say for example you decide to charge 7 dollars an hour. How long would it take you to decorate a simple to a complex 8 inch cake? If you said 2 to 4 hours then your price would range from 14 to 28 dollars; right? Keep that on your reference booklet.
- These usually would include things that are unique to every cake, like sugar models, or flowers or a special ribbon requested for that cake.
Sugar models and other sugar art are priced on your skills not on cost. So if you made a figure how much you charge is based on how much time you put into it and what you think your figures are worth.
Let’s say for example -the extras cost is 5 dollars. Keep that on your reference booklet.
Note: Delivery and set up are also to be included in your pricing. If you offer free delivery you can add it as indirect cost or charged as an extra cost. Remember; It may be free delivery for the customer but you still have to calculate the gas, time and extra help you use to delivery that cake.
Let’s go see what we have on that reference booklet – shall we?
You do not want to charge as low as the local bakery and as a beginner you might not be able to charge as high as the home bakers who has already established her business. However, never under-price your cakes as this is very unethical and a big disservice to your fellow bakers.
Direct cost – 20 .00
Indirect cost – 10.00
Total Cost of your cake = 30 dollars.
So the cost per slice is 1.25 (30 divide by 24 servings)
Now you have a few options -You could price your cakes based on your Cost Price or Market Price. (Cake Pricing)
Let’s start with based on Cost price.
Remember this works only if you have done a thorough job of your indirect cost or else you would be under pricing your cakes –
A couple of different ways to get to the price using cost price as your base.
- You could take your cost and add the wages you want; in this example 14 to 28 dollars is your wage (calculated above) so the selling price of your cake is
(30 dollars cost) + (28 dollars wages for 4 hours ) plus (5 for the extras) = 63 dollars
- You could take your cost and add a percentage instead of wages to it. Say you decide that you want to make 35% on your cakes.
So take 30 dollar and add 35% to it. So now your cake selling price is 40.50 dollars/1.68 per slice plus 5 for the extras.
- You could take your cost and multiply it by a number like 2 or 3 or 4 depending on the complexity of the design or your skills.
If you multiply by 2 your SP is 60 dollars, if you multiply by 3 your SP is 90 and so on plus 5 for the extras.Pricing your cakes based on Market Value
Price your cakes based on the Market value for your product.
A good example of this would be – designer items. How many of us have paid a big price for a hand bag just because we love that brand? You can buy a hand bag for as little at 30 dollars or as much as 3000 dollars! Why is that?
Because we are willing to pay 3000 dollars for brand? A name? who sets that value? the market!! What we are willing to pay for that name is how the brand sets it market value.
You can charge your cakes based on your branding too! yes!
You still do your costing and keep that as a reference, so you will be able to calculate how much is your profit.
But you price your product based on what the market is willing to pay for it.
As a cake decorator to do this quite simply – find out what other cake decorators are charging. Obviously they are charging what the market is willing to pay. So they have already established the market value for the cake.
Find the price that works well for you and then evaluate your costing and work your selling price around it. Make sure you check with your costing as well.
A Brand Name – A famous cake decorator who has won many awards and has made a brand name can quote her price based on the value she brings to her cake. She may not care what other cake decorators around her are charging.
To her; her cakes are worth XXXX dollars. She may get a few less orders but that is probably what she wants – quality not quantity orders.
A few points to note when pricing based on market value – Cake Pricing
Sometimes the market value is low so you might need to decide if you want to still charge higher than the market value or find a way to bring your cost to match that price.
Some times the market value is high so you get paid a premium or you can give extra benefits that add value to your product.
What’s most important is that you have to charge what feels comfortable to you and what makes it worth your time and effort. When you value what you do and price it accordingly; others will do the same too.
My personal experience
When I began my business I priced my cakes lower than the market value, not because I wanted to get more business. No!
Unlike most professionals that go to courses and learn by practice, my practice was on the job.
While I was very confident of my baking skills, I still had to prove my decorating skills not only to my customers but myself too.
So I made a lot of cakes by just charging for the cost and was very happy about it. I let friends pay me the cost of the cake so I could learn and it was a win win situation for us all.
The right approach
I needed the skills and gain some experience and they needed the low-cost option. But as my level of skill and expertise grew so did my prices.
We all have to start somewhere and sometimes we have to make compromises along the way to reach our goals. What’s important is how you feel about it. Charge what you think is right to you and you will attract those people who are willing to pay the price you quote.
The Price Tag vs the Name Tag
To me it doesn’t matter if the cake has a price tag on it or is for FREE. Once it leaves my hands it’s a work of art made by Veena Azmanov.
People who see the cake don’t ask how much you paid for it… they ask who made the cake. So I take pride in what I do and the value I offer.
I have given you more on pricing in my post – I bet most of you are under pricing your cakes
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