Cake pricing can be the most challenging and intimidating question to most beginners in the cake decorating world. Moreover, pricing your cake is not just about adding the costs of ingredients and a markup. And, in this post, I share my pricing strategy for your homemade cakes.
One of the scariest questions is: How much would you charge for this cake? And, if I don't quote the right price I may lose the order. And, if I overcharge, the customer will go somewhere else. Conversely, if I quote a low price, then I will not make any money.
I've calculated the cost of the same cake a zillion times to make sure I got it right. Also, I try so hard to reduce my costs so that I could charge less for my cakes. And, as a result, get more orders.
In fact, sometimes, I look at the price and say, I wouldn't pay that much for a cake. So, how can I charge that from customers?
Pricing a cake
Video on Facebook
Video on YouTube
Does that sound like you? I use to be that person above!!
(yup hiding face in palms here)
These are some of the most common questions I get asked from beginners. And, it really resonates with me because I've had the exact same questions in my head all along.
- How should I price my cakes? And, how to price cakes or cupcakes?
- Also, can you share your price-list with me? Please send me your cake pricing chart.
- And, what is the right price for a beginner?
- How much should I charge for this type of cake? And, what is the price of cake for this design?
- In addition, do you have a cake pricing guide?
And, 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 a little bit ... it's long.. so grab a cup of coffee).
How much should you charge for your cakes?
I'll share with you what I do and how I go about pricing my cakes.
Now, having done two degrees and an MBA - you may find that my method sounds very geeky. And yet, trust me the books are not wrong and it's how you apply that knowledge to practical issues that make a huge difference.
So, hang in there - I will try my best to make it as simple as I can for you all to understand. In fact, I will give you more than one option on how to price your cakes. So grab a cuppa and let's make it a date with cake pricing.
There are four main components to pricing your cakes (pin)
1. Direct costs
- Cost of ingredients and supplies. Every ingredient no matter how little has to be included in your pricing.
- Cost of accessories - such as cake boards, boxes, and dowels.
You do not need to do this for every cake recipe. Pick some that are representatives of your most common cakes. Since we tend to use the same ingredients in almost all of our cakes. For example, flour, butter, eggs, milk, buttercream, and fondant cost you - 20 dollars to make an 8-inch cake. Also, keep these costs for your reference.
Other direct costs include delivery (taxi or fuel costs), set-up costs (boards, poles, boxes).
2. Indirect costs
- Utilities - such as gas, oven, mixers
- Advertising - business cards etc.
These would include what you pay for electricity, gas, water, phone, etc. It also includes any tools or accessories that you purchase in order to make and decorate your cakes. Any cost that is associated with your business but not a direct ingredient in each cake, is considered an indirect cost. It's simpler to calculate these types of expenses on a monthly basis, rather than on a cake by cake basis.
For example, you can use a rough estimate that 25% of your utility costs are related to your business. Then calculate that total for a particular month and divide it by the number of cakes you've made that month. This will provide you an estimated indirect cost per cake.
For example in an average month, your indirect cost is about 10 dollars per cake. Furthermore, marketing expenses, such as advertising, building and maintaining a website for your business, even your business cards are part of your business expenses.
Labor
- The time you spend on the cake - you must include the time you spend to design the cake, shop for the ingredients, bake the cake, decorate and set up the cake.
- You have to put a dollar value as a wage for your labor.
Yes, often people forget to include the time it takes them to design the perfect cake, the time that gets spend back and forth emailing customers for the order and design. The time you spend to go buy those ingredients, as well as the time you spend baking the cake.
Delivery
- This includes not just the price of the taxi or gas to drive the cake but also the time you spend to set up the cake.
Just for an example, let's price a cake (rough estimate)
Price | 24 servings | |
Direct Cost cake, frosting, cake board, delivery | 20 | |
Indirect Cost Gas, oven, | 10 | |
Labor ( $ 5 x 6 hours) | 30 | |
Delivery | 5 | |
Total cost | 65 | 2.7 per slice |
Profit - % or a mark-up | ?? |
Why should you mark-up or add a percentage to your cake?
Many cake decorators don't do this!! Look at the table above. It's got cost, labor, delivery but there is no profit. The labor is your wage it is not a profit. You worked hard on that cake and you deserved to be paid. The profit comes when you add that last line - % or a mark-up. When you make that profit you have a successful business. Does that make sense?
So, what is better a % or a mark-up?
It's a personal preference. Some people say I want to make 30% profit of every cake I sell and then there are those that say I want to make $50 on every 24 servings.
How do I determine labor - my wages?
If someone employed you what would they need to pay you, so you would accept their job? Would you take that job if they paid you 40 dollars an hour or would you say -no I need at least 50 to make it worth my time.
The minimum wage in Israel is 25 so when I started cake decorating I did actually charge only 25 per hour. Now I have moved up to 50 because I think that's modest.
It's definitely not what an artist should be paid but I'm still OK which what I pay myself. So, you see; it's up to you!! And what you think is fair to you!
Cost vs. value
Price your cakes based on their value, not their cost
The most important point I want to make is this. Pricing for decorated cakes is not about cost +. Rather, they need to be priced based on the value they provide to your customers. It's a luxury product. Therefore, it should be priced on value not cost. It's like the difference between the price of a dinner in a top French restaurant, and your local fast food joint. You don't know what is the cost of ingredients that go into your 5-course French dinner. Frankly, you don't care. You pay for the experience, the emotional value you get from it, and of course the great taste and presentation.
The same goes for custom-designed decorated cakes
Having said that, if you decide to make this your business, you need to make sure that you have a good business model. In other words, you can make the profits that you would like to have from this business. Otherwise, it can be an expensive hobby, or worst, a losing business.
Therefore, it's very important to have a very good understanding of your costs. These include more than just the direct costs of ingredients that go into your cakes. I will discuss that in detail below.
First of all, let's start with determining the value of your cakes.
The main factors that determine the value of your cake (pin)
- Where are you located and how much are your customers willing to pay?
For example, the price of a cake in New York is not the same as in Texas? (and New York and Texas are both in the US) - What clientele are you serving? (middle-class kids' birthday cakes? high-class wedding cakes?)
- or What is your expertise? What unique value do you offer?
- What is your reputation and demand for your product?
Let's explore these factors
1 & 2 - Where are you located and how much are your customers are 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).
When I first relocated from the US (in 2005), I regularly made cupcakes, cake balls, and cake pops. And yet, it wasn’t very popular here in Israel and to some, it was something new and fascinating.
I grew up with a decorated cake for every birthday, weddings and holidays. But, in Israel custom decorated cake was a luxury item and very rare to find. It was not a must-have item for a birthday party. A birthday cake was not even in the budget! I was surprised that some weddings I attended did not have a wedding cake and no one seemed to miss it.
Most birthdays that my son attends have no fancy birthday cakes. Rather, what they often had was a simple cake that grandma made in a baking foil, poured some chocolate sauce over it and sprinkled some sprinkles around.
So in 2005, there was very little awareness or demand for custom decorated cakes in Israel.
Much has changed since then. However, the market here is still lagging behind the rest of the world. And yet, this is where I chose to start my business. So as you can understand, the level of awareness, and as a result, the demand for, and value of decorative cakes has a direct effect on how much I can charge for my cakes. Hence, I had to find and focus on those customer segments where there is a demand for decorated cakes. For example, the ex-pat community, and people who immigrated to Israel from the US or the UK.
You need to do the same in your location. Find out what are the trends. What types of cakes are more popular. What are people willing to pay for those cakes? In some places, sheet cakes are very popular, while in other places no one cares much about them.
Decorated cakes take a long time to make. There are some customers who view them as a waste of money. And yet, there are those who value the work and effort put into it and are ready to pay for that.
3. What is your expertise? Or what unique value do you offer?
It is important that you be honest with yourself when answering this question.
Also, almost anyone who starts a business wants to make money. However, your success is largely dependent on your expertise and the value you offer customers.
Most cake decorators will tell you they provide a unique value. Some examples include: doing something new, personal consultation, design expertise, modeling expertise, etc. But is that enough to create a differentiated value?
First of all, you need to ask yourself what makes your product better than others? Do you bake the cake from scratch? Are you offering free delivery? Are you a unique artist? Do you have creative and unique designs? Are you offering any extra frills? How are your skills compared to your competitors?
Supermarkets cakes vs. homemade cakes
One of my mom’s friends used 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 product, 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.
- Supermarkets' business model is based on low-profit margins, backed by a cost-driven, highly efficient operation.
- A bakery sells about 300 to 600 cakes a week.
- They purchase ingredients in bulk and at a fraction of the price that we buy them from the supermarket!! So the same flour that you pay two dollars for probably cost a few cents for them.
- In addition, they work on a large scale, which puts quantity before quality. We deal in quality and custom orders. There is no comparison - right?
As a home baker, you try to use top quality ingredients as compared to generic supermarket brands, and you customize each and every cake. While supermarket cakes are flash-frozen; you offer freshness, consultation, designing and much more.
Competitors
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.
What would get a customer to choose your cakes over hers? You definitely do not want people coming to you just because your prices are low? Do you? There is no honor in being that 'cheap cake lady'
Unique expertise and value
Identify your unique skills and expertise. Try to use them to create value for your customers.
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.
Since in my present market baking a cake from scratch is considered unique and valuable, I use it as my competitive advantage.
4. What are your reputation and the demand for your product?
To get cake orders you first need to create awareness and generate demand for your product.
- Do people know you?
- Have you built a good reputation?
- Does your product have a market presence?
- If you have a good reputation, your cakes will be in high demand and you will be able to charge a higher price.
Personal example - Most of my business comes from word of mouth. I do not advertise. As such every client that comes to me, comes through someone I know or has tasted my cakes at some event.
Because I work in a price-sensitive market this is the best way for me to build my business and reputation.
Once people hear about you and your skills from a reliable source their attitude to pricing changes. I have seen that with my customers. There is real tangible value to a good reputation.
All the above factors are important factors in determining what is the value of your cakes in the eye of your customers. How much are they willing to pay for them? What price will your specific market bear?
Is your business model profitable?
As I mentioned above, unless you're doing this as a hobby, the purpose of your cake business is to generate a profit. The more the better.
Therefore, it's crucial that you understand both sides of the business. How to create demand for your product, reach your customers, price your cakes correctly, and deliver them. And at the same time, what are the real costs of making your cakes, and running your business. Of course, your goal is that your income from selling your cakes will be higher than what it costs you to make and deliver them to your customers
Hence, understanding what are your total costs, and calculating them correctly is critical to your long-term success.
A few points to note when pricing cakes based on market value
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 in my baking skills, I still had to prove my decorating skills not only to my customers but for 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. I considered it as if these customers are funding my education.
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 what works for you. Which customers are you're aiming to serve, and what are they willing to pay the value you provide.
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.
Here's another post that speaks on pricing cakes. I think you'll find it a good read too. - I bet most of you are underpricing your cakes
Frequently asked questions
Just for the purpose of simple maths:
1. First, estimate how many hours is this cake going to take - 5 hours
2. Then, calculate the cost of ingredients - $20
3. Next, determine the labor cost - $20 x 5 = 100
4. Add utilities cost - $5
5. Sundry cost (small cost) - $5
6. Then, calculate the total cost: 20 + 100 + 5 + 5 = $130
7. In addition, how much profit you want to make - 30% = 130 x 30%
8. So, finally, the total cake price = $ 169
First, not all buyers are your customers. And, you are never going to be able to please everyone. In fact, there will be those who cannot afford your cakes and that's ok.
Often, the problem with not getting cake orders is not the price but the marketing effort. You have to attract the right customers.
For example, luxury Swiss watches are sold at exclusive shops, not on Amazon.com.
When you are new to cake decorating it is normal to take longer to decorate the cakes. In fact, speed comes with time and practice.
This is where you need to decide how much to pay yourself.
Read - Timeline for decorating a cake.
This is an important decision and we have discussed this in detail here on the blog - How to start a cake business from home.
It depends on how much time and how much work-load you can handle. Hence, there is no "right" number of cake you need to do to be called a cake decorator. Please read - how many cake orders can I take.
We discussed a few more cake pricing questions over on the cake decorating blog
And, I'd love to know what you think, not just about this post but about cake pricing. Also, about your concerns regarding cake pricing. So, please share your thoughts, questions, and comments with me, and the other readers. And, I might update this post and include some of your comments and address specific questions. So, just write a comment below and I'll be happy to address those questions.
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anne nix
hi veena, thanks for your article. it is very thorough and informative
i have an unusual situation that i need help for. a local baker needs a cake decorator. he has offered the job to me. i live in a medium/small town with 2 other bakeries. i will be considered as contract labor and the cakes will be mixed and baked by the bakery, then passed on to me for frosting and piping. i am responsible for all of the tools and supplies needed, custom cakes will also be up to me to decorate. i will be charging separately for the decorations. i have no idea what and how to charge!!! can you help me? thanks in advance.
Veena Azmanov
Hey Anne. Well, you have a few things to ask yourself.
Are you ok with the cake being made by the bakery? If yes, then you can consider it like a job but instead of you decorating at the bakery you do it at home.
Also, ask yourself how long (how many hours) is it going to take you to decorate the cake. Based on that you can calculate the cost and wages.
Hope this helps. All the best
Miraj Chimwani
Hi Verna. Thanks very much for this website. I am learning a lot. I have a question on costing. How do I come up with charges for a class? A few people are interested in learning cake decorating from me but I have no idea on how I i should about charging them?
Veena Azmanov
Miraj, it first depends on the market value of the cake decorating classes. How much are people charging in your area. Then, use your own experience and quality of work to compare. Then you decide how much you want to charge for your time and knowledge.
Lolita Belandres
day 5 Done. Thank you.
Siobhan
Thank you very much for sharing your expertise and giving insight to so many different points when cake baking. I like you once were am now starting off baking cakes for friends and family and as you said previously they pay for the cost of the cake which in itself is like funding my education for baking and decorating which I love and as I bake more my confidence is building but I would especially like to thank you for writing your cake timeline on when to do things as my head went blank thinking how am I going to do all of this and have it ready for the day.. you have simplified that and given clarity on the timeline which is ideal and the cakes I have been making are complicated using gumpaste, modelling chocolate, tiered cakes you name it I give it my best shot and Ive been been successful with my cakes so far long may it continue haha Thank you again so much! Love Siobhan from Scotland UK
Veena Azmanov
Thank you, Siobhan. I am so happy you found my posts and blog useful. Thank you for the lovely feedback. All the best with you cakes.
Pat Hoffman
Hello. I got the day 2 lesson but not day 1
Veena Azmanov
Pat please check your spam and other folders. It shows here that it has been sent to you
Joan
Hi Veena,
Your post on cake pricing has been really helpful. But I'm still confused on how to maket cakes.
I know my cakes taste fantastic and are good because I use the best quality ingredients I can find. But my problem is I never get any orders even if I use social media. I don't have a wide social cirlc3 and often end up making cakes for home and family.
Is it advisable to use dummy cakes for showcasing skills and different designs and posting those pics on social media?
Or should I just only post pictures of cakes actually made. Im planning on making an album which i could possibly market through wedding caterers.
Please help me. What should I do? I'm really at a loss as nothing seems to be working out.
Thank you very much.
Veena Azmanov
Hey Joan. You are not alone. The beginning can be tough with getting orders but as you make cakes and the word spreads you will start to get orders.
I do have a post - how to advertise and market your cake business - do read it. I'm sure you will find some tips there. In fact, take a look at all the articles under my business section, I think you may find some tips and ideas.
And yes, dummies are a great way to showcase your work, practice and create new designs. You don't have to wait just for orders There are so many cake enthusiasts that do only dummies and showcase their skills. Social media can be difficult with these recent changes which are why I always encourage people to make a website where people can find you. You can make your own or hire someone to make one for you. I have a step by step on how to make a website as well if you are interested.
I hope this helps. Don't be discouraged I'm sure things will get easier as you progress
Michal
היי! איזה כיף לראות ישראלית שמצליחה כאן בארה"ב.
אני התחלתי לעצב עוגות לא מזמן ואני לגמרי במערבולת רגשות לגבי תמחור העוגות המושקעות שלי... אבל הבלוגים שלך מקסימים ומפורטים. אמשיך לקרוא 🙂
תודה
מיכל
Veena Azmanov
Hey Michal. Thank you so much for your lovely comment. Welcome to my blog. I am happy that you are enjoying my recipes and articles. Please feel free to ask any questions if you have. Cake pricing is a very subjective but also stressful decision for every artist. I'm sure eventually you will find your way through it. Happy caking
Michal Solomon
Thank you
תודה!
Aakla
Thank you for this blog it is great learning about cake pricing from you. it helped me to order a cake
Veena Azmanov
Thank you, Aakla
Suchismita Das
Hi Veena,
I'm little bit confused about the cake weight. If someone orders a 1 kg cake, should the cake alone weigh 1 kg or should it weigh 1 kg along with the filling and frosting whatever it may be buttercream ganache or fondant?
Veena Azmanov
Hey Suchismita. Sorry, not sure I can be much help with this. Here we sell cakes by servings not by weight so I am not sure how they calculate cakes by weight. I presume you would weight it after all the filling.
Cheryl Fernandes
Hi Veena,
I follow you on facebook and Instagram. I love your work and your beautiful. I was looking for cake pricing for a long time and even wanted to take up a course. you have covered the needs in a simply way. but I would like to know if i'm making a fondant cake with fondant figures or flowers. how do i price this thing. since we work as home bakers how we can consider our time and price.
Veena Azmanov
Hey Cheryl. Glad you found this post useful. Cake pricing can be simple if you keep both the customer and yourself in mind.
Make it a win-win situation.
As I said in the post, decide how much time you take to do a project, be honest with your standard of workmanship, and decide how much do you want to pay yourself for that amount of work. If you price fairly for your quality of work, people will pay. If not, they perhaps are not your customers.
Hope this helps.
XXX
Megan
Hi Veena!
This post has been so helpful. I’m new to the cake-baking world and many people have been asking me to bake them cakes for events. I’ve been researching how to price these cakes, and your information has been pivotal in helping me to determine my prices.
Also, I love your recipes! Your caramel filling for cakes and tarts is divine, and your stuff buttercream frosting tutorial helps me pipe perfect rosettes. Your site is my of my favorite to go to when I’m looking for recipes for the extras (e.g. fillings, new flavors, etc.) in my cakes. I appreciate your work so much!
All the best - Megan
Veena Azmanov
Thank you, Megan. Happy to hear you found this post useful and like my recipes. Yes, we love the buttercream frosting for flowers too. Happy to know my site has become your favorite. Please feel free to ask any questions if you have. Happy to help. Wish you a Happy Easter.
Nkechi
Thank you so much Veena! This article has been most helpful
Manju Mathew
Hi Veena, i am a beginner and i am in search of all relevant/useful information/tips to get started. Luckily i came across your site and i am pretty impressed. Cake pricing is definitely a tricky space and i guess you have covered it really well for a beginner like me. Thank you.
On a different note i have a question on fondant cakes. I have been asked to make a cake for my daughter's friend's birthday and i was wondering whether you would have a chocolate and strawberry cake recipe which can be covered in fondant. Thank you.
Veena Azmanov
Thank you, Manju. Glad you found this post useful. It is a bit long because it does cover a very sensitive topic. Most of my cakes can be covered with fondant unless I say otherwise in the recipe. I do have many chocolate cakes and two strawberry cake recipes. One with oil and the other with butter. I often use the butter based cakes in summer. You can find all my layer cake recipe here - Layer cake.
Manju Mathew
Appreciate your prompt response. Thanks a ton.
I will let you know how it turned out.