By Barbara Barrows for SugarEd Productions
Oh, this is hard. How do you know how much to charge? How do you know what people will pay? How do you handle discounts, refunds and freebies?
The whole money thing can be one of the toughest hurdles to get over when you’re starting a cake business. Since the goal is for you to love cake decorating, and to love it for a long time, you’ll need to set a price that keeps you in business, covers your time and supplies, and makes you happy.
Cake prices have a huge range, probably even in your own area. Discount stores sell quarter sheets for as little as $6.99 (check the discount rack). The people you see on TV get a bit more… Charm City Cakes will set you back a minimum of $1,000 if it’s sculpted, or about $15 per slice for a stacked wedding cake.
Hopefully, somewhere in between will keep you in business and make you happy. The first thing you have to do is cover your costs. You won’t stay in business long if you charge less than you spend to make a cake.
What a Cake Costs You in Money
Here’s a math exercise for you. (Yes! Math! An integral part of any business.) Let’s find out what it costs you to make an 8” round cake. Take a look at your grocery store receipts and figure the approximate costs of:
All-Purpose Flour (1 cup = 4.25 oz, so about 1/18 of a 5 lb. bag)
Cake Flour (1 cup = 4 oz, or 1/8 of a 2 lb. box)
Sugar (1 cup = just about 8 oz, so 1/8 of a 4 lb bag – and most bags are now 4 lbs, not 5)
Powdered Sugar (1 cup = 4.25 oz, or a little over 1/8 of a 2 lb. bag)
Vanilla (6 teaspoons in an ounce)
Butter (2 cups per pound, 8 tablespoons per ¼ lb stick)
Baking Soda (48 teaspoons in an 8 oz box)
Salt (48 teaspoons in an 8 oz container)
Shortening (1 cup = about 7oz, or about 1/7 of a 3 lb can)
Flavorings and colorings
Every other edible thing you put in or on that cake
Okay, so there’s your ingredient cost.
Now how about disposables used in construction? Parchment sheets? Paper towels? Piping bags? How much did you pay for that cake board? Do you include candles? Are they keeping the cake drum? Do you supply a box? Non-skid for the journey? Add it up!
Certain “intangibles” can raise the price as well. You might want to add in a dollar or two for power usage (mixer, oven and dishwasher), trips to the grocery store, dish soap, hot water, etc.
Now you know what a cake costs you to make in dollars and cents. And it’s probably already more than the “geez, it’s only eggs and sugar” customers want to pay. Probably over the discount store’s price as well. And you still haven’t counted your time!
What a Cake Costs You in Time
This exercise is very similar to your grocery pricing. How long does it take you to make a cake? Think of the time you actually spend on baking and construction.
Prepping your work area
Collecting, measuring and mixing ingredients
Checking for doneness
Damming and filling
Decorating (of course!)
Cleaning your work area
Putting everything away
Shopping for more ingredients
More than you thought, right? Wow! What an enormous effort for “just something simple.”
What Your Time is Worth
Time is priceless. It is one thing you can never get more of. Isn’t yours valuable?
As of January 2012, minimum wage in the U.S. is $7.25 an hour. That’s for an unskilled worker with no experience. Don’t you deserve more? According to Glassdoor.com, grocery store decorators in the U.S. generally get from $9 to $16 an hour. Judge your experience and skill, and price your time accordingly.
Total it Up
Add your costs and the value of your time. This is your baseline. This is what you need to charge to make it worth your while to make a cake. How does this number compare to what you’re already charging?
- This is so much less than what I charge! Bravo! You’re not only covering your costs, you’re paying yourself a decent wage for your work and can even cover some business overhead.
- This is right about what I charge! Bravo again! For you, making cakes is sustainable and worth your while.
- This is more than what I charge! Hmm. Is it time to raise your prices?
- This is way more than I could possibly charge! Is it because you’re not confident in your skills? Or because your area can’t sustain these prices? Can you target a higher-end market? Is it possible to get your ingredients wholesale? If there’s nothing you can do to cut costs or raise prices, you might want to re-think a cake business at this time. You might not be able to make enough profit to keep you happy with caking – eventually you’ll either run out of money or get tired of giving away your time.
Happy Caking! Sharon Zambito