I used to do cake decorating 30 years ago before I got caught up in life; raising kids and a demanding career. Finally the kids are grown and I am blessed with time once again to do some of the things I love.
I've been doing a lot of research the last month in starting my own home business once again. Its very costly to get into such a broad market as 'cakes' since there is so much overhead involved such as the large variety of cake pans, packaging, space for refrigeration and supplies etc. needed, so for ME, I've decided to specialize in a tighter focus of just cupcakes, which seem to be the current craze.
Your question of how much to charge for cupcakes was something that I also needed to know. There are several factors that go into how much to charge. You have to be competitive in pricing in order to get the business and yet still make some kind of profit, or you're wasting your time.
Before you can arrive at a selling price, you need to know what your cupcakes cost you to create and how much they cost you to package. How much they cost you to create also depends on whether you make the cupcake batter from scratch or whether you use packaged mixes, which can be much less expensive, not to mention faster.
By the way, I was a die-hard fan years ago of cakes made from scratch until I started doing some comparative taste-testing and incorporating the help of some friends and family members to taste some sample cupcakes, some made from scratch compared to some made from several different grocery store brands packaged mixes. More times than not, the packaged box mixes were much moister than my made from scratch recipes and stayed moist longer! Boy, that was a blow to my ego. Ever since, I've been using box mixes for my cakes. It saves me some money and time, which means I can sell my cupcakes for a little less. I use any name brand of box mixes that I find on sale, as long as they are the 'Moist' variety. I do make my buttercream frosting from scratch and never use canned icing.
Anyway, you need to take your recipe that you use for your cupcakes and frosting and price out your ingredients for a batch of cupcakes (a standard cake mix will yield 24 cupcakes.). Then you need to price out your packaging per unit. Add these expenses together and you have a per cupcake cost. Using a box mix for the cupcakes, making my own buttercream frosting and packaging in a typical 12 cupcake box plus insert, my cupcakes cost me about .65-.70 per cupcake to make and package, which does not include my time. I double my cost to make each cupcake to compensate for my labor. For buttercream iced cupcakes, I charge $1.50-2.00 each (including packaging) depending on the elaborate design of the frosting. Swirls and sprinkles- $1.50, Roses etc. $2.00.
If you are using gum paste or fondant on your cupcakes, they will cost you more to make because these are pricey additives that will not necessarily add to their value as far as the consumer is concerned. Making your own fondant, although pricey to buy all the ingredients up front to do so, can save you quite a bit if you intend to use it regularly. Also working with fondant takes quite a bit of time. So with the cost of fondant plus your time involved for labor, those cupcakes are going to cost you quite a bit more to make.
If I can give you a word of advice, if you are making cupcakes for kids, don't bother going to all the trouble of making fondant flowers. Kids are not any more impressed with fondant flowers as opposed to buttercream and parents are more concerned with the bottom line (what its going to cost to supply cupcakes for a whole class of kids). I experimented myself to see exactly how long it took me to make buttercream roses and leaves directly on cupcakes (that were top-dipped and cooled first in melted chocolate for a smooth and fast base onto which I could make my roses and leaves as opposed to making roses and leaves out of rolled fondant. The fondant roses and leaves took me four times as long to make which was what convinced me to leave the fondant flowers to the more special occasions like wedding cupcakes, where the consumer expects to pay more to get more.
The bottom line is that you have to KNOW what your finished product costs you to make and how much time it takes to make it before you can price it out to potential customers. The only thing worse than realizing after the fact that you under-quoted your cupcakes to a buyer if finding out that you came out in the end in the red and that buyer gets you some more business for the same price. OUCH!