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what are your views on this cake pricing suggestion?

post #1 of 19
4/27/12 at 6:25am
Thread Starter 
Hello fellow cake artists!

the other day I got a call for a wedding cake from a couple who had stopped in at a bakery I use to work for before I went into business for myself as a cottage food business about an hour drive away from the bakery I use to work for. The wedding is up by me so made sence they head my way for ordering.

later I called the bakery I use to work for and thanked them for the word of mouth and sending them my way, just getting started not a lot of people know about me yet.

they asked what I was charging for the cake and was totally floored that I was "going so cheap!"

they suggested this way of pricing and its kept me awake at night since the convo.

food cost plus 15 to 20% mark up.
then add in my time which I should be paid 1.00 a minute it takes me to be working on the cake.

now, Im all for charging for my time to pick this stuff up, drive out or order the stuff to my place Gas isnt cheap I get that. but how many of you charge 60.00 an hour for your time?

I know I could have charged more for this cake but its really one of the first few wedding cakes Ive done from home on my own without the support of a full scale bakery. I dont feel I should be charging them for the heat in my house!

am I wrong here? do I need to be following this system?

what are your views on this?
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post #2 of 19
4/27/12 at 6:57am
I agree somewhat with what they said. I wouldn't pay nor would I give myself a salary of $60 an hour. Also, I would be taking in consideration ALL of my cost. There is no way they only take in food cost with a 20% mark up. They have insurance, licenses that need to be renewed, utilities, etc., etc. The 15% is your profit margine after ALL expenses, food cost, business cost, and your salary.
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post #3 of 19
4/27/12 at 7:19am
That $60/hour figure may be accurate for them, since they have additional overhead (rent, licensing, etc.), it's just another way of taking costs into account.

For your own purposes you can't really take any shortcuts, you need to figure out what your costs are (ingredients, labor, and overhead) then add an appropriate profit margin to bring you up to the market price in your area.
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post #4 of 19
4/27/12 at 9:07am
$40 to $60 an hour here depending on what I'm doing. But I believe, and customer satsfaction and demand for my services prove, that my skill level justifies it. Not to mention my own overhead, scratch ingredients, tons of butter, yada yada...perfectly justifiable for what I do. Can everyone get paid like that? No, and I couldn't either 5 years ago. Wasn't qualified.
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post #5 of 19
4/27/12 at 9:08am
Have you done a business plan? A formalized, researched, business plan will identify all of your costs & overhead (along with a host of other business related things which are critical to a successful enterprise).

There is a member here on CC, mimifix, that has written a book on how to start your own baking business. I have not read it and I know nothing about it, but it is a small price to pay for more information:

http://www.amazon.com/Start-Run-Home-Based-Food-Business/dp/1551808331

You may also wish to investigate the software offered by CakeBoss:
http://www.cakeboss.com/Default.aspx

Most of the information you've been given is correct, but as AZCouture stated above, you have to work your way up to a $40-$60 an hour wage. Your hourly wage is something you need to determine within the structure of a business plan and profitability.

p.s. You said, "I dont feel I should be charging them for the heat in my house!". You DO need to charge for the percentage of space (or utilities) in your home that you use for calculating home business overhead or expenses. Your tax advisor is the appropriate person to advise you on this aspect.
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post #6 of 19
4/27/12 at 9:33am
Quote:
Originally Posted by Apti


p.s. You said, "I dont feel I should be charging them for the heat in my house!". You DO need to charge for the percentage of space (or utilities) in your home that you use for calculating home business overhead or expenses. Your tax advisor is the appropriate person to advise you on this aspect.



While I do agree that all costs need to be taken into consideration, as a home baker I disagree with charging for general utilities. Gas or electricity for baking, yes - costs for heating or cooling my house, no. I'm going to heat or cool my house no matter what I'm doing in it, so I don't believe that should be passed on. Likewise, I don't believe the customer should be paying part of my mortgage either. Of course it's different in a shop or storefront. What would you be doing there if not making cakes?
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post #7 of 19
4/27/12 at 10:03am
Okay, I read this as the bakery telling her charge for her ingredients, her profit margin, AND an additional $60 per hour. Now if I break down my cost inlcuding what I get paid, it would come to that, but if I break down my cost, and an additional $60 an hour, all togther it would be way over $60 an hour. Is everyone here averging a $100 plus per cake? I am just curios.

And just so you know part of your mortgage is a business deduction for business expenses. I am not sure if I am going to explain this right, but hopefully it'll make sense, the value of the space you use for business that you pay mortgage on, is a business expense, and therefore is a tax deduction.
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post #8 of 19
4/27/12 at 10:27am
Of course a business tax deduction is one thing and yes, I'll take all of those I can get. But passing part of that on to the customer? No, I don't think so.
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post #9 of 19
4/27/12 at 10:56am
I spoke at length with a woman who has a VERY successful home business, not caking, but a home business. She has figured out what the cost of the mortgage for her office is and took her average electric bill and broke down the costs and uses that as part of her overhead. If you weren't caking in your home, your electric bill would be lower and you're eating that cost if you're not factoring it in. It's not going to be as much as a storefront, but why would you pay incurred business costs out of pocket? Just food for thought.
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post #10 of 19
4/27/12 at 11:25am
Quote:
Originally Posted by QTCakes1

Is everyone here averging a $100 plus per cake? I am just curios.

Per hour, or the charge to the customer for the cake?
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post #11 of 19
4/27/12 at 11:26am
Quote:
Originally Posted by VaBelle

I spoke at length with a woman who has a VERY successful home business, not caking, but a home business. She has figured out what the cost of the mortgage for her office is and took her average electric bill and broke down the costs and uses that as part of her overhead. If you weren't caking in your home, your electric bill would be lower and you're eating that cost if you're not factoring it in. It's not going to be as much as a storefront, but why would you pay incurred business costs out of pocket? Just food for thought.



Be careful with home office deductions, there are really specific IRS rules about using the space EXCLUSIVELY for your business, etc.

If I tried to do $60 an hour on top of ALL of my expenses I wouldn't have any customers, that wouldn't fly around here. But if they're talking about food + $60 an hour to cover all costs + your salary and profit that might make sense. You'd have to sit down and figure it out for yourself, though. Everyone's costs are going to be different and if you're working from home your costs will be different from a storefront's costs. It would be like if Walmart gave you pricing advice...Their business model is different, so their pricing might not work for your business. icon_rolleyes.gif
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post #12 of 19
4/27/12 at 12:11pm
Quote:
Originally Posted by costumeczar

If I tried to do $60 an hour on top of ALL of my expenses I wouldn't have any customers, that wouldn't fly around here.

Oh me neither. Walmart price advice. Oh my gawd. You know what, I bet people have asked Walmart bakery employees advice on pricing. icon_lol.gificon_lol.gif
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post #13 of 19
4/27/12 at 1:43pm
Thread Starter 
thanks everyone you have given me lots to think about!

my house was built in the 30s and set up in a way that I have a butlers pantry off the kitchen. that room is completely dedicated to my business, I only use my home kitchen for the baking and for refridgeration. all decorating and frosting making is done in my cake room. I also have room right next to it (both with their own doors ha ha ha) that is my office. I have my computer that runs my cake boss software, printer, pictures of my cakes from the past and for the days I feel like a total failure I have the notes and letters from happy customers I like to read.

My husband is a numbers guy so he is always pushing me to break things down and see that the cost is. Im still learning, Im an artist more a business woman and thats my problem. but he keeps me on my toes!

I live in a small town where I really cant charge the big bucks that the bakery I use to work for does, they are in a big city. I also agree that although I make very nice cakes they are not up to the jaw dropping standards of some of you. I hope to get to 60.00 an hour or more but for now I dont see myself making more that 15-20.00 an hour after overhead, ingredients etc..

thanks for all who answered, like i said Im just starting out on my own. I was a decorator not a baker so Im still in the learning stage of leveling cakes and really getting my product to where I want it. the decorating I could do all day.

you have all given me peace enough to sleep tonight! ha ha ha!
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post #14 of 19
4/27/12 at 1:53pm
SimplySweetAmy~~Your home and working spaces sound lovely. If you have the artistic talent and your husband has the financial "numbers" talent to break down costs and keep track of the number crunching, you should do well. It sounds like you are definitely on the right track for success.

Sleep well.
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post #15 of 19
4/27/12 at 3:34pm
Quote:
Originally Posted by simplysweetamy

my house was built in the 30s and set up in a way that I have a butlers pantry off the kitchen. that room is completely dedicated to my business,



Oh...the butler's pantry...Our house in Boston had a butler's pantry because it was built in the 1920's, and I miss it soooo much! When we moved to Virginia and the realtor was showing us the kitchens here I was thoroughly disgusted with the so-called pantries in newer houses. I think I said to him "this isn't a pantry, it's a closet!" So sad... thumbsdown.gif
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