It's true, there are several factors to consider when pricing your cakes, but there are some basic formulas that should get you started in the right direction. First, you need to know how much the ingredients cost. The experts in the restaurant industry state that your costs should be somewhere between 25 - 35% of what you charge. But in the baking business, lower is better - especially with the high labor that can be associated with decorating wedding cakes. Yes, costing can be a tedious process, but not spending the time calculating food costs means that you probably won't spend time watching all of your other costs and will price by the "what my competitor charges" method. (ack! now that's a recipe for disaster!) Remember: the first step is admitting that you have a problem...
To begin costing cakes, you will need to have several pieces of information at hand (bills, receipts, recipes) and a decent scale. You will need to break all of your ingredient costs down by the pound (or ounce, or gram, etc.) For example, a 50 lb sack of flour costs $15.74. So, my price per pound for flour is $0.31. [50/15.74=0.31]. After you have broken costs down by the pound, then you can plug this information into your recipes. Say you have a chocolate cake that uses 15 lbs of flour - you know that your flour costs for this batch are $4.65. And so you go through your recipe, calculating all of the ingredient costs based on the weight of each ingredient and its cost per pound. When you have your cost per batch done, then you have to weigh the batter (or unbaked product) for each pan, or portion that you are making. Using chocolate cake as an example, the cost of a 68 lb. batch of chocolate cake is $47.74. The price per pound of batter is $1.42. We calculated this by dividing the batch weight (68 lbs) by the cost per batch ($47.74). Now, you need to know how much the layers cost. Lets use a 12" round as an example. Place the 12" round pan on a scale, tare (zero) out the weight and pour in the usual amount of batter. If this is your normal weight - record it - and then live and die by it. In our case, a 12" round weighs 1.75 lbs. So, the cost for one 12" layer of chocolate cake is the batch weight per pound x the weight of the cake in the pan, or $1.42 x 1.75 = $2.48. Now, that's just one layer of chocolate cake. It's not a whole wedding cake. To calculate a wedding cake, you will need costs for all of the different sizes of tiers, the fillings, the icing, the cake drum, etc. Even after all of this hard work (my brain hurts), there is still more work to do! You will also need to know all of your overhead (rent, electricity, insurance) plus all of your labor costs. This goes into what you charge, too. So - it's not all about what your competition is charging. You have to know your own costs so that you can stay in business. Building the spreadsheet is the time-consuming part, but once you have it, the only thing that will change are the fluctuating cost of ingredients - which is easy to plug in down the road. At the end of the day, a healthy business should ideally be operating at a 10% NOP (net operating profit), or greater. You calculate a NOP by doing this: Take the Sales $ amount and subtract COGS (that's the ingredients + production labor + supplies) to give you the Gross Margin. Then, subtract Expenses (all other overhead) from the Gross Margin. Take that dollar amount and divide it by the Sales number to give you the NOP%. If you aren't operating at a profit after doing those calculations, then you definitely need to reexamine your pricing.
