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How much to Mark Up your Cost - Page 2

post #16 of 26
Sorry I quoted before the edit! The main difference is that they are two different things, that mean two different things.

For accounting, tax and all other purposes your mark up means nothing, so I have to disagree and say it does make a difference. Someone can believe that they are making much more money than they actually are. Especially as its so easy to confuse the two in your head.
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"Taste your words before you feed them to people."
www.sugaredsaffron.co.uk
www.facebook.com/SugaredSaffron
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post #17 of 26
Quote:
Originally Posted by SugaredSaffron

Someone can believe that they are making much more money than they actually are. Especially as its so easy to confuse the two in your head.


Agreed. I actually had to look up the difference myself, I'm sure they covered that in one of my MBA econ classes but it has been a while. From now on I will be more careful about the difference between the two. Luckily you can easily convert them: Margin = Markup/(Markup + 1) and Markup = Margin/(1 - Margin).

In the US most cake shops are in the 10-30% range for profit margin (or 11% - 43% markup) once you factor in all your cost components, most markets won't support higher margins than that. If you are consistently at the low end of that range and can't reduce your costs or increase your prices then I agree running your own business may not be worth it.
post #18 of 26
Anna, I like your posts and Jason's.

I believe Jason and I have very specific reasons why we are on CC and they may not be just that we have nothing better to do.

Jason is correct in that those small items need to be taken into consideration. I am taking the next big step with my business and I have to account for every tiny detail, be it a cost or a time issue. In pm's I work with people to realize the time it takes to buy the paper towel, the cost, and the time we use while cleaning with it.

Keeping track of all costs and time is a lot more than you think when you do it correctly. Once factored in, a true picture will be apparent.
post #19 of 26
Quote:
Originally Posted by Annabakescakes


FYI, You have entirely too much time on your hands. I hope you aren't neglecting your wife and child. While a small portion of your posts are helpful, and I agree with you much of the time, if my husband spent 1/10 as much time meddling in other people business on the internet as you, I would have to hang my head in shame. Image



Wow! I was going to stay away from this one, but I just can't! I believe you owe Jason a public apology for that nasty remark!! If you don't agree with him, then agree to disagree and move on or debate in a FRIENDLY manner!!
post #20 of 26
Yeah, that part of her post was really puzzling to me, especially considering that I average about 15-20 minutes a day here. I chalked it up to cognitive dissonance, which can sometimes cause a disproportionately hostile response when one is confronted with facts that are inconsistent with existing beliefs.
post #21 of 26
*snort*

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post #22 of 26
#TeamJason <333 icon_lol.gif
post #23 of 26

This discussion was really helpful. I am new to the cake business. I purchased the cakeboss pricing software after a few sales this year but with my background in accounting i noticed that it was calculating profit incorrectly. It is assuming that the amount generated for labour was part of the profit. none the less i simply markup the suggested selling price by 35% to calculate final selling price. 

post #24 of 26

You can think of pricing cakes this way: the costs plus the wages.

 

Wages means AT LEAST minimum wage.  

 

There is no reason to bake if you are not earning at least that much.  Better to just donate the cake ingredients and all.

post #25 of 26

Regardless of what it costs you to make a cake you can only charge what the market will bear.  But to do so, you have to find your target customer, and when you do, you should know your costs. But you should charge as much as you can. If you don't, you negatively effect the market price which hurts everyone.

 

With the new cottage food laws, lots of ladies baking cakes are undercharging. If they have hopes of one day owning a storefront, they are shooting themselves in the foot by driving prices down.

 

If you simply decide a wage per hour that you want to make and add your costs to that, you become a cake making service, not a cake business. A cake business considers what it costs to pay employees to make a cake and then make a profit on top of that.

 

Your target market is not people who want to pay $40 for a grocery store cake. Nor is it people who want to have a cake lady who makes awesome cakes for really cheap.  Nor is it a person who wants you to charge less because there will be lots of people at her party and, "surely it will drum up business for you".

 

 

post #26 of 26
Quote:
Originally Posted by howsweet View Post

 

If you simply decide a wage per hour that you want to make and add your costs to that, you become a cake making service, not a cake business. A cake business considers what it costs to pay employees to make a cake and then make a profit on top of that.

No, sorry.  If you are a one-employee company,  then you should be able to plug in the costs and the salary, and see if that comes out to less than your per serving prices.  I'm not saying that is the primary way to determine prices--but it is an important self-audit.   

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