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Absolutely OUTSTANDING article that everyone needs to read ! Well Done AZ.
{of course Costumeczar wrote about this on her website recently, so she's ahead of the power curve in business matters)
Why, thank you, thank you very much. I think that people are tired of pretending that there's enough business for everyone (there isn't) and I happened to hit on it in that blog post. There are also too many people who think that because cakes are cute they should always be fun to do. @snarkybaker has used the term "jobbyist" to indicate someone who thinks that a job should be as fun as a hobby, among other things, and that just isn't realistic. That's why I think you need to pay more attention to the business side of it than to the cake side if you're going to end up with a profit at the end of the year. Here's a link to my article, and there's nary a unicorn to be seen in it... http://www.acaketorememberva.blogspot.com/2014/07/a-passion-for-cakes-can-be-detrimental.html
Fantastic article - no amount of sunshine, love, passion or rainbows can replace a business plan.
Exactly!
Nancy- once you actually do write up a good business plan (don't sugar coat it either, based on it real facts/figures), I think you'll soon realize that you are not going to be picking out the new 6 Series as a cake decorator, you know?! Their salaries are not high by any means. I'm sure as a teacher you're earning much more. So take that into account before you switch over a lower earning profession and give up the one that is paying you a living wage. Can you adjust and survive on limited funds (from the salary of being a cake decorator)?
AMeh, I made about $170,000 in profit after all was said and done last year, so you can make a completely decent living if you're willing to work like a professional.
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Okey doke. A statement like that and hordes more newbies naively hit the Me Too! button.
Knowing Snarky, I know how much aggravation and hard work went into that figure, so I wouldn't trade places with her! But I'll add that she's also VERY smart about the business side of a business and doesn't spend a lot of time with the rainbows and unicorns.
AFromScratchSF, love that link you posted about restaurants. After working 7 years for my son in his restaurant, everything in the article rings a bell! He and his family are enjoying a NORMAL life now that he closed it 3 months ago. It's amazing to me how many people don't' know how to use a toliet on America! You think owning your own business gives you more free time....NOT! While others enjoy holidays and birthdays going out to dinner, you can't , and every birthday is celebrated at your restaurant! And the best part, as the article pointed out, is that every customer thinks they know how to run your business. Oh, I can go on and on. Thanks for posting that.
AI have owned my own business in addition to teaching. I know it took every spyware second I had, and is not easy at all. But my school is in an area that pays poorly, and my pension will be just about 10k. I've been teaching English for over 25 years, though, and I will be done at 55. I can't bring home stacks of papers into my 60s. So so need a second career. It may not be this, I don't know, but I do,like making and decorating cakes. It does fulfill my creative urges!
FromScratchSF, love that link you posted about restaurants. After working 7 years for my son in his restaurant, everything in the article rings a bell! He and his family are enjoying a NORMAL life now that he closed it 3 months ago. It's amazing to me how many people don't' know how to use a toliet on America! You think owning your own business gives you more free time....NOT! While others enjoy holidays and birthdays going out to dinner, you can't , and every birthday is celebrated at your restaurant!
And the best part, as the article pointed out, is that every customer thinks they know how to run your business. Oh, I can go on and on. Thanks for posting that.
seriously--not to mention the idiots (some men) who not only can't hit the target but come in to use it while you're cleaning -- i don't think so -- zip it up, zippie -- omg --
i like this part of that article,-- the blue parts are my emphasis
"I have learned to keep your fears to yourself and to only share your courage. Opening a restaurant is easy. Keeping it going is hard.
Only open a restaurant if you're ready to give up all personal time, personal space, and personal sanity. Be ready to start calling out orders and names in your sleep. It is hard for me to give anyone a reason not to pursue their own dream. If you don't have a dream, you don't have much.
At the end of the day, there is only one type of success, and that is to be able to live your life your own way on your own terms. One cannot think in terms of the monetary. One must think in terms of the pursuit of happiness."
Here is an excellent example of what does "NOT" qualify as professional. Poor woman bought a birthday cake cake from a little jobbyist on Facebook.
https://www.facebook.com/cakes.infinity?fref=ts
The cake had NOTHING in the way of supports, and needless to say collapsed. The party venue told her to call us. She brought it in and we pretty much rebuilt it from scratch for the bargain price of $250. We documented what we did with pictures so she could go back to the original buyer and get her money back, or at least the portion she had to pay us. The baker refused.
Being a real professional is an actual job. Most of the the time it's not fun. It's marketing and taxes and insurance and working 'til 4AM because somebody called in sick.
I almost never spend any time on CC, haven't in years, because I have a big time serious JOB. 3,000-ish cakes a year plus 200,00 ish thousand cupcakes, blah blah blah. If you want emotional support, this might be useful, but if you're serious about making money at this, I would suggest you log off this site and go take a marketing class, or an accounting class. There are an awful lot of people around here who talk a good game, but those who can bake, this who can't jibber jabber a lot on the internet.
Here is an excellent example of what does "NOT" qualify as professional. Poor woman bought a birthday cake cake from a little jobbyist on Facebook.
https://www.facebook.com/cakes.infinity?fref=ts
The cake had NOTHING in the way of supports, and needless to say collapsed. The party venue told her to call us. She brought it in and we pretty much rebuilt it from scratch for the bargain price of $250. We documented what we did with pictures so she could go back to the original buyer and get her money back, or at least the portion she had to pay us. The baker refused.
Being a real professional is an actual job. Most of the the time it's not fun. It's marketing and taxes and insurance and working 'til 4AM because somebody called in sick.
I almost never spend any time on CC, haven't in years, because I have a big time serious JOB. 3,000-ish cakes a year plus 200,00 ish thousand cupcakes, blah blah blah. If you want emotional support, this might be useful, but if you're serious about making money at this, I would suggest you log off this site and go take a marketing class, or an accounting class. There are an awful lot of people around here who talk a good game, but those who can bake, this who can't jibber jabber a lot on the internet.
I dont know how many of the members run a successful business yet have time to. as you said, jibber jabber on the internet 
A[QUOTE]Meh, I made about $170,000 in profit after all was said and done last year, so you can make a completely decent living if you're willing to work like a professional [/QUOTE]
Wow! That's great! How long have you been in business?
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FromScratchSF, love that link you posted about restaurants. After working 7 years for my son in his restaurant, everything in the article rings a bell! He and his family are enjoying a NORMAL life now that he closed it 3 months ago. It's amazing to me how many people don't' know how to use a toliet on America! You think owning your own business gives you more free time....NOT! While others enjoy holidays and birthdays going out to dinner, you can't , and every birthday is celebrated at your restaurant!
And the best part, as the article pointed out, is that every customer thinks they know how to run your business. Oh, I can go on and on. Thanks for posting that.
If you liked that one, you'll LOVE this...
http://www.thrillist.com/eat/nation/understanding-cooks-best-kitchen-advice?ref=facebook-868
This one actually had me laughing out loud because all those photos could have been taken at my commercial kitchen, especially the photo of the jacked up broom that's melted from the heat and the dude eating a tiny portion of something over the trash can. I never realized that yeah, most of the people cooking your food are, well, colorful individuals, until I started working in a commercial kitchen.
And also, I now go completely blank when I need to make just 12 cupcakes or just a 6" cake. My brain completely fizzles and short circuits. I'm making so much product I'm buying 100 lbs of butter at a time. Someone came over to my house just yesterday, opened the fridge to get a beer and he's like, uh, that's a lot of butter. I'm like, it is? (looking at 8 x 1lb blocks). You mean not everyone has 8-10 pounds of butter, lots of condiments, and no actual food in their fridge at all time? Hahahaha
OT, sorry.
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Being a real professional is an actual job. Most of the the time it's not fun. It's marketing and taxes and insurance and working 'til 4AM because somebody called in sick.
I almost never spend any time on CC, haven't in years, because I have a big time serious JOB. 3,000-ish cakes a year plus 200,00 ish thousand cupcakes, blah blah blah. If you want emotional support, this might be useful, but if you're serious about making money at this, I would suggest you log off this site and go take a marketing class, or an accounting class. There are an awful lot of people around here who talk a good game, but those who can bake, this who can't jibber jabber a lot on the internet.
Agree 100%
Also want to add logistics classes, once your business gets rolling - Custom cake work is all about the bits and pieces: how much materials you need to have on hand, where do you buy from, how do you store your items... There's ingredients, boxes, decorations, building materials, hard stock (pans, spatulas), flex stock (icing colors, boxes), consumables (flour, sugar). Lead times on special orders for things you use once a year, production times to a finished product...
Basically, it's all the down and dirty business details they don't show on TV, because it spoils the fun and fantasy.
The more intimately you know these details, the easier it is to know what you can do, what you can't do, what's profitable, and what's a waste of time.
@snarkybaker, It sounds like you have more than one shop. Do you sell just cakes and cupcakes or do you sell other stuff (food? drink?) too? I'm glad you are so successful. I can tell you work really hard.
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Okey doke. A statement like that and hordes more newbies naively hit the Me Too! button.
OK so lets fix that and talk about something that we never talk about. Profit margin. Average profit margin on a successful food sales business is 20-30%. This is a VERY general number based on many, MANY factors, but for the sake of Fischer Pricing this for the average Jane that wants to start selling cake from home and thinking it will pay retirement or make a living off it, lets just use the very general industry average and split the difference - 25%.
Sales - expenses = profit.
Using Snarky as a general example, I by no means have ANY idea of her financial picture... if she has a profit of $170,000, that means her store(s) did at least $212,500 in sales per year. I suspect that if she has several stores and employees, that margin is much higher because she isn't growing anymore, she's established and probably topped out at 30-40%. That is doing extremely well. When you start, your profit margin on average negative 20%, and it takes on average 5 years to grow to being 20-30%.
If you are selling cake at $3/serving (or cupcakes at $3/each), that means you need to make around 70,834 servings of cake/cupcakes per year to make $170,000 in profit - your take home. That's 3,270 servings of cake/cupcakes per week.
Say you'll be happy with $40,000 in profit. That means you need to do at least $50,000 in sales. That's 16,667 servings of cake/cupcakes per year to make $40,000 in profit. That's at least 321 servings of cake/cupcakes per week, trying to work 40 hours per week, paying yourself around $20/hour.
Obviously the number of servings/cupcakes you need to sell is different for everyone based on cost of living. With all the new bakers coming in with all the CFLs, there is NOT enough business to go around. I have changed my view on CFLs a lot lately because the chances of running a successful food business is already very, very low. The lowest chance of being successful in just about any sector of business. I can't wait to see how much lower that number is going to drop now. I'm not an economist, but I think you have a 10% chance at success (if I remember correctly). I predict that number will drop to 2% or less now that anyone with a mixing bowl and an oven can start selling food.
Last point - making food in this quantity consistently is HARD on your body. HARD. I jumped into physical labor (making cake/dessert for a living) at 33. I went from being in excellent shape-gym rat-social butterfly-super fashionable gal to breaking my back, scars up and down my arms, callouses on my knees, tennis elbow, cracked dry hands that I can't seem to heal, varicose veins, and overall general exhaustion that I have never in my life experienced sitting on my butt all day behind a desk. I'm only 39.
Sorry, more dream killing. :(
Originally Posted by FromScratchSF
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OK so lets fix that and talk about something that we never talk about. Profit margin. Average profit margin on a successful food sales business is 20-30%. This is a VERY general number based on many, MANY factors, but for the sake of Fischer Pricing this for the average Jane that wants to start selling cake from home and thinking it will pay retirement or make a living off it, lets just use the very general industry average and split the difference - 25%.
Sales - expenses = profit.
Using Snarky as a general example, I by no means have ANY idea of her financial picture... if she has a profit of $170,000, that means her store(s) did at least $212,500 in sales per year. I suspect that if she has several stores and employees, that margin is much higher because she isn't growing anymore, she's established and probably topped out at 30-40%. That is doing extremely well. When you start, your profit margin on average negative 20%, and it takes on average 5 years to grow to being 20-30%.
If you are selling cake at $3/serving (or cupcakes at $3/each), that means you need to make around 70,834 servings of cake/cupcakes per year to make $170,000 in profit - your take home. That's 3,270 servings of cake/cupcakes per week.
Say you'll be happy with $40,000 in profit. That means you need to do at least $50,000 in sales. That's 16,667 servings of cake/cupcakes per year to make $40,000 in profit. That's at least 321 servings of cake/cupcakes per week, trying to work 40 hours per week, paying yourself around $20/hour.
Obviously the number of servings/cupcakes you need to sell is different for everyone based on cost of living. With all the new bakers coming in with all the CFLs, there is NOT enough business to go around. I have changed my view on CFLs a lot lately because the chances of running a successful food business is already very, very low. The lowest chance of being successful in just about any sector of business. I can't wait to see how much lower that number is going to drop now. I'm not an economist, but I think you have a 10% chance at success (if I remember correctly). I predict that number will drop to 2% or less now that anyone with a mixing bowl and an oven can start selling food.
Last point - making food in this quantity consistently is HARD on your body. HARD. I jumped into physical labor (making cake/dessert for a living) at 33. I went from being in excellent shape-gym rat-social butterfly-super fashionable gal to breaking my back, scars up and down my arms, callouses on my knees, tennis elbow, cracked dry hands that I can't seem to heal, varicose veins, and overall general exhaustion that I have never in my life experienced sitting on my butt all day behind a desk. I'm only 39.
Sorry, more dream killing. :(
$680,000 in sales to make $170,000 profit and $160,000 to yield $40,000 if it's 25% profit margin no?
Did i mess up my math? I was in a hurry to try and get my point across.
Snarkybaker, you're back! We were discussing once your recipe for champagne cake in these forums. I keep telling myself that next time I'm in Raleigh, NC, I'll stop by Sugarland bakery. Everything looks so delicious on your site!
AOT, sorry. [/quote]
Original message sent by FromScratchSF
Did i mess up my math? I was in a hurry to try and get my point across.
I think it was wrong, too, but you made it more happy than it really is! To make $100,000 profit at a 25% profit margin you'd have to make $400,000 gross, which is even less sunshiney than you were saying.
25% of 170,000 is $42,500, which would represent expenses, so gross sales would be $212,500, less expenses of $42,500 = $170,000. Right? That's 25% profit margin. You make 25% more in profit then your break even point.
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Fine tuning the math can reap a more accurate figure but your point is clear. Very clear. If someone doesn't understand it or thinks they can slide by anyway, then they deserve what you have demonstrated.
When snarkybaker posted her yearly income I was concerned that people would take that at face value. Thank you Jen, for your post.
Hahaha this is why my sister does all my books! OK, please keep me away from the calculators, just use this...
http://www.bankrate.com/calculators/business/gross-ratio.aspx
Plug in some numbers to give you an idea what you need to be doing in order to survive doing this.
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25% of 170,000 is $42,500, which would represent expenses, so gross sales would be $212,500, less expenses of $42,500 = $170,000. Right? That's 25% profit margin. You make 25% more in profit then your break even point.
i getcha but you're taking a fraction of your net rather than the gross--see what i mean?
170,000 x 4 = $680,000 -- so there's 3 parts over head and 1 part for profit
You can make all the snarky remarks about unicorns, rainbows, sunshine and flowers that you want to, it still will not detour people from wanting to own their own business. Having a multi-billion dollar industry including the CFL's telling them that they can has way more influence in their decision than my telling them to follow their dreams does.
Snarkybaker followed hers and with hard work and determination she was able to achieve it. Will it happen to everyone? Probably not but who's to say? People come to this site thinking their questions will be answered by professionals. I know she is pretty busy but I wish she could offer more advice on CC. I know a lot of members would love to hear more about the day to day operations of running a successful business like the post up thread with the pic.
Information like that would be invaluable to some bakers and cake designers that are on the fence about opening up a business. Information from some one who talks the talk and walks the walk so to speak. I mean there's a way to answer someone realistically with facts and honesty, there's not need to punch them in the gut. And more times than not, the answers some members post are over kill. I've heard some members say "yeah, it stung but I needed that", really, okay, you like brutal honesty, I get that but not everybody does. You can say I sugar coat the facts when posting, I thought I was treating people the way I wanted be treated. And I thought that was called respect.
I also thought that the business section on here was to ask questions and get answers about businesses, like how to start one, steps to take, how to promote and maintain, etc. Excuse me, I didn't know that you have to have a business to be able to post here.
And please don't say that I'm angry and trying to start an argument because I'm not (
). I'm just offering my opinion.
OK, come on!!! My cakes look nothing like the wrecks on cake wrecks! And I use all sorts of support. :)
Nancy
AI don't see anyone complaining about how this thread is going. So why are you? Why are you, yet [B]again[/B], instigating trouble? This is a perfectly good thread with adult conversations. What is so wrong with what is being said? My goodness, Nancy is even having a laugh!
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Yes. K8 has it correct.
Business or accounting classes might be warranted if you aren't familiar with how to figure the profit margin on a business you are involved in.
Liz
The problem with only offering rainbows and puppy kisses is that it doesn't show the reality of WORK. Not everyone can make it in business, does that mean they shouldn't cake - nope. Does that mean they shouldn't try - nope. But patting them on the head and telling them to go for their dreams does them no more good than the "brutal" gut punch remarks. Business isn't easy, especially a business that includes perishable goods and a revolving inventory. Entering into business before you have any sort of business plan is a bit like offering to perform surgery before going to medical school. It doesn't apply to hobbies or cakes for your kids, business is not for everyone and shouldn't be taken for granted that anyone can be successful without a proper plan or preparations. It's more "brutal" to tell someone to jump into debt and 80+ hour work weeks before they're ready than to tell them - ya ain't ready girl. 7 cakes in your gallery and you think you're frustrated now, you admitted you don't have a plan and have had a failed business before because of no plan - there's way more frustrations coming. A lot of pros don't post because their sick of the drama that comes with this site. Anything other than a big ole fat thumbs up is attacked and made into drama. Waiting for the {hugs} now...
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