Pricing is by far the number one struggle that us cake business owners face. But why! Shouldn’t it be simple. Other businesses don’t seem to have this battle. We are all in this together so I have compiled the top ten reasons I hear all the time. Let me know if you identify with any of them… or can think of any more!
Top 10 reasons:
• We are passionate about creating cakes and are not necessarily in it for the money – at the beginning.
• We fail to realise it is a business – yes you own a proper business and all that comes with it, think taxes, insurance, utility bills, phone bills etc.
• We forget we need to pay ourselves for our time.
• We benchmark our prices on other cake makers and don’t take into account each business has a different set of operating costs.
• We think everyone can make a cake so why would our customers pay us a premium – it’s only a few ingredients after all.
• We don’t value our expertise and creative talents.
• You don’t know your break even point.
• We look at supermarket cakes and benchmark the prices – this is even worse than benchmarking other cake makers!
• We don’t think about a profit percentage – if you want your business to grow adding this element is vital.
• We feel guilty or embarrassed for charging a high price when it is something we love to do.
The Pricing struggle is all too common
Sadly the reasons above are all too common within our cake industry. But the good news is that you can work towards reducing and then eliminating the reasons on that list. And the secret is to create a solid pricing structure. I know this from past experience in my own cake business journey. When you’re not sure about your cake pricing it can lead you to either resenting your business or worse closing it down.
My pricing story
When I started my cake business I had a solid pricing structure. I started in cupcakes and had worked out a price point that allowed for operating costs including taxes, bills, profit and a wage. The trouble came when I diversified into other types of cakes and didn’t properly work out my prices. I bench marked other cake makers and hadn’t factored that my operating costs would be different. From the moment I diversified I was unintentionally creating an unsustainable business. In the end after a horrendous period in my business life I had to make a decision to either drastically change or close. As much as I was resenting my business at that time I chose to give it one last push and that was the best decision I made.
I change my strategy and spent weeks creating a pricing structure that was solid and would bring me in a profit. I research what my target market would pay for cakes, looked at my break even point, looked at what I wanted to earn, looked at what I needed to bring in for running costs and much more. I set about creating spreadsheet after spreadsheet. That was the turning point for creating a solid pricing structure and moving my business forward.
Create your solid pricing structure
I urge you to go and create a solid pricing structure for your business. So that you too can eliminate those top ten reasons above. When creating your pricing structure remember to look at how long it takes to make each cake, the ingredient costs involved, the operating costs and always remember to add a profit percentage. This can take time but schedule a couple of hours to really focus on it. Then implement it and watch as your business begin to thrive. Just think no more working for 50p per hour!
Let me know how you get on.