Pricing cakes for profit! I understand what it is like not to have a profitable pricing method in place for you cake business. For 5 years of running my cake business that was me. I got it right for some of my products but got it majorly wrong for the majority of the cakes I was selling. I was getting fed up, disheartened and beginning to hate cakes!
I was sick and tired of creating cakes for 50p an hour, however the thought of all the numbers and calculations left me in a cold sweat! I felt like I was in a catch 22 situation.
But if I wanted to be profitable and have a successful cake business then the numbers game was just something I would have to master.
Pricing Cakes: The 7 Step Cake Pricing Formula
It took me a while, a lot of trial and error but I created the 7 Step Cake Pricing Formula and wow it completely transformed my business. For the first time in my cake business life, I was creating a profit, making a wage and beginning to succeed at the business game.
This wasn’t just a one time only thing that I created and then forgot about. I use it in my cake business for every single cake that my bakery creates and I teach it in detail to my mentoring students.
Now I want to share it with you to help you and your cake business.
Helping you creating a profitable business from selling cakes.
So what is the formula, well first let’s take a look at the categories that the formula is made up of:
- Ingredient Costs
- Sundry Costs
- Utility Costs
- Total Cake Price
Ok, now time to pop it into a formula:
The 7 Step Make Money With Cakes Pricing Formula:
Mindset + (Labour + Ingredients Costs + Sundry Costs + Utility Costs) x Profit = Total Cake Price
Step 1: Mindset
Let’s start with your mindset. How you think about pricing, how you think about money, how you value your time and more. Now you may think it sounds a bit ‘woo woo’ and to be honest it can be. But I am strong believer of mindset, the law of attraction (yes, for those of you in the know I totally love The Secret!) and how it can be totally transformational. Mindset is a HUGE, HUGE, HUGE topic and if it is new to you, start slowly. I recommend looking on YouTube for free content and then going from there.
Step 2: Labour
Labour is often a part that cake makers forget about when pricing cakes. That sounds ridiculous but when you enjoy the cake making process it doesn’t feel like work. Which is fantastic. But not sustainable if you are not charging for it. Especially if you are thinking about making your cake business your only income. So how to charge. Jot down an hourly rate that you would love to charge. Then add 20%. How does this make you feel? Excited? Nervous?
Now that you have your hourly rate, start recording EVERYTHING that you should be charging for. Pop it onto a spreadsheet or clearly write it on a piece of paper. Make a note of mixing time, the baking, the cooling, the decorating to the shopping, cleaning, delivering, admin and more for every single cake you create. This is so important as you need to see what really goes into each cake you create.
Step 3: Ingredients Costs
This step most cake makers do include which is lovely. It can be fairly time consuming to implement, especially if you have lots of different recipes. But once this part is done you will just need to keep a check on any price fluctuations and change accordingly.
Step 4: Sundry Costs
The sundry costs are all the items you use that aren’t ingredients so cake boards, boxes, ribbons, dowels, etc. I recommend shopping around for the best prices that you can find. This is simple to pricing the Ingredients Costs.
Step 5: Utility Costs
Utility costs are vital costs and something that you need to pay in order to create each of cakes. This is why I pop it into the pricing cakes formula. It can be a little harder to calculate but go find your utility bills (gas, water, electric), tot up the total yearly cost then work out the daily or hourly costs.
Day Costs = Yearly total divided by 365 days
Hourly Costs = Yearly total divided by 8760 hours in a year
Step 6: Profit
My favourite part and one that a lot of cake makers miss out. The simple truth is, if you want to grow your cake business then you need profit. Profit is the money you can put back into your business and is not to be confused with your wages/drawings.
Follow steps 1 -5 and your business will gave you a wage and cover costs. Add this step and your business will flourish.
Profit will allow you to invest in that cake shop you have always wanted, buy new tools, hire a bookkeeper, use paid for marketing to market your business, improve your kitchen, etc. The profit margin you wish to add is up to you. However, I recommend aiming for somewhere between 30%-60%. But you can start small, one step at a time. A 1% profit margin is but better than no profit margin.
Step 7: The Total Price
Now it is the fun part of pricing cakes, time to calculate steps 2 to 6.
Add together Step 2: Labour, Step: 3 Ingredients Costs, Step: 4 Sundry Costs and Step 5: Utility Costs. Then multiply it by your Step 6: Profit and this will leave you with Step 7: The Total Cake Price.
- Step 2: Labour – £15 x 5 hours = £75.00
- Step 3: Ingredients Costs = £37.00
- Step 4: Sundry Costs = £6.00
- Step 5: Utility Costs = £4.00
- Step 6: Profit x 30%
- Calculations: (£75 + £37 + £6 + £4) x 30%
- Step 7: The Total Cake Price = £158.60.
Now it is your turn to take what you have just read and apply it your cake business, start pricing your cakes for success today. If you prefer to watch this method in a video then check out my free Cake Pricing Masterclass. If you have a question, then join our friendly Private Make Money With Cakes Facebook Group and ask away.
Good luck and if you need extra help and support please do get in touch to see how I could help you with personal cake business help through one-to-one mentoring.