How much should I charge for my cakes?
Cake pricing is often the most stressful decision a cake decorator has to make. The fear of losing customers by over-pricing or losing money by under-pricing is often a dilemma. But it doesn't have to be. Here are a few tips on the subject of how much should I charge for my cakes?
This is the most frequently asked question in the cake decorating world. If you visit a cake decorating group one of the most frequent questions you get is - how much would you charge for this novelty cake or what would the price of this wedding cake be?
The truth is that there is no right or wrong answer. Why? Cake pricing is not about a number. It is about everything from buying those ingredients to making and delivering the cake.
The price of cakes varies from one location to the other. Quick simply because the cost of butter is not the same everywhere, neither are taxi fares or individual wages. Not to mention a novice cake decorator will no experience won't get much business if she charged what a well-known cake decorator with 20 years of experience charged.
What should I include in my cake pricing?
Everything - yes, everything that you use for your cake and more. Here's just a simple guide to cake pricing.
Please note these prices are just estimates used for the purpose of an example they are not actual calculations.
|Price per cake||Price - $$||Estimated|
|Accents (gumpaste, lace etc.)||5.00|
|Accessories - (board, ribbons etc.)||5.00|
|Overhead (utilities - gas, oven etc)||5.00|
|Hourly wages $5 x 5 hours||25.00|
|Delivery charges (taxi or gas)||5.00|
|Total||65.00||24 - servings|
|Profit - mark-up (+ $50)||115.00||$4.6 per slice|
|Profit x 3||195||$ 8 per slice|
|Profit - 30% ($19.00)||84||$3.5 per slice|
Now, we spoke about the 4 main business expenses in our earlier post - how to price your cakes,
It really is very difficult to over-price cakes unless you are a celebratory cake artist with a brand name people are willing to pay for. Most of us end up making just a little more than what we spend. But, it doesn't have to be like that.
One of the reasons we don't charge as much as we should is that we are afraid to value our own work and we're afraid people will not value it as well. But, in reality, there are many people who are willing to pay a few extra dollars for good work, good quality, and good cake designs.
Am I charging too much for my cakes?
Now that you've seen the above table do you think you are over-pricing your cakes? The answer is hardly ever yes. The most common problem is that cake-decorators are under-charging their cakes. Take a look at the above table and compare that to your 8-inch/ 24 serving s cake. Is it more or less? Is that what you want to earn? How much more should you earn?
Personally, I charge about $7 per slice and my prices are 20% more than local cake decorators in my area.
Can I just price my cakes with the cost of ingredients times 2 or 3
This method will only work if you have done your cost structure properly. This method often leads to under-pricing because people forget to include things in the costing. The price of the cake is not just the cost of ingredients but labor as well as other minor additions as you can see in the table above.
Should I charge per serving or per cake?
This will depend on the location. In most places charging per serving is the standard. There are also places where cakes are sold by weight like in India.
When it comes to charging by servings it will also depend on the size of the servings. There are two known standards in the industry Wilton and Earlene. Earlene's cake servings are slightly larger. So it is important to make sure you specify cake size in your pricing chart. You can see my cake servings chart guide
Do I charge less for birthday cakes and more for wedding cakes?
Personally, I think all the cake should be at the same price. A standard cake is 2 layers with a minimum of 4-inch tall cake.
However, I do recommend my wedding cake customers to go for taller tiers in wedding cakes as they look more esthetic. So instead of 2 layers, I'd recommend 3 layers of cake with a minimum height of 6 inches. That's when I charge more for wedding cakes. But, it's an option, not a standard.
How do I decide how much to charge for my wages?
This actually depends on your expertise, skills, and experience. We spoke more about this here - How to price my cakes.
Can I just use the local bakery prices?
Local bakeries often charge very low or very high depending on what their business model is. Some sell by the quantity which means they price lower so they can sell more. Then there are others that make only a few cakes which are prices more so they sell fewer cakes at a premium.
Why are bakery prices so high?
Local bakeries charge what they need to keep their business successful and make a profit. They need to pay rent, utilities, employee salary etc. Depending on what their business model is you will find they either charge too much for somethings and very little for others.
Can I lower prices and sell for cheap?
Not unless you want to be the cheap cake lady. Unde-pricing your cakes may get you more orders for a while but it will also give you a reputation for cheap cakes. Cheap cakes are often associated with lower quality as well.
So, while you don't want to price your cakes too high, it is also important to not price your cakes too low. Remember every industry has a set standard of prices. You can call your local cake shops and cake decorators to see what's the standard is in your location. Charging anything lower than that would bring down the industry-standard as well.
How do I compete with Wal-Mart prices?
Wal-Mart is not your competition. Places like Wal-Mart, Costco, Sam's Club or grocery stores don't sell fresh cakes. Their cakes are made at one location then shipped throughout the country which means often the cakes are made months in advance and flash-frozen. These cakes are often loaded with preservatives to keep them fresh for long. These cakes are not custom made but generic cakes that work for every celebration.
You, on the other hand, are a custom cake decorator. You make fresh cakes with fresh ingredients. You take the time to design and decorator the cake especially for the customer with his event in mind. So, you see Wal-Mart is not your competition and you should very compare your prices or your business to Wal-mart.
My customers complain that I charge too much for my cakes.
This is actually a good complaint to have. The truth is that there will always be people who will complain about the price. If your cakes were 20% lower or 20% higher than this you would still have those customers who complain that your cakes are over-priced.
What it actually means is that you need to target the right customers. Customers who are willing to pay for your cakes. So instead of looking at your prices look at your marketing. Target the right customer - see my post how to market and advertise your cakes
If I over-price my cakes I will lose customers?
And, that's ok too! Yes, not everyone is your customer. There will always be people who cannot afford your cake and that's ok.
For example, not everyone can afford a Lexus some of us have to buy cars that are within our budget. Same with your cakes, people who want cheaper cakes are probably not your customers. But, often with the right advertising and marketing, these can be turned into repeated customers.
Most people like cheap cakes from places like Wal-Mart.
That is actually not true, just a myth. You will be surprised how many people would rather spend a few extra dollars on a good quality cake. Also, there many people that value a beautifully decorated cake and they are willing to pay for these cakes.
I can charge less and make more cakes?
This is often a business model used by large grocery chains where they make more cakes, and sell them at low prices. This model works on quantity rather than quality. If you are a small business it is very hard to keep up with this model as you will eventually burn out making large volumes for less. See my post - how many cake orders can I take?
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