PRICING GUIDE FOR A CAKE BAKER

IT'S NOT A MUST TO FOLLOW HOOK LINE AND SINKER, GRAB THE RELEVANT PARTS THAT APPLIES TO YOU

Mindset + (Labour + Ingredients Costs+ Sundry Costs+ Utility Costs) x Profit = Total Cake Price

1.    Mindset

Gaining control of our mindset is the key to unlocking your pricing struggle. Your Mindset is often the first hurdle we bakers have to overcome. We are very good at letting our own personal fear control our pricing. We are fearful of having no customers, we are scared of pricing too high or too low, we think we are not good enough, and to make it all worse we are actually fearful of pricing correctly! So you need to get your mindset right before you move on to the next step.

2.    Labour

Labour often the undercharged part of the cake pricing formula. However, when you know you are being paid a decent wage/salary then you making a cake becomes more enjoyable. But if you aren’t getting any good wage, then it can be like a chore job and you will feel demotivated. You do not want to work for nothing. To help you gain a control on the labour aspect, make a note of what you honestly want your hourly rate to be. This can be anywhere from N500-N5,000 per hour. It all depends on you and what you think you are worth.

If you are just starting out, you may charge N500- N1,000 an hour, When you start getting better in your skill level, you can increase your hourly rate to maybe N1,500 or N3,000 an hour. But let me tell you something. No matter what, we always never know our worth, so that is why, I will say, whatever the hourly rate you decide, increase it by 20%. If you are still unsure or feel it is too high, then just keep the rate as it is without increasing it by 20%.

So now that you know your hourly rate. Next start to monitor how long each type of cake takes to create. Record everything, from the initial enquiry, shopping to the mixing, baking, cooling, cleaning, decorating, delivery, set up, etc. So if it takes you 5 hours to do a vanilla cake and your hourly rate is N1,000 an hour, then your labour wage/salary is N5,000.

As you do this will you start to build up a spread sheet of times you take for different size cakes

3.    Cost of Ingredients

I know this can be quite time consuming part. If you are making cupcakes or small individual cakes it is important to know the price of one so make sure you calculate every batch. So when you are shopping for ingredients, take note how much the eggs, flour, butter, margarine, etc costs. If you buy in bulk or a whole bucketful of margarine, you just need to calculate the unit cost. Let’s say you buy 500grams of flour at N1,000 and you only used 50g of flour, then the cost of that is N100. The formula is: N1000 /500g x50g

So use this formula for every ingredient you use. If this is too time consuming, then just come up with an estimate of how much your ingredients cost. And remember to cost out every single recipe and recipe variation you work with.

4.    Sundry Costs or Extra Costs

Similar to step 3 this is fairly simple to cost and again. Sundry costs are things like cake boards, boxes, ribbons, dowels, etc

5.    Utility Costs

I know calculating Utility costs are a little trickier to calculate as you have to look at your bills or think of an estimate or figure to cover your utility. If you get bills and want to be very accurate. Find your electricity bill or your meter, and water bill then calculate the total yearly costs. You can then calculate your daily or hourly costs.

Daily Costs = Yearly total bill divided by 365 days

Hourly Costs = Yearly total bill divided by 8760 hours in a year.

This is how you can calculate the utility costs per day or per hour (whichever you prefer). But how many of us have time for this, again if this is too much trouble, just come up with an estimate amount.

6.    Profit

If you want to grow your business this is the most important part. So far if you follow the process until this step you will be paying yourself a wage, covering your costs and not losing money. If you add this part this is where you will see your business grow. The profit will allow your business to grow without you sacrificing your wage.

The profit is money that you can invest back into your business. So that you can afford that shop you want, buy new cake equipment, create a website, buy flyers, generally market your business, and outsource your bookkeeping, admin, etc. Do not overlook this step. How much profit you add to your cake pricing formula is your choice. But aim for at least somewhere between 20%-60% profit.

7.    The Total Price

The final step is calculating steps 2-6

(Labour + Cost of Ingredients + Sundry Costs + Utility Costs) x Profit = Total Cake Price

Practical Example,

Bose of Bose Cakes and Bakes has an order for a 10 inch fondant vanilla birthday cake with small piping detail and a few fondant roses on an iced cake board and packaged in a box.

Bose starts calculating:

Labour–N1,000 x 5 hours = N5000

Ingredients Costs = N2000

Sundry Costs = N600

Utility Costs = N450

Profit x 30%

The Formula (N5000+ N2000+ N600+ N450) x 30% = N10,465

Therefore, the total price Bose will quote to the customer is N10,465.

So this is the 7 step simple formula I recommend you use to price your cakes. Once you have mastered this Formula, you can tweak it from time to time. Look at where you can save costs, think about increasing your profit percentage or your hourly rate and make sure to revisit your pricing structure every year or so to account for inflation. Remember your prices are not set in stone and this formula will grow as your business grows. If you find that your price is already higher than the market value you need to reduce your costs, find a new market, or both. However, please do not try to price your products below market value.