CAKE PRICING: MY PRACTICAL ULTIMATE GUIDE
How much do I charge? What's Cake Pricing? What's my Cake or Treats Worth? How much profit am I making? Is this business actually profitable?
Cake Pricing are predicaments that we face in our cake business from time to time. The ‘how much do I charge?’ question is something that will forever be asked in cake groups.
Hi Adventurous Bakers! One thing I want you to understand is there’s absolutely no one in this business who hasn’t faced this dilemma (cake pricing). It’s not a ‘novice‘ thing. Irrespective of your expertise and years in the baking and event industry, this is a question you will get to ask either publicly in cake groups, or from your mentor, or from your colleague.
So how do we tackle this plague (cake pricing) that has become a tradition? A lot has been said about it. Courses have been paid for it. Articles have been written about it. Still yet the question still lingers. The truth is, many of us are guilty of learning and not practising. We read something intriguing somewhere and store it in the cloud either electronically or via other means. Some of us even go ahead to write it down.
It is not about how many times this topic (cake pricing) has been treated. It is now about YOU ready to put it to practice. If you’re not ready, then don’t bother wasting your time to read through. If you’re however READY to stand out from the crowd, the next paragraph is for YOU.
MY ULTIMATE GUIDE TO PRICING YOUR CAKES AND TREATS
The formula is simple and I will break it down soon so everyone will understand cake pricing: Cost of Ingredients + Labour cost(estimated time spent) + Indirect cost + Profit = Actual Price
For a simpler formula : CI + LC + IC + P = AP
COST OF INGREDIENTS (CI) :
This is the real cost of any item that goes into your cake or treats even the ones you have at-home already and the ones you DIY (that is you make yourself). No matter how small it is, add the cost. DON’T ASSUME. I will teach you how to get the accurate cost for even the smallest weight of an item.
I recently bought Silvercrown Baking Powder. The weight is 454g and it was sold at ₦900. Let’s assume I want to make a regular sponge cake in 8 inches round pan; covered with basic buttercream decoration; and for it I’m using 500g of batter and also 4tsp of baking powder.
First I want to convert my baking powder from teaspoons to gram. So 1 tsp = 5 gram (You can do this by measuring and leveling a tsp of baking powder and weighting it to get the exact weight. Then you write it down in a book for next time. I have a book I keep for expenses. You can do that too). Hence 4tsp is 20g (5g × 4tsp). Let’s go to a working image.
This ₦39.6 is the unit cost of baking powder per 500g of our assumed 8inches round cake batter.
You are going to write out all materials used in making this 8inches sponge cake and include the ones you used in decorating (whether the decoration is in buttercream or whipcream or in fondant) and calculate it like the assumptions I did for baking powder.
Once you have ascertained all costs per unit of ingredients, you add them all together and keep aside as TOTAL COST OF INGREDIENTS.
LABOUR COST (LC) :
This one works in two ways. If you’re a novice and working on a particular cake project, you can ‘assume‘ a time frame for yourself. That is you can assume you will start and finish that cake project let’s say in 5 hours. (Or for a start, get a stop watch once you’re ready to start, and start timing yourself. Once you’re through working, check the total time).
Once you have stipulated the time, then move over to place a payment for each hour you spend. This is totally up to you. You can charge yourself ₦700 per hour or more.
On the other hand, if you have been working on cake projects for a while, then you will know by now the estimated time frame you use from start to finish.
So let’s go back to our novice. Formula for LABOUR COST = Time Frame × Amount per hour.
Here it will be : 5 × ₦700 = ₦3,500. Your Labour Cost would be ₦3,500 (keep this total for later).
INDIRECT COST (IC) :
These are all indirect expenses incurred over a particular period of time by your business. Let’s assume you open your cake studio or shop or outlet 5 times in a week, you have staff members, you pay rent, you pay tax, you pay utility bills, your cake tools, transportation, sponsored AD, social media manager fee, data, fuel for generator, items used for packaging your cakes/treats, etc are all expenses under indirect cost. Now we are going to get the estimate per month and per week. So I will give estimated amount for these expenses.
Rent : ₦150,000 ; Electricity : ₦10,000 ; Fuel : ₦3,000; Tax : ₦3,000; Cake tools : ₦10,000 ; Data : ₦3,000; Transportation : ₦2,000; Social Media Manager Fee: ₦20,000; Sponsored AD: ₦10,000; Staff : ₦30,000. First we will add all the Indirect cost estimated here together and write out the total: ₦241,000 .
We have 12 months in the year; You open 5 times in a week; and let’s assume you sell 7 cakes per week. Let’s proceed to our working picture.
From our calculations, we have seen that our INDIRECT COST per unit (per cake) is ₦574 . Keep this too for later. This calculations isn’t just for cakes. It can also be used for your smallchops, pastries/snacks , dessert, food platters, etc. Make adjustment where necessary. Just remember that the rule is to first DETERMINE to do it right and follow the simple formulas. Let’s go to profit.
PROFIT (P) :
Your profit is the total of your first three cost multiplied by 30%. What do I mean? Let’s assume we have calculated ALL our cost of ingredients both for baking and decorating as illustrated by the baking powder example I gave before, and the total cost for making my 8inches buttercream round cake is ₦7,000; Labour Cost (as calculated above) is ₦3,500; Indirect Cost (as calculated above) is ₦574; then profit formula :
Now we know our profit gained from an 8 inches round cake covered in buttercream is ₦3,322.
Yes we are finally there!
So what’s our actual cost of the cake? What should we charge for the cake? Cost of Ingredients + Labour cost + Indirect cost + Profit = Actual Price.
Let’s input the figures into the formula : ₦7,000 + ₦3,500 + ₦574 + ₦3,322 = ₦14,396
Your Actual Cost is ₦14,396. That is exactly the actual/original/real cost for the cake. Now you want to give your clients a rounded figure. You can now charge ₦15,000 for your 8inches round cake covered in buttercream.
Now I will write this down in my expense book. I will do the same for a size 10″ sponge cake in buttercream, and other sizes. I will also do this for other cake types, other cake frostings, and other shapes like squares.
This way I will have a basic actual price for my cakes and I will save myself the dilemma of undercharging for my cakes. This also applies to other treats.
So let me ask again, ARE YOU READY TO PAINSTAKINGLY DO YOUR CALCULATIONS WELL? ARE YOU READY TO CHANGE THE NARRATIVE OF YOUR BUSINESS THIS YEAR?
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