Facing Inflation: Adjusting Your Cake Business

By Cydni N. Mitchell

You would literally have to be under a rock not to have noticed the rising cost in, well, everything! Gas, butter, eggs—you name it and it’s probably gone through a severe price increase over the last 24 months or it’s about to increase in the next six months. In thinking through the tips I was going to share in this post, I came across an article titled “Menu Price Inflation Hit a New 40-Year High in March.” Wow, that’s saying a lot. As much as we might see a bit of a break as the world finds its new post-pandemic normal, it’s doubtful that we will see huge shifts back in the other direction anytime soon.

With all of that said, I am not one to bring up issues without some sort of resolution. So, I’m sharing my thoughts on changes you can make to your business today or in the next few months to help manage the impact rising costs might have on your business.

Plan for Pricing Adjustments

Although I don’t recommend changing your pricing every time the price of eggs goes up a few pennies, I do recommend that you make your life easier by creating a system to easily track your costs so that you can adjust your prices when necessary. Using an Excel spreadsheet or a bakery costing software will come in handy as the cost of ingredients continue to change.

Make it a point to analyze your costs quarterly to ensure that your pricing is still structured in a way that allows you to continue to turn a profit in your business. As the changing cost of ingredients and supplies begins to impact your profit margin, adjust your pricing accordingly so that you can afford to stay in business.

If you decide to increase your pricing, it is completely your decision to make a public announcement to your client base. Personally, I don’t feel like it is necessary. You obviously should not change pricing as it relates to previous quotes or contracted orders. However, I feel future orders or purchases should be priced in a way that promotes profitability in your business.

Substitute Ingredients

In cases where ingredients can be adjusted without compromising taste or quality, consider changing out more expensive ingredients with more cost-effective ones. I know this can be a hard adjustment for those bakers or chefs with a discerning palate, but I recommend that you tweak your recipes to optimize for cost and then test it on your customers. If the feedback is positive or if they don’t even notice the change, then you may have found a winning adjustment.

Shop Around

It can be very convenient to shop within your community, but there might be better alternatives when it comes to purchasing ingredients or packaging. Check out online vendors to see if you can find more cost-effective options for some of your main ingredients or supplies. Consider changing brands or buying in bulk to help reduce your expenses and increase your profits.

Reduce Your Menu

Previously, I mentioned using technology to help track your ingredient costs. Once you’ve taken the time to nail down your costs, you should also analyze the profitability of your menu items. As much as you may love having that super-unique flavor on your menu, it may no longer make sense to offer it in this economic environment. Consider temporarily removing items from your menu that just don’t make financial sense at this time. If you don’t offer it, they can’t order it. However, if it totally breaks your heart to remove certain items from your menu, make sure to charge a premium so that it can remain a profitable option for your business when a customer selects it.

Look for Opportunities to Change

Let’s face it: Is it really necessary to have five different types of packing for five different menu items? As much as you might love creating unique experiences for your customers, there are likely changes that you can make to certain areas of business that will help reduce costs without impacting the customer experience.

Brand stickers can be replaced by rubber stamps. Craft boxes can be used instead of fully custom printed boxes. Plastic party/cocktail cups can be used as packaging for single cupcakes and as actual water cups for customers. Take some time to review your supplies and other expenses to find areas in which you might be able to make small changes that can make a big financial impact over time.

Final Thoughts

In conclusion, the world is changing, and running a food business is getting more expensive every day. Some changes are a result of the pandemic and might eventually go away, but there is no guarantee that life or costs will ever go back to normal. Therefore, it is your responsibility as a Sweet Boss to make sure that you’ve made adjustments that will keep your business running in a profitable direction. Don’t neglect the small changes. If you can find a way to cut your costs by $85 per month, that will increase your profits by over $1,000 in one year. That could pay for a new piece of equipment or a nice trip to the beach. Either way, it’s up to you to pay attention to the numbers and make the right changes so that your business will not only survive these tough times but thrive!