The Golden Rule for Pricing Cakes

It’s the age-old question, the one I hear most often in the cake groups I frequent, the one I get asked the most at cake shows and wedding fairs. The one question every baker wants to know….”How do I price my cakes?”

The most common response that I see is, “It’s just three times the cost of your ingredients”

It seems simple enough, most anyone can easily calculate three times the cost of their ingredients, but really, it’s sort of like asking the question, “what came first, the chicken or the egg”? and hearing, “oh the chicken” …is it really the chicken?

How can you know what three times the cost of your ingredients are, on a cake you haven’t baked yet? How can you know how much a cake is going to cost you in advance, AND, does the three times the cost theory even work?

I wanted to put it to the test.

I broke out my paperwork and sat down to do some sums- something I haven’t done for a while- thank goodness there was no long division involved! I pulled out an example of a standard 10, 8, and 6-inch tiered cake.

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So here goes…..

Ingredients:

I shopped for ALL of my ingredients ahead of time- but not significantly so, and the total cost of my grocery bill was $22.18. This, however, didn’t include the cost of things I already had in my pantry, such as flour, vanilla extract, baking powder and baking soda. The additional cost of those ingredients was an extra $5.32

It also didn’t include the cost of the fondant and the gum paste that I purchased on Amazon, or the cost of the food color or the gold luster dust; the additional cost of those items was: $20.42

Total: $47.92

Miscellaneous costs: Miscellaneous costs include things like cake rounds, drums, boxes, dowels, ribbon, cake jewels, stencils, parchment, cling wrap etc:

The total cost of these items for the cake was: $7.85

New Total: $55.77

Let’s not forget the cost of my business expenses, such as insurance, heating, cooling, electric: $14.50

Total Costs: $70.27

So, at THIS stage, I have covered my basic costs to make this cake and the total cost to me, is $70.27, let’s multiply this by the elusive 3, which gives us a final total of $210.81

$210.81 for a three-tier cake…it sounds like a lot and it is a lot, but let’s look at this further.

A 3 tier cake of this size yields 74 servings. $210.81/74 gives us a per serving cost of $2.85, which is WAY lower than my minimum serving cost, which is based on a plain cake with minimal decoration. This particular cake had several sugar flowers. So, right off the bat, I would say, this pricing structure just wouldn’t work well for me. It relies very heavily on being able to thoroughly price out your ingredients in advance and doesn’t give you much room for error. I could see businesses hemorrhaging costs on a pricing scheme like this.

Time and Labor

One thing, I haven’t addressed yet is my time and labor costs, and to do this I need to look at how many hours I have put into this cake.

  • Consultation, quotes and sketches: 3 hours
  • Shopping both in store and online: 3 hours
  • Making the decorative elements for the cake: 5 hours
  • Preparing my workspace, mixing batters and  making frosting: 3 hours
  • Baking the cakes, cleaning up and storing the cakes for assembly: 3 hours
  • Torting, filling and frosting the cakes: 2 hours
  • Covering the cakes with fondant and smoothing/getting sharp edges: 2 hours
  • Decorating the finished cakes: 1 hour
  • Stacking and doweling the cakes: 45 minutes
  • Delivery of the cakes: 1 hour
  • Paperwork, billing, invoicing, administration: 1 hour

Total: 24 hours and 45 minutes

That’s over half a working week into a single cake!

 

So, let’s go back to our t12471337_1125958910774108_1199178510728077099_ootal: $210.81- $70.27 =  164.54 (Weekly salary)

Now, if I were making a 3 tier wedding cake EVERY WEEK, let’s say 50 cakes a year, minus holidays, that would give me a yearly salary of $8227.00

Well, I have to tell you, I don’t make 50 wedding cakes a year, I don’t make 30 wedding cakes a year, I actually make somewhere in the region of 16 wedding cakes a year, which would give me a yearly salary of just  $2632

The problem is, $2632 doesn’t really adequately cover the cost of running my business, it doesn’t reflect the hours of time I put into managing my business, or the hours of time I put into marketing and advertising it, or the money I spend to reach new clients. It doesn’t reflect the money I invest to learn new skills, create displays, improve my portfolio, create samples and attend wedding fairs. $2632 doesn’t get you very far if this is your full-time career; which for many of us, it is.

As an hourly wage:

$164.54/40 hours = $4.11 per hour, which is around half minimum wage and leaves me with nothing in the kitty to reinvest in my business. Essentially it leaves me no “profit” and that’s if I take the entire $164.54 bucks leftover as a salary, which let’s face it, I’d probably have to if this was my full-time career, and I’m probably going to be buying tools, gadgets and other new items for my business; those items will come out of this profit and out of my salary.

I firmly believe that a full-time cake decorator should be earning more than $20 per hour and have money to invest back into the business. Our hourly rate should be higher because we don’t have consistent business all through the year, we have peaks and troughs, busy times and not so busy times. Most of the hours we work are unconventional hours; we are working through the night, late into the evening and on weekends. We also have to invest to make a profit.

So, let’s revisit this and now look at how much I WOULD have made on this cake per hour if I charged my normal fees; which would have been a per serving cost of $8 for the cake and additional costs for the decorative elements and delivery/setup.

  • Base cake cost: $666
  • Estimate of Sugar Flowers: $60
  • pleating: $25
  • Standard Delivery and Set-up: $50

Total: $801

$801/25 hours = $32 per hour

Or, If I paid myself $25 per hour, I would have had $176 to invest back into growing my business.

Investment = Growth

Growth = Profit

So, my question is, how do you price your cakes?

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