Starting out in the cake world is hard. There's no guidebook to how much you should charge for cakes. No steadfast rules on how you should operate your business or what etiquette is practiced by other bakers who have progressed well in the cake world.
If you started a business selling shoes you would have some idea of where to start when you are given the RRP. With cakes a lot of people think its guess work, well they would be wrong.
When you first start out you will almost always doubt your worth, want to compete with your local competitors and make sure you get the sale. Some make the mistake of thinking they should run their company like a supermarket in some price war with the other local bakers. This is really a mistake which will hinder you.
Some doubt their skills are good enough to command a higher price and so go in at silly prices like £30 for a 10" sponge fully decorated. Doing this when working from home can give you a false sense that you are doing well. Of course you will make lots of sales as everyone loves a bargain and if your cakes are good they will come back for more. However your bank balance won't thank you for it.
The average cost of materials for a 10” cake with modelling and detailing is £28 this includes things like boards, boxes, the use of your oven etc. This doesn’t however include the cost of your time. If you are running a business you will triple the cost of this on average to arrive at a price you should charge. This cake could take anything from 6-12 hours depending on the design you may even find you have work to do the day before for figures and other modelling work. You will have spent time on the design idea and this too can be time consuming.
Why then would you charge £30 for this 10” cake? You may be the lowest priced baker in your area and yes as I said before you will make that sale. However the only profit you will make is around £2. If you attach a business card or ribbon to the box you will earn even less.
This costing also doesn’t take into account any advertising costs you may have, lighting for your kitchen whilst you work. The equipment you buy to make the cakes and the wear and tear on these over time. If you offer to deliver you will have fuel and wear and tear on your car to account for too. There are so many more costing’s I could mention here, but you get my point.
If this is how you run your business you will not last long. You will make a name for yourself and you will get the sales, however you are in fact paying to bake someone a cake if the money they pay you doesn’t cover your costs and more. You may as well hand over £5 to every person you see in the street and save yourself the hassle of all that work. You will find yourself ostracised by other bakers too as it is not good practice to try and outdo each other to get a sale. The decision should be down to the customers taste and how good you are as a designer.
If you would like your passion for cake to be a profitable business check out our next blog where I will share with you some great ideas which will really help you stand out from hobby bakers.