Six key points that will determine what you will earn:
- Your ability to grasp the business side of making cakes
- Knowing what you need to charge to make your target income
- The ability to apply those prices to your business
- Removing the limiting belief; ‘but nobody will pay that in my area’
- Marketing – Online and offline
- Product – your cakes
It is important to note that the quality of the cakes themselves sits at number six, yet so many cake decorators spend so much time, effort and money on their cake skills, but so little addressing the points above.
Pricing Cakes – What do you need to charge?
In order to work out what you NEED to charge to make your cake business profitable, first you need to pour a coffee and answer the following key questions as accurately as you possibly can:
- How much do you NEED to earn a week to survive?
- How many cake decorating hours can you give every week?
- How many cakes can you make within those hours?
- What are your weekly overheads?
- What are your Cost of Ingredients?
Taking points 2 and 3, it makes things easier if you look at each cake and allocate a number of hours to decorate. That way you can ensure that whether its a quick and easy cake or 7 tier masterpiece, that your pricing is consistent and you know that it will be profitable.
The numbers given below are to provide some content to the formula, but your number will likely vary hugely;
- How much do you NEED to earn to survive? £500
- How many cake decorating hours can you give every week? 35
- How many cakes can you make within those hours? see above for how to better breakdown those hours
- What are your weekly overheads? £130
- What are your Cost of Ingredients? 30% of the price of the cake
To give a cake decorating hour a value; say a cake at £120 takes 3 hours of your 35 hour week.
Pricing Chart Based on a 35 hour Decorating Week
The two main components when it comes to pricing cakes are ingredients and time (your pay) so you need to develop a pricing chart that assesses both.
Our Pricing Chart would have Bands as the column headers, which were time orientated and the cake size, which are ingredient cost orientated, as the rows. When you produce your pricing chart it shows the customer very clearly what they are paying for and you’ll know that you are pricing for profit.
For more information on this and for effective marketing techniques along with invaluable, straight talking, business information check out our BUSINESS TUTORIALS delivered by Paul Bradford & David Brice along with professionals in Digital Marketing, Business Coaching, Photography and in the Legal and Accounting fields.
Professional v Hobbyist
Everyone has different financial requirements. While a professional and hobbyist can produce the same level of cake, the main issue comes down to what they require in terms of income.
Hobbyists are not making cakes to earn a living, they are making makes because they enjoy it and will only charge a minimal amount, perhaps to cover ingredients. The hobbyist then gets their reward through the gratitude of the recipient.
Professional cake decorators will, however, require an income from their business. Using the formula above will help determine what that income is, how many cakes are needed and the prices required to achieve those results.
Hobbyists do not need to make a contribution to business running costs, nor need to charge for their time. This is where the huge discrepancy comes when comparing prices between professionals and hobbyists.
Professionals feel that this is unfair and creates an uneven playing field. Hobbyists wonder what all the fuss is about as they will charge what they want to charge. There’s no point in one side or the other getting annoyed by this, as that will only lead to a negative spiral and never change the underlying facts.
Professionals need to set their brand, marketing and customer experience above the hobbyist and target the right customers, who will pay the professional prices for a professional service.
What can you expect to earn?
This is a challenging question and one that comes with many caveats.
When we ran Paul Bradford Designer Cakes from a shop on Linlithgow High Street in 2005, here is an extract of our annual accounts. Note that this was before Paul was known and we had 4 members of staff, we were selling balloons and other party accessories:
|Paul Bradford Designer Cakes 2005|
|Staff||£59,025||Plus Directors 47%|
|Rates and water||£4,609|
|Light and Heat||£2,153|
|Repairs and Maint||£3,263|
|Directors salary/Dividend||£60,000||( c)|
|between Paul and David|
|Net PROFIT (a-b-c)||£1,304|
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