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How Much Should I Charge for my Cakes?

How Much Should I Charge for my Cakes?

This is one of the most frequently asked questions by cake decorators when they begin to sell their cakes.

The simple but frustrating answer is that no one can tell you how much you should charge.  Setting a price structure is one of the most difficult parts of any business.  As with real estate, the price of cakes varies widely by location and is largely determined by your local market.  Finding the right price point requires research of your competitors' prices, and a solid understanding of your own costs.
As artists, it is hard to know what value to place on our work.  We don't want to sell ourselves and our talents short, but neither do we want to shock our customers with high prices, leave them feeling like they paid too much, or even worse - have a customer argue with us about the price of our cake.  In this article I will address some of the common questions about the pricing issue.

Am I charging too much for my cakes?
It's doubtful.  The most common problem with pricing is underpricing. 

I don't feel right charging very much - I'm just starting out.
It is natural, when you are starting your cake business, to feel unsure of your skills, and hesitant about charging very much for your cakes.  The first thing to remember is that we are our own worst critics.  When YOU value your cakes and price them appropriately, your customers will too. 

I have read that a good way to price cakes is to charge for the cost of ingredients times 2 (or 3).
We firmly believe that the "ingredients times 2 or 3" method of pricing is arbitrary and not rooted in any kind of business theory.  In our experience, this method results in grossly underpricing your product.  The cost of the cake lies not in the ingredients, but in the labor invested.

Should I charge by the cake or by the serving?
Charging per serving is the standard in the cake industry.  Just like bread is sold by the loaf and milk is sold by the gallon - cake is sold by the serving.  Find a serving chart you like, and stick with it.  Two popular serving charts are Wilton's and Earlene's.  Earlene's chart has slightly larger serving sizes than Wilton's, so you will want to adjust your price-per-serving appropriately if you choose this chart.  Most caterers are trained to cut wedding cakes to Wilton's standards.  If you have a customer base that enjoys a more generously sized piece of cake, Earlene's chart is a great choice.

I should charge more per serving for wedding cakes than for party cakes, right?
Well, here at CakeBoss we believe that a cake is a cake, no matter what the occasion, and that there should be no price difference.  Brides are already told in bridal magazines and web sites that vendors are ready to rip them off at the mere mention of the word "wedding".  (Watch a funny YouTube video).  Charging a higher price for a wedding cake just reinforces this misconception.  However - there could be an argument made for charging more for wedding cakes - wedding cakes require a tasting and consultation which party cakes usually do not.  They require more time for delivery and setup, and of course, more stress.  IF you decide to charge more per serving for wedding cakes, be sure you understand why you are doing it so you will be able to explain when your bride asks you why her "wedding" cake costs more than a "party" cake would.

How do I know what people will pay for a cake in my community?
Call other custom bakeries in your area and ask them how much they charge per slice for wedding, party and sheet cakes.  Set your prices close to theirs, or maybe slightly lower if you are still building your skill level.  Do NOT undercut them - this is a disservice to them, and to other decorators in your community. 

But I called the local cake shop, and their prices are way too high. I can do it so much cheaper than that!
The local cake store is charging what they need to charge in order to pay rent, utilities, make payroll, and keep a roof over the head of the owner. If you significantly undercut their prices, you are not only lowering the value of cake in your community, but you could affect their business enough that they have to lay off employees, or even close. Even though you don't have the overhead of a cake shop, you owe it to the cake decorating community to maintain the value of your goods. There is no honor or pride in being the "cheap cake lady". Also, you run the risk of antagonizing them if you undercut their prices significantly. You never know - professional networking is a powerful thing. You may want to build a relationship with that cake shop. Professional relationships can enhance your business reputation and increase your bottom line through referrals! Don't think: "Their prices are way too high." Think: "Wow! Look what a custom cake is worth!"

Here's a real-world example: What if your home were paid off, so when it came time to sell, you put it on the market for much less than your neighbors' homes just because you didn't "need" the full market value? Not only would that not make any sense, but you would lower the value of everyone's homes on your street and make your neighbors angry.

Wal-Mart sells their cakes for $15!  I can't match that price, much less beat it!
Never, ever compare your prices to Wal-Mart, Sam's Club, Costco, or a grocery store.  People can't get the same cake at Wal-Mart that they get from you.  That cake at Wal-Mart was made months ago, flash-frozen, and shipped to the store, where an employee working as quickly as he/she could frosted it with icing from a bucket, and maybe added some airbrushing or buttercream roses.  That employee probably had 50 other cakes to complete in the same shift.  The difference between your cake and Wal-Mart's cake can be likened to the difference between custom garments and off-the-rack clothes. Say you went to a seamstress, consulted with her about the perfect fabric and cut for your body type, discussed your coloring, took measurements, went back for several fittings, and in the end had an exquisite dress, hand-made with excruciating attention to detail, perfect for your body and your coloring.  When the seamstress required payment, you would not tell her that a Wal-Mart dress costs $14.99, so that's all you should pay. The two products are not comparable. 

People around here are used to Wal-Mart prices, they won't pay much more than that.
You'd be surprised.  It won't take long for your customers to realize that you are providing the kind of cake that Wal-Mart simply can't. Will Wal-Mart match a baby shower cake to an invitation? Will they accept fabric swatches of bridesmaids' wedding dresses to ensure a perfectly color coordinated wedding cake? Will they respond to multiple emails from a mother who's worried about making her daughter's bridal shower perfect in every way? No!

Someone complained about the price and said I charge too much!
Then that person is probably not meant to be your customer.  Do they complain about the price at the hairdresser?  At the grocery store?  Probably not.   If they will complain to you about the price, imagine what else they will complain about. If you let them talk you down in price, you are setting a very bad business precedent.

I can't charge that much, it's just cake!
"Just cake" can be found in the cooler at Wal-Mart for $15.  If you are going to sell your cakes, it's important to eliminate the phrase "it's just cake" from your vocabulary.  Custom cakes and cookies are edible works of art that require skill and artistry, and can take days to complete. Duff Goldman, the "Ace of Cakes", has a $300 minimum for a 10-15 serving custom tiered cake.

If I charge too much, I might lose the sale!
And?  Do you need to take a sale where you end up making below minimum wage or even losing money? 

I never know what to charge friends and family.
Yeah, that's a tough one.  There are a lot of factors at play here. Things to consider:  do you have time to do the cake?  Do you WANT to do the cake?  How close are you to the person requesting the cake?  Do you owe them a favor?  Is he/she always requesting favors and free stuff from you?  We can't tell you how much to charge friends and family, but here are some options to consider:
  1. Have a standing arrangement - if you offer to do the cake, it is free.  If they request the cake, they pay for it (either full price, discounted some percentage, or ingredients only).
  2. Different standing arrangement - if the person requesting the cake lets you have free reign of the design, the cake is free (or charged ingredients-only).  If the person is going to get picky about design and act like a customer, then he/she can pay like a customer.  This is a great way to practice new techniques you've been dying to try, and get some new cakes in your portfolio.
  3. Offer all friends and family a standard discount off your regular prices (15%, 25%, 50% - whatever you are comfortable with).
  4. Friends and family pay full price like everyone else. 
    Whatever you decide, don't feel obligated to make a fancy cake for every family function, or every family/friend who wants one.  There are only so many hours in the day!  It's ok to say you're too busy, especially if it's a last-minute request.

To price your cakes, there are four key elements to be aware of:

1. Ingredients and supplies
To know how much to charge, you must understand how much you are spending.  It takes a time investment to calculate your ingredient costs, but it is vital to understanding what a cake costs you to make.  Don't forget the cost of the boards, boxes, foil, and dowels.
2. Time
When you start thinking about it, the time you spend on a cake is so much more than just the time spent decorating.  There is time spent consulting with the customer, planning a custom design, shopping, baking, cooling, making fillings, frostings, fondant, and sometimes custom work like fondant or gumpaste toppers or figurines.  You deserve to be compensated a fair hourly rate for the time you spend on a cake.  Don't forget cleanup time!  We've all seen what our kitchens look like after a big cake! 

When you bake a cake,  you use your oven, your utilities, your pans, your mixer, your dishwasher, and soap.  These things all required an initial investment by you, and a nominal fee for their use should be added to the cost of the cake.

4.  Delivery
Your customer lives two hours away and wants the cake delivered?  Then you must certainly be compensated for your time, your gas, wear and tear on your vehicle, and any tolls that are incurred on the trip.  The current federal reimbursement rate for mileage is 58 cents per mile, so this is a good place to start.  Remember to charge for the entire round-trip!
CakeBoss can help you itemize your ingredient costs so that you know exactly what all your recipes cost YOU out-of-pocket.  Then, using the pricing calculator, you can easily figure a total cost for a cake, including time, overhead, and delivery.  You would be surprised how these things can add up!  One CakeBoss user recently told us she had been planning on charging $30 for a cake, but when she used CakeBoss to add up her costs, she realized she needed to charge $56! 

CakeBoss also tracks profit for each cake, contains a photo record of all your orders, lets you print customized invoices and reports, has a calendar feature to assure that you never forget an order again, and much, much more!  Your satisfaction is absolutely guaranteed with our 30-Day Money Back Offer!  If CakeBoss does not completely change the way you run your home cake business, we will refund the full purchase price within 30 days, no questions asked.

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