How To Price Your Cakes Cake Pricing

One of the scariest questions is: How much would you charge for this cake? And, if I don’t quote the right price I may lose the order. And, if I overcharge, the customer will go somewhere else. Conversely, if I quote a low price, then I will not make any money. I’ve calculated the cost of the same cake a zillion times to make sure I got it right. Also, I try so hard to reduce my costs so that I could charge less for my cakes. And, as a result, get more orders. In fact, sometimes, I look at the price and say, I wouldn’t pay that much for a cake. So, how can I charge that from customers?

Pricing a cake video

Video on Facebook here – Video on YouTube These are some of the most common questions I get asked by beginners. And, it really resonates with me because I’ve had the exact same questions in my head all along.

How should I price my cakes? And, how do price cakes or cupcakes? Also, can you share your price list with me? Please send me your cake pricing chart. And, what is the right price for a beginner? How much should I charge for this type of cake? And, what is the price of the cake for this design? In addition, do you have a cake pricing guide?

And, as much as I’d like to say, this is what I charge and you can charge the same; that’s not possible. So, I thought I’d write a little post on cake pricing (well, I planned to write a little bit … it’s long.. so grab a cup of coffee). Now, having done two degrees and an MBA – you may find that my method sounds very geeky. And yet, trust me the books are not wrong and it’s how you apply that knowledge to practical issues that make a huge difference. So, hang in there – I will try my best to make it as simple as I can for you all to understand. In fact, I will give you more than one option on how to price your cakes. So grab a cuppa and let’s make it a date with cake pricing.

There are four main components to pricing your cakes

Why should you mark up or add a percentage to your cake?

Many cake decorators don’t do this!! Look at the table above. It’s got cost, labor, and delivery but there is no profit. The labor is your wage it is not a profit. You worked hard on that cake and you deserved to be paid. The profit comes when you add that last line – % or a mark-up. When you make that profit you have a successful business. Does that make sense? For example, you can use a rough estimate that 25% of your utility costs are related to your business. Then calculate that total for a particular month and divide it by the number of cakes you’ve made that month. This will provide you with an estimated indirect cost per cake. For example in an average month, your indirect cost is about 10 dollars per cake. Furthermore, marketing expenses, such as advertising, building and maintaining a website for your business, and even your business cards are part of your business expenses.

So, what is better a % or a markup?

It’s a personal preference. Some people say I want to make 30% profit of every cake I sell and then there are those that say I want to make $50 on every 24 servings.

How do I determine labor – my wages?

If someone employed you what would they need to pay you, so you would accept their job? Would you take that job if they paid you 40 dollars an hour or would you say -no I need at least 50 to make it worth my time. The minimum wage in Israel is 25 so when I started cake decorating I did actually charge only 25 per hour. Now I have moved up to 50 because I think that’s modest.It’s definitely not what an artist should be paid but I’m still OK which what I pay myself. So, you see; it’s up to you!! And what you think is fair to you!

Let’s explore these factors

All the above factors are important factors in determining what is the value of your cakes in the eye of your customers. How much are they willing to pay for them? What price will your specific market bear?

The same goes for custom-designed decorated cakes

Having said that, if you decide to make this your business, you need to make sure that you have a good business model. In other words, you can make the profits that you would like to have from this business. Otherwise, it can be an expensive hobby, or worst, a losing business. Therefore, it’s very important to have a very good understanding of your costs. These include more than just the direct costs of ingredients that go into your cakes. I will discuss that in detail below. First of all, let’s start with determining the value of your cakes. When I first relocated from the US (in 2005), I regularly made cupcakes, cake balls, and cake pops. And yet, it wasn’t very popular here in Israel and to some, it was something new and fascinating. I grew up with a decorated cake for every birthday, wedding and holiday. But, in Israel custom decorated cake was a luxury item and very rare to find. It was not a must-have item for a birthday party. A birthday cake was not even in the budget! I was surprised that some weddings I attended did not have a wedding cake and no one seemed to miss it. Most birthdays that my son attends have no fancy birthday cakes. Rather, what they often had was a simple cake that grandma made in baking foil, poured some chocolate sauce over it, and sprinkled some sprinkles around. You need to do the same in your location. Find out what are the trends. What types of cakes are more popular? What are people willing to pay for those cakes? In some places, sheet cakes are very popular, while in other places no one cares much about them. Decorated cakes take a long time to make. There are some customers who view them as a waste of money. And yet, there are those who value the work and effort put into it and are ready to pay for that. Most cake decorators will tell you they provide a unique value. Some examples include: doing something new, personal consultation, design expertise, modeling expertise, etc. But is that enough to create a differentiated value? First of all, you need to ask yourself what makes your product better than others. Do you bake the cake from scratch? Are you offering free delivery? Are you a unique artist? Do you have creative and unique designs? Are you offering any extra frills? How are your skills compared to your competitors? Never ever compare your product to a supermarket product, not even if you are at a basic level of cake decorating. This is not a good price guideline. Why? Because supermarkets have a very different business model than ours.

Supermarkets’ business model is based on low-profit margins, backed by a cost-driven, highly efficient operation. A bakery sells about 300 to 600 cakes a week. They purchase ingredients in bulk and at a fraction of the price that we buy them from the supermarket!! So the same flour that you pay two dollars for probably cost a few cents for them. In addition, they work on a large scale, which puts quantity before quality. We deal in quality and custom orders. There is no comparison – right?

As a home baker, you try to use top-quality ingredients as compared to generic supermarket brands, and you customize each and every cake. While supermarket cakes are flash-frozen; you offer freshness, consultation, designing, and much more. Since in my present market baking a cake from scratch is considered unique and valuable, I use it as my competitive advantage.

Do people know you? Have you built a good reputation? Does your product have a market presence? If you have a good reputation, your cakes will be in high demand and you will be able to charge a higher price.

Personal example – Most of my business comes from word of mouth. I do not advertise. As such every client that comes to me, comes through someone I know or has tasted my cakes at some event.Because I work in a price-sensitive market this is the best way for me to build my business and reputation. Once people hear about you and your skills from a reliable source their attitude to pricing changes. I have seen that with my customers. There is real tangible value to a good reputation.

A few points to note when pricing cakes based on market value

Frequently asked questions

We discussed a few more cake pricing questions over on the cake decorating blog

And, I’d love to know what you think, not just about this post but about cake pricing. Also, about your concerns regarding cake pricing. So, please share your thoughts, questions, and comments with me, and the other readers. And, I might update this post and include some of your comments, and address specific questions. So, just write a comment below and I’ll be happy to address those questions. Therefore, it’s crucial that you understand both sides of the business. How to create demand for your product, reach your customers, price your cakes correctly, and deliver them. And at the same time, what are the real costs of making your cakes, and running your business? Of course, your goal is that your income from selling your cakes will be higher than what it costs you to make and deliver them to your customers Hence, understanding what are your total costs, and calculating them correctly is critical to your long-term success. Unlike most professionals that go to courses and learn by practice, my practice was on the job.While I was very confident in my baking skills, I still had to prove my decorating skills not only to my customers but for myself too. So I made a lot of cakes by just charging for the cost and was very happy about it. I let friends pay me the cost of the cake so I could learn and it was a win-win situation for us all. I considered it as if these customers are funding my education. But as my level of skill and expertise grew so did my prices. We all have to start somewhere. And sometimes we have to make compromises along the way to reach our goals. What’s important is what works for you. Which customers are you aiming to serve, and what are they willing to pay for the value you provide? People who see the cake don’t ask how much you paid for it. They ask who made the cake. So I take pride in what I do and the value I offer. Here’s another post that speaks on pricing cakes. I think you’ll find it a good read too. – I bet most of you are underpricing your cakes Did you LIKE this recipe? Save it for later. You can find my recipes on Pinterest. Follow me on Facebook, Twitter, and Instagram.Subscribe, and I’ll send you new recipes right to your inbox.