Would you Prefer To Listen? 

In this blog post, I am going to share 6 Common Cake Pricing Mistakes To Avoid In Your Cake Business –  these will quite literally cost you money.

 

1.Charging Per Inch

If you’re asking a customer what size they would like their cake to be and then charging per inch, then this one is for you.
 
If you are unsure what I mean by this, then I have a little example for you:
 
You have been asked to make a 6″ cake.
Let’s say that you decide to charge £10 per inch.
The price of the cake would be £60.
 
If it was an 8″ cake, the price of the cake would be £80…and so on.
 
On the face of it, you might think that sounds like a decent price, and for some cake designs of those sizes, I expect it would be. BUT… how do you know whether you’re making any money out of that?
 
Here’s the thing… different cakes will use different ingredients and consumables. Likewise, different designs on the same size cake will take you different lengths of time. So whilst charging per inch may make you mega profit on one cake design, it will most likely leave you out of profit on another.

I did a little experiment with a previous wedding cake that I made. This cake was a four tier cake comprising of a 4″, a 6″ and 8″ and a 10″ cake. So that would be 28″ of cake in total.

If I charge £10 per inch, then the price of the cake would be £280. What I actually charged was £400 based upon ingredients/consumables, oven usage, time and hourly rate. So that would have been a loss of £120 for that order, if I’d have charged per inch. Now that is massive, isn’t it?

Obviously, that is quite an extreme example. But even if it’s a £5 or £10 pound loss per order, that all adds up and will eat away at your profit.

 2.Charging Per Serving

Now this one is pretty similar to charging per inch – It’s just a different way of making the same mistake really.
Let’s use an example for you so that you can see how it works.
If you get 12 portions of a six” cake, and you charge £2.40 a portion. then that cake will be priced at £28.80. Seems low doesn’t it?
If you sat down and worked out a proper price for that cake, then it may have been priced in the region of £45 to £50, if not more. So that’s a lot of money for you and your cake business to be losing.

 

3. Costs x 3

Recently, a lovely baker contacted me about her pricing. She said that she’d been told that the way she should price her work is to work out her costs and then multiply that by three. She asked me if I thought that that was correct.
 
This method of pricing might work for some things, but I don’t believe that it works for cakes. The reason being that generally speaking, the cost of ingredients/consumables isn’t a massive proportion of the overall price of the cake. The time it takes to make the cake is usually where the greater cost lies.
 
To use an example of my basic buttercream drip cakes, the consumables for that cost about £8. So if I did 8 x 3 that would be £24 – is isn’t much is it? It wouldn’t even pay me National Minimum Wage.

4. Asking Other Cake Makers What To Charge

Most likely THE most common mistake I see made when it comes to pricing cakes is this one so it deserve a blog post all of its own:

 

5. People Won’t Pay That In My Area

Common phrases I hear are:
 
“You can’t charge that in my area”
“People in my town won’t pay that for a cake”
“That’s ok but I live in XXX I can’t charge those prices here”
 
But how do you know, unless you have actually tried to sell to them? You will not be everybody’s cup of tea – and nor should you want to be. There will be 1000s of potential customers in your area, and you couldn’t cater for them all, even if you wanted to. BUT, some of those 1000s of people will pay your prices, and they are the customers that you want, you aren’t looking to cater for everybody. You should not. e tempted to reduce your prices in order to get more work. If you do this, all that will happen is that you will come to make the order, and you’ll hate it. You’ll wish you’d never agreed to make it because you didn’t charge enough. I know that it’s really tempting to charge less, because you’re afraid that otherwise you won’t get the order, but…. It is better not to work at all that to work for nothing. By working for no profit, you are not respecting your time, you’re devaluing your work, you’re giving up precious family time, and you are quite literally overworked and underpaid.
Why would you do that to yourself?

 

6. Charging Friends and Family

I understand that it can feel really alien to charge your friends and family members. The way I look at it is, if that friend and family member is prepared to take up space in my diary, then they should be prepared to pay. Usually you will be find that they will be prepared to pay, it is just you that feels a little bit awkward about it.
 
If you feel that you want to offer that friend or family member a discount, then go for it – how much of a discount you offer them is totally your decision. Make sure they know what the full price of the cake is, and then what their discounted price is – this helps if they are recommending you to somebody else, they can tell that person the full price so that the new customer isn’t expected the discounted price that your friend or family member might be getting.
 
If you have got to the end of this blog post and know that you are making one or more of these common cake pricing mistakes, then a pricing review is in order!
 
The only way to know that you are charging properly and making a profit is to take account of:
 
Your Ingredients/Consumables
Your Oven Usage
Your Time
Your Hourly Rate