How to Price Cakes – 5 Step Guide
For anyone who has started a cake business or has decided to sell cakes on the side, the question of “How much should I charge for my cakes?” had to be asked at one point or another. This question can be difficult to answer and quite personal as it can often involve a person’s own experience, skill, confidence and self worth. This is very similar to someone deciding how much to sell their paintings. After all, wedding cakes and birthday cakes are essentially, works of art. Just like the variance in prices of paintings due to who has painted them, there can also be a variance in prices of cakes based on how much a person feels their own cakes are worth. So you get my point…it’s personal. Of course when deciding how much to charge for your cakes, there is also market value to be considered. How much are other cake business charging in your local area? Again though, we are talking about art. I can go to my local supermarket and buy a cake, or I can go to the finest cake shop in town. It’s a big difference in price and quality.
The purpose of this article is to introduce the idea of something called itemization. The idea is to break down all the different parts of a cake, whether it’s an ingredient, a decoration, or a specific task or service that needs to be carried out, and give each of these things a set price.
If we put how cake business price their cakes on a scale with itemization on one side, what would be on the opposite side? Well…pricing like this…
1 tier = $50
2 tier = $150
3 tier = $300
The problem with this side of the scale (opposite of itemization) is that it doesn’t account for clients asking for additional decorations or elements as well as time spent on some tasks that take a long time to execute. For example, with the pricing above, someone might order a plain 3 tier cake with simple ribbons. Awesome, that’s an easy $300. The next customer might order a 3 tier cake covered with sugar roses. Now I have to spend 10 times longer making dozens of sugar roses. $300 is not worth the time anymore. This is a very over simplified example, but you get the idea.
Now most people are probably around the middle of the scale I mentioned before. They have a balance of simple pricing but also account for extra and customized requests. This is totally fine and most likely works ok for most, but the truth is, having your cake business itemized entirely is simply better for everything. It’s better for your business in the following ways…
If you have detailed itemization for all facets of your business, you can always make adjustments and each change you make will reflect on everything else. For example, ingredients in a recipe all have their own cost prices that carry over to the selling price of a particular flavour that you use in your cakes. If your supplier decides to raise the price of sugar (for whatever reason), you can simply make one change to your itemization system, and it will adjust the price per portion of the flavour you sell that includes sugar (everything lol).
Having an itemized system for all facets of your cake business allows you to have a lot more clarity on many things. It lets you see where your costs are high and where you can increase margins to make more profit from selling your cakes.
Professionalism and Trust
When your clients see your methodology for how you have priced your cakes, it builds trust and shows that you take what you do very seriously.
After you have shown the client your design and they are able to see a birds eye view of all the different parts of the cake and how much each of them cost, you and them are able to make adjustments to decrease or increase the price of their cake to suit their budget.
Better for calculating costing
Mainly when it comes to ingredients and recipes, you are able to see and adjust costs and margins very easily which provides a more efficient system.
For many years in our cake business, we used a customized system that was built by Serdar Yener using Excel spreadsheets. There were sheets for ingredients, recipes, decorations, services and tasks, materials etc. When a recipe was created, it linked back to ingredients. When a cake was created in the system, it linked back to decorations, non-food items, boards, textiles, delivery costs etc. This way, whenever a change needed to be made, it reflected on all things that we linked to it, and vice versa. For example, changing the price of an ingredient would change the price of the flavour, which would change the price of the final cake the flavour was being used on. This way, the system is robust, adjustable, scalable and effective.
The problem was that setting up a system like this took a long time and it was quite tedious to work with. While pricing your cakes using itemization may be the best way (and easiest way once the hard work is done), it takes some time to set it up. That’s where Cakenote comes to the rescue! We wanted to make a system like this available to everyone which is the main reason why we created Cakenote. This idea of itemisation is at Cakenote’s core and what’s better, we have done all we can to incorporate this itemization system into the design process. This is how Cakenote offers a way to price a cake simultaneously while you design the cake.
5 Step Guide on How to Price a Cake
1. Obtain a complete finished design on paper (read our How to Design a Cake article)
2. Obtain the following information before starting with pricing.
- Your standard serving size price list.
- Portion prices of different cakes in different categories such as common flavours, and special flavours which involve more cost and time.
- Price of a dummy cake, also calculated in number of portions.
- Price list of individual decorations in different sizes. For example, small roses and large roses or small ornaments and large ornaments.
- Price list of non-edible materials like boards, internal supports, dowels etc.
- Price list different services, like delivery, packaging, set-up at event etc.
- Price list for assembling costs in different categories. For example, simple cakes and complicated cakes. This is the amounts that you charge for the time you spend to put cakes together. For example, you may charge $0.50 per serving for simple cakes and $1.00 per serving for complicated cakes.
3. Obtain a suitable pricing form which includes the following sections.
- Quotation or order number for easy to reference.
- Date of first contact and event date of order.
- Name of the cake. This could be a combination of maybe a last name, initials, date, flavour, nature of the cake like 2T (2 tier) or event. Anything to help you easily identify the cake. For example, SMITH/2T/030520.
- Personal/contact information of the customer.
- Multiple lines for cake information.
- Multiple lines for construction items.
- Multiple lines for services.
- Prepare for itemizing the cake in 4 different categories. Cakes, decorations, construction and services.
- List all individual items and their prices.
- Calculate totals manually or automatically (with spread sheet formulas).
- Here’s an example…
5. Developing a Cake Catalogue with Prices
Charge always same price for same items.
- Name items with specific heights so you can charge different price for different heights.
- If any item does not exists in your catalogue while you’re pricing a cake, create a new item and give it a price to finish the pricing for the time being. You may change the price of this new item according to time spent after the first time you work with this item.
- You may also produce price tags for each cake which can be done with spread sheets by linking cells. This set-up will allow you to change individual item prices all in one action.
Cakenote offers an easy to use system that allows you to do all the mentioned things above and allows you to price your cakes while you design them. Join a 14 day free trial today or checkout the instant free demo.