One of the most difficult aspects of starting a home baking business is knowing how much to charge. When you first start out you may not have the knowledge or the confidence that someone with more experience has, and you may feel as if you shouldn’t charge what you are worth. Let’s explore the pros and cons of pricing in the baking world.
First, know that you cannot compete with a commercial bakery or big box store prices. If a potential customer comes to you with an idea, or wants something for below what it costs you to make it, then let it go. I will gladly tell customers with budgets below my pricing that they should seek another baker or go to a big box store. Not to mention that big box stores flash freeze their cakes and they are shipped into the store frozen. You can’t compete with their low prices, but your quality will be custom made for the client.
It is great to try and work within a customers budget, if it is possible and fair to both of you. Don’t be offended by someone who can’t afford your custom cakes or cookies, or someone who just doesn’t see the value in what you are selling. I once had an inquiry where the customer sent me a 3-D hand made fondant dragon sitting atop a mountain of gold. I asked them what their budget was for the cake and they replied, “30”. “Thirty-dollars?”, I replied extremely confused. Yes, their budget was $30 dollars and they had thought that since the cake was for a kid that it shouldn’t cost that much and that would somehow change the price. To create just the 3-D dragon topper would have taken hours and hours of work. To buy the ingredients and supplies to make the cake would have been $30 or more depending on everything that went into that cake. My minimum for 3-D cakes is $200, so $30 was not something I was even going to entertain. I turned them down, and I still slept like a baby that night.
It can be really hard at first when starting out, and you want to make every potential customer happy. You may even think that you will get “exposure” if you make a bunch of cheap cakes or cookies for people. Don’t get hung up on exposure, and only do free or cheap cakes if you want to. Exposure a lot of times is just something people use who do not value what you do. You wouldn’t ask your repair man to come over and fix your sink and ask to pay him in exposure. You don’t go to Target and ask them if you can pay for your cart in exposure. Just because you are at home baking a cake doesn’t mean you do not have bills to pay like everyone else.
Something I have found from making things to get exposure at times is that you may not get the exposure you think you are getting. I’ve exchanged services or even given people free cakes thinking that they would post it online or tell others, and guess what, they don’t go out of their way to make sure I get the exposure I thought I was getting. It is a huge let down, and a great lesson that you personally may rave about a business or service but that doesn’t mean they will for you in return. Don’t let exposure be a trap for you.
You should consider a few factors when pricing your cakes. First, think about the location. Cities like Lexington, KY have more people and higher incomes than smaller towns, therefore bakers can set items at higher price points to remain competitive than in smaller towns. Secondly, don’t price far below the competition either. That’s a fast way to make enemies with other local bakers and bakeries. I personally feel like as a home baker you should be charging more than a bakery anyway because you are making custom items that aren’t mass produced, and a lot of times are made custom order for the client. It may be good to start out your prices low when you are new, but slowly increase the price once you get going and as your skill set also increases. The lower you price and the hours you are going to spend working on your baked goods, the more you will get burned out. You may calculate your earnings and find you are making very little, maybe even less than minimum wage. Make it worth it.
Make sure to also factor in the supplies you are buying and the supplies that will be going with the customer, like boxes, cake boards and support systems. I never give those away for free. I have probably even lost orders over the extra $25-35 I have to add in at times for the cake board and the support system, but I refuse to be out the cost for those items. I even calculate in the shipping for items I have to order and put that in the quote. You even need to think long term like the wear and tear on your car and tires you will need to replace, or oil changes for all the extra driving for cake deliveries. Make a minimum delivery fee for in town and then add a $1 per mile (or more) for anything outside of a certain zone and then stick with it! You are also spending your TIME delivering a cake, and should be compensated for that delivery.
Try to get the customer’s budget upfront. Most times they will say, “Well, I don’t know how much ______ costs”. Sometimes they will have a price range. It is always helpful to get the budget, especially when they have a very low budget. It will save you a lot of time upfront in even making them a quote, if you know beforehand that their budget is $30 and your minimum is $100.
A helpful way I find to price for cakes is having a base price per serving to start with. This give you an idea of how much you will make with no or minimal decorations on the cake (You decide how “simple” a cake is to you). After you find the base price by how many servings the customer needs, then factor in the complicated decorations, figures, hand made flowers, cake board, boxes, support structure, or anything else that will take your time and money to add into the cake.
An example is an 8″ cake with my base pricing is $60.00. For me personally a simple design would just be basic icing and maybe a message, or simple buttercream rosettes. Anything else added to the cake outside of the base would be added in. I would calculate the board and the paper that covers the board and the box. I would also add in extra decorations. Also, don’t forget to add in any fees you may incur when the customer pays you. I use Square and there is a fee. I do not pay that fee, the customer does. Do not be out cost for anything!
If you make custom cakes and get orders for 3D/sculpted cakes then this way of pricing can be trickier. Set a fair to you minimum price that all structured cakes should start, and then factor in the details. My minimum is $200, and if the cake required a large structure and details that would be added on to the minimum price.
Please, please, please charge what you are worth! I couldn’t afford my own cakes (which is why I started to begin with), but that doesn’t mean that other people can’t afford what you make. There are people out there who will save up and value the work you do, find those people and then maybe even go the extra mile for them to keep them coming back. I will personally do more for the clients who pay what I want to make on an order by sometimes adding in extra cake or details to make the cake even more fabulous.
What tips do you have for home bakers? Add your pricing tips in the comments below, or on our Facebook page!