26/01/2024
What does this even mean? What are we multiplying? What’s 3? Why 3?? Why not 4?? Or 6??
For years, I followed this advice, until I did my numbers and realized what a complete BS this was. For years, it made me lose a lot of profit for my cakes that I could have potentially earned and used to grow my business. If you’re running your own cake business, you are 50% the cake artist, but the other half of you is also 50% the business owner, and business is about numbers. It’s all a numbers game.
x3 was NOT enough to cover for labor fees, overhead and profit. Why? Because the better skilled I was, the better my cakes tasted, the more equipment I upgraded, the higher my value was and therefore, the more I should be charging. Do the actual math and run your numbers.
Let’s see.
Example: Total ingredient costs = P1000
They said to multiply total ingredients costs x3 to cover for profit, overhead, etc.
P1000 x 3 = P3000 selling price
If, for example, your labor as a newbie is P300/hour (mine is more than double this because of my skill level) and it took you a total of 3 hours to make the cake from start to finish, that’s P900. This is possibly even longer in reality for newbies.
P3000 - P900 - P1000 = you’re left with P1100 to be split among profit, utilities, equipment, rent, gas, hidden costs, etc. Do you think that’s enough? People focus only on revenue and sales and think they’re making money. You could be selling 100 cakes a month and still not make anything if you don’t understand your numbers and just guesstimating your pricing or asking in baking groups, basing your costs on what others are charging.
From the moment you read that first inquiry and responded, your work started. Every hour and every penny counts, up to the last piece of tape you used to seal your cake box. I did a Live talk before (I think this was my very first or 2nd live talk ever) about the 7 key ingredients in a cake that determine pricing.
1. Your actual baking ingredients used in the cake. (Cake, filling, frosting)
2. Decorations - fondant, balloons, toppers, flowers, etc
3. Packaging and office supplies
4. Equipment and cleaning supplies
5. Utilities and Gas
6. Labor (your Time)
7. Profit
If you missed calculating for one of these key ingredients or don’t get the numbers accurately, congratulations, you’re probably undercharging and paying your customers to take away your work. I’ve attended soooo many classes in the past decade and a half, NONE of them really broke down the numbers for us step-by-step. They only taught us recipe costing in culinary school. Custom cake pricing is NOT as straightforward as food costing, or pricing for regular baked goods. This is where most people make a mistake. Two same-sized cakes can cost differently, depending on several factors and this is where it gets tricky and difficult. Even overhead cost is taken into account differently compared to other businesses.
This Saturday, we will get down to the actual numbers and calculate everything from tracking time per task, fixed and variable costs, using a worksheet to record all ingredients and material costs, use my pricing calculator and learn how to overcome pricing fears and negative thoughts about profit. See you all tomorrow and get your calculators and Excel sheets ready! 🙂
Unfortunately, we are overbooked and slots are full. I was only planning to do this class one time. However, you can put in a request for another costing class in the future, I might consider it. Purchasing the templates alone, without guidance, still won’t help you understand how to really price custom cakes.
More business classes coming this year so, stay tuned! Join the broadcast channel for class schedules if you haven’t yet. Link is in my profile.
-J
