How do I charge for cakes? How do I set prices? How do you know how much to charge? What price would you charge for xyz cake?
I receive emails and comments (and sometimes even phone calls) every single week asking me about how to determine what to charge for cakes. I’ve been debating on posting this for awhile, but since I’ve shared it with so many readers privately, I figured I might as well go ahead and make it public. So here’s my answer.
Please note, this article primarily relates to home bakers, but hopefully anybody in the cake decorating business can glean some tips!
Pricing is definitely one of the hardest parts of doing a cake business. When I started, I was just throwing our random numbers and guessing.
But after doing some research, I came to the conclusion that charging “by the serving” works best for me and is pretty much the “standard” way to charge across the cake industry. I have a base price for all cakes, then I add onto that price for details, difficulty, multiple tiers, etc. I also add on for delivery.
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For about the first 2 years of doing cake, I was charging $1-$2 per serving for cakes. That was not good. Although I was inexperienced, flying by the seat of my pants, and learning as I went, I was still undercharging. I was killing myself with orders, making very little profit, and my home and homeschooling were suffering.
I was also trying to “compete” price-wise with mass production bakeries and grocery store bakeries and not wanting to charge “too much” more than them. Learn from me: Don’t even think about trying to compete with mass retailers!
After more than 2 years of that, I knew things had to change. I asked some trusted friends and other cake decorators and everybody agreed that I was undercharging.
In fact, a few of my customers would even comment on how “cheap” my cakes were, or how they were driving 45 miles to get a cake from me because it was nicer than some of the custom bakery cakes and “so much cheaper”.
That’s NOT a reputation I wanted. And it’s not a reputation you want either!
So in 2012 (and again in 2013), I increased my prices and started to take fewer orders. I’m proud to say I’m finally making good profit on a regular basis.
I still don’t charge as much as some nearby bakeries (35 miles is the nearest “real” town – I live in the STICKS!), but since raising my prices, I regularly pay myself and it feels great! I’m also not undercutting local bakeries/bakers and stealing business with “cheap” cakes. PS – if you do that, you will make enemies!
I think that it’s fine to have lower prices (but not super-duper grocery store cheap) if you’re new and trying to get established but once you’re experienced, you should be making profit. Especially if you’re doing quality, comparable work.
Obviously I can’t answer that question for you – some bakers/cakers just do better work than others, but you have to be honest with yourself and set your prices accordingly.
If you live in a big city where the average price for an intricately decorated cake is $7 per serving, and you know (or people are telling you) that your work is as good or better than theirs, then don’t sell yourself short – compete with those prices!!
If your work and the quality of decorating is more along the lines of what they’d find at a grocery store bakery, then you may want to gear your prices more toward what they’re charging (although NOT as low – they’re still not putting out homemade cakes and they’re not paying retail for ingredients!!).
The most important thing is this… You need to value your work so that your customers will value your work! Never say “it’s just cake”! If they want “just cake”, let them get it from somebody else!
OH, and let me say this. I was terrified when I first raised my prices, afraid of losing customers, etc. And it’s still hard sometimes when people balk at my prices or decide not to order because they think I’m too expensive (especially local people in my tiny town)… but honestly, I’m still turning down 3-5 orders per week because I’m booked up and it’s SO much nicer to know I’m really making money and not sacrificing my family life for nothing.
If someone can’t afford my cake, I’m okay with that. Sometimes it’s a genuine budget issue and I live within a budget myself – that doesn’t offend me. But sometimes people want something “extra special” for a not so special price and I can’t cater to that.
I consider what I do art and I usually invest 3-8 hours in every cake. I need to be paid for my time just like anybody else. This may sound harsh, but if people want to pay $.50 (or less) per serving, then they need to go to a grocery store and get a cheap cake where the frosting is scooped out of a 5 gallon bucket and the sheet cake is baked hundreds of miles away and shipped frozen. I don’t look down on that – I’ve bought and eaten my share of Walmart cakes and it’s nothing to scoff at – but that’s not what I do!
If they want a custom cake that requires me to take away hours and hours of my time, from my family, then it’s not gonna be cheap. Period. You don’t want the reputation of being cheap and you have to make it worth YOUR time or you’ll burn out and quit.
I do make exceptions (of course) for family and friends. I often will give them a discount, but I rarely do them for free unless it’s my immediate family and then they may still pay for ingredients.
How did I come to my “per serving” price?
I came up with my price list based on three things:
- Consider what other local bakers/bakeries are charging. Call them and ask if you can. Sometimes at home we have to charge less, but not much. Bakeries do have the added expense of paying for their building, extra utility bills, commercial equipment and maybe paying other employees, etc. But you want to be competitive. Charge $3-3.50 per serving if they’re charging $4… not you charging $1 per serving when they’re charging $4!
- The cost of your ingredients and other expenses. This will take some time and math but you have to know what cakes are costing you. Add up your ingredient costs (break it down per serving), cake boards, tape, boxes, gas for deliveries, business cards, even consider the electricity (if possible, check your previous bills and see if there was an increase after you started caking). All of these things matter!
- Your time. This is most important! As a homeschooling mommy of 6 kids, I have to really value my time. I don’t want to be spending my 5th hour on a cake knowing I’m only going to make $20 profit on it… that really stinks! When I first evaluated my money and profit, I was only profiting about $2 per hour. That was NOT acceptable. You need to know or be able give a really good guess on how much time you’re spending on cakes. Yes, there are times when you’re going to make a big mistake and something is going to take way longer than you anticipated, but generally speaking, you should have a fair idea of your time involved and decide how much you want/need to make per hour for it to be worth your time and energy!
So, I know you’re probably still wondering … but what do YOU charge?
So here it is. This is not my exhaustive price list, but rather a general overview of my prices for decorated party cakes and wedding cakes. This is also subject to change without notice:
- $3 per serving minimum; very few exceptions.
- For tiered cakes, they generally start at $3.50 per serving for 2 tiers and the price increases per tier (by $.25 per tier, so a 4 tiered cake would be a minimum $4 per serving) and for difficulty/design.
- I charge $15-25 extra for 3-D sculptured toppers
- I charge $4 and up for sculptured/carved/3-D cakes
- $10-$35 for smash cakes when ordered with a party cake, depends on size and design’
- Delivery beyond 10 miles from my home starts at $50.
You can also visit Facebook here and see some of my “Boutique Cakes” that have set prices. If you want to get some “professional” advice on some of this, check out these Craftsy Classes: Small Cakes, Big Business and How to Start a Cake Business. Craftsy classes are awesome and I’ve not been disappointed in any of the ones I’ve taken!
And that’s it!! I think I’ve covered all the details and answered most of the questions I get! I wish you the best in your cake business and as always, if I can help, don’t hesitate to shoot me a message or email… and please keep reading at RoseBakes.com!! xo
So, did this help you? Do you have other questions about how to charge for cakes? What do you think about my pricing? Good? Bad? On Par? I love to hear from readers and would love to have your input/opinions!