Hey friends! I want to welcome my friend Rebekah, from Angelfoods.net, to Rose Bakes today. She's a dear friend, a fellow blogger & cake decorator, a great encourager, and a wealth of information! She also has a beautiful Australian accent - which I love!! One of my most popular posts on this blog is How to Charge for Cakes and today I'm excited for Rebekah share a new perspective on this: 3 Tips to Price Your Cakes Better!
Take it away, Rebekah!
The question ‘how to price cakes’ is the #1 most asked question and topic in the cake and baking industry. It is popular because of how important it is to price correctly and so many people struggle with it.
I started in my auntie's bakery when I was 13 years old as a junior shop assistant. Back then I was incredibly shy and wouldn’t even talk to the customers! I would ring up the total on the cash register and point for the customer to read it. After my confidence grew I went on to manage the bakery, did apprenticeship and became a qualified baker + pastry cook, plus having my own home cake business.
In the 15+ years around food, I learned about how profit can be good, and very quickly drained away by wastage and under-pricing. I ‘get’ and understand the industry and pricing is the foundational 101 building block of your business.
3 Tips to Price your Cakes Better
And the #1 reason people struggle with pricing? Lack of confidence. Much like when I was a 13yo junior shop assistance and I didn’t have the courage to talk, in the baking business you need to build up the courage and confidence to know your numbers + talk about them!
Today I am going to share top 3 tips to pricing your cakes better to make money and a profit.
#1 Research Competition
Start by checking out your competitors. They have been in the industry for a while and have started adding up the costs and overheads. Learn from their hard-earned experiences! There is no need to reinvent the wheel.
What are people in your area charging for a similar cake? That is a starting point.
Research at least 3 competitors and go middle of the price range. Why? Think about buying a toaster. Do you buy the cheap $5 one or the $150 toaster or do you buy middle of the price range?
Lastly, check in with yourself and ask yourself, ‘how do I feel about that price?’ If it feels profitable, that’s a good starting point. If you spend longer decorating that cake than you thought you would, then charge extra next time. No you have found your sweet spot for pricing.
#2 Pricing Guides
Once you have researched your competitors, put together a pricing guide. That way you can refer to it at a glance when clients are asking for a quote.
When quoting I refer to a pricing guide (takes 5 seconds), offer 3 x quotes, being 3 options at 3 different price points (for example what they are asking for, a budget option and a high end option). I add fine print at the end saying ‘’this is a quick quote to give you an idea on pricing. The final amount will depend on final details, which I am happy to discuss further.’’
Pricing guides are so you aren’t put on the spot and come up with a number on a moment’s notice and guesstimate a cake price. You have already put the thought into the prices and that gives you peace of mind to know you will profit (see next tip).
#3 Pricing for Profit
My personal favourite pricing strategy is pricing for profit, otherwise called Profit Margins or GPM (Gross Profit Margins).
Profit means that you are working for profit and if you ask me, which is the #1 reason or selling point of getting into business for ourselves! (Maybe second to being our own boss).
Profit margins mean taking into account costs of the product, like ingredients and packaging and add a percentage of overheads. The rest is profit. I teach how to work out profit margins here.
For a newbie start-up, I recommend at least 50% profit margins and for someone who has been at it 12 months or more, between 60-75% profit margins. I teach how to work out profit margins in this free MP3 cake pricing training.
Pricing cakes better is going to mean a profitable business for you. And that has to be a good thing, right?
What tip above are you going to use? For more pricing tips check out these free (or virtually) with pricing guides, how to raise prices, giving discounts, quoting to price your cakes with confidence for profit.