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Are you making any profit when you sell your cakes? How to price cakes is a tricky topic because it feels very personal to come up with a number that we feel represents our time and effort. But it’s important to take the time to price cakes accurately to make sure you’re not losing money! In this tutorial I’ll walk you through 4 steps to calculate your cake prices.
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0:00
how to price cakes is a tricky topic
0:02
because it feels so personal coming up
0:04
with the number that we feel represents
0:06
our time and effort but it's important
0:08
to take the time to price your cakes
0:10
accurately to make sure you're not
0:12
losing money in this tutorial I'll walk
0:14
you through four steps to calculate your
0:16
cake prices the first step when you
0:17
think about how to price cakes is to
0:19
calculate your direct costs these are
0:22
the costs of whatever you're selling the
0:24
ingredients of your cake filling
0:26
frosting any garnishes and also any
0:28
packaging materials
0:30
for the ingredients refer to your
0:32
recipes and take out each ingredient and
0:34
you'll also need receipts showing the
0:36
cost of each ingredient or you can look
0:38
them up online if your Supermarket or
0:39
grocery store has their prices online
0:42
this is a bit timec consuming for your
0:44
first recipe but gets much quicker after
0:46
that there are three ways to work out
0:48
the cost of each ingredient and I'll
0:50
show you how to do it for ingredients
0:52
measured in grams and also in cups and
0:54
in units for example eggs first in units
0:57
or items for example eggs find the cost
1:01
of the carton of eggs that you buy and
1:03
divide that cost by the number of eggs
1:05
in that carton that's the cost of one
1:07
egg if your recipe says two eggs just
1:10
multiply the cost of one egg by two
1:12
write down that cost on a piece of paper
1:14
or I'll show you how to make a
1:15
spreadsheet in a minute which will make
1:17
this process really fast for all of your
1:19
other recipes for any ingredients in
1:21
your recipe that are measured in grams
1:23
check the packaging to see how many
1:25
grams are in that package and write that
1:27
down then look at your recipe and see
1:30
how many grams you need and write that
1:32
down divide the total weight by the
1:35
weight that you need and write down that
1:37
number two and circle it now write down
1:40
the cost of the whole package and divide
1:43
that by the number you circled this is
1:45
the cost of the amount of ingredient you
1:47
need for your recipe for any ingredient
1:50
measured in cups or tablespoons or
1:52
teaspoons look at the nutritional label
1:54
look at what the serving size is and how
1:56
many servings are in the package if the
1:59
serving size is A4 of a cup and there
2:02
are 75 servings in the bag that means
2:04
the bag has 754 cups in it so dividing
2:08
by four to get the full cups there are
2:11
18 and 3/4 cups of flour in this bag if
2:14
the bag of flour costs $5 each cup of
2:17
flour is going to cost 5 divided by 18
2:20
and 3/4 which is 26 if your recipe uses
2:24
2 cups of flour that will cost you 26 *
2:27
2 which is 52
2:30
repeat that process for all of your
2:32
ingredients you might be shocked to see
2:34
how much your ingredients cost per cake
2:36
perhaps just the ingredients add up to
2:38
more than the price of a huge sheet cake
2:40
at a grocery store or supermarket and
2:42
we'll talk about why that's important in
2:44
a minute if you use a spreadsheet to
2:46
calculate your costs instead of just
2:48
writing them down you can calculate the
2:50
cost of all of your recipes in minutes
2:53
if spreadsheets give you anxiety skip
2:55
ahead in this video to 5 minutes to make
2:58
a cost spreadsheet start start with the
3:00
ingredients in one column and the price
3:02
in the next make sure you don't include
3:04
any currency symbols in the same cell as
3:07
the price so put dollars or Pounds or
3:09
whatever currency in a different column
3:11
and then write your prices out just
3:13
using numbers in the next column type
3:16
the total size of the package this could
3:18
be 12 for a carton of eggs or
3:21
4530 for a 4.53 kg bag if you're using
3:25
grams to measure your ingredients in the
3:28
next column calculate the cost of one of
3:30
that ingredient 1 gam or 1 o or one
3:32
teaspoon or one tablespoon or one egg
3:35
use whatever measurement your recipe
3:36
uses for that ingredient it doesn't have
3:38
to be the same for all of the
3:39
ingredients on your list to calculate
3:42
this type equals and then click on the
3:44
price then press the slash for divided
3:47
by and click on however many grams
3:49
ounces teaspoons tablespoons or items
3:51
are in the package and press enter or
3:54
return do this for all of your
3:55
ingredients and I have a template for
3:57
this spreadsheet with all of the
3:58
formulas already in in puted which I'll
4:00
share in a second now in the next column
4:03
type however many units you need for
4:05
your recipe 600 g of sugar 3.3 cups of
4:08
flour but don't include measurements
4:10
like grams or tablespoons in the same
4:12
column use a different column now in the
4:14
last column calculate the cost of the
4:16
ingredient in your recipe type equals
4:19
the cost of one unit and then multiply
4:22
with shift 8 and then click on the
4:24
amount you need for your recipe and then
4:26
press enter or return voila after you've
4:29
done the this for all of the ingredients
4:30
in your recipe go to the bottom of the
4:32
list of ingredients and all the way to
4:34
the final column and underneath it type
4:37
equals sum then a bracket or parentheses
4:40
and then click on the top cost and drag
4:42
all the way down to the bottom one to
4:44
highlight all of the costs for that
4:46
recipe and then press enter or return
4:48
and that's the total cost of all of the
4:50
ingredients to make that recipe I've put
4:53
the link to my spreadsheet in the top of
4:54
the screen and in the video description
4:56
which you can download and fill in using
4:58
your own ingredient price es and recipes
5:01
the other direct costs to include are
5:03
the cost of a cakeboard the cake box and
5:05
any other packaging supplies too I'll
5:07
talk about Custom Cakes and deliveries
5:09
in a moment you might be thinking there
5:12
are a lot more costs to making a cake
5:14
and you're right those are coming up
5:16
next starting with indirect costs
5:19
indirect costs are the things that
5:21
aren't going to be boxed up and given to
5:23
your customer but still play a part in
5:25
making it possible to make your cake for
5:27
example gas or electricity f your oven
5:30
and a cake fridge if you have one your
5:32
rent if you rent a space for baking or
5:34
selling your cakes driving to buy your
5:36
baking supplies and buying a bigger
5:38
mixer to make your cakes well come back
5:41
to the mixer and any other Investments
5:43
you make to be able to make your cakes
5:45
for all of the other indirect costs that
5:47
are necessary to make your cakes make a
5:49
list of them and also how much each one
5:51
costs per month then work out how many
5:54
cakes you sell each month which could be
5:56
an average of how many cakes you sold in
5:58
the last 6 months
6:00
now it's time to spread out your
6:01
indirect costs between your cakes so
6:04
that you include them in your prices for
6:06
example if you need to drive to Costco
6:08
once a month to buy your baking supplies
6:10
and you estimate that the fuel for your
6:12
car is going to cost $5 and you make
6:14
five cakes a month that's a $1 cost
6:17
added to each cake you make if your gas
6:19
or electricity or water costs are $20
6:22
higher on the month's you make cakes and
6:25
again let's say you make five cakes a
6:26
month that's $20 divided 5 which is a $4
6:30
cost added to each cake this sounds
6:32
trivial because the numbers are so small
6:34
but everything adds up for Investments
6:37
like a bigger mixer first think about
6:39
how long you're planning on using it for
6:41
if it's 5 years divide the cost of the
6:44
mixer by 5 years and then divide that
6:46
number by 12 to calculate the cost of
6:48
one month divide that by however many
6:51
cakes you sell in a month now you've
6:53
spread out the cost of that mixer
6:55
between every cake you sell for the next
6:57
5 years approximately at least the next
7:00
thing to include when you price your
7:01
cakes is the cost of your time and you
7:04
might be thinking that you don't need to
7:05
charge for your time because you enjoy
7:07
making cakes or you're at home anyway
7:10
but if you weren't making a cake for
7:12
someone else you could be doing anything
7:14
else you wanted to do that day so when
7:16
you're dedicating time to making a
7:17
specific cake for someone else you need
7:19
to include that time as a cost of that
7:22
cake you might start by charging the
7:23
minimum wage in your area say $10 an
7:26
hour and if you figure out that the
7:28
baking and frosting and decorating will
7:30
take you 4 hours you'll add $40 to the
7:32
price of your cake But as time goes on
7:34
and your skills improve you might
7:36
increase your hourly rate and with that
7:38
you'll increase the price of your cakes
7:40
before moving on to the final part of
7:41
the price the profit let's talk about
7:44
how to price Custom Cakes and deliveries
7:47
Custom Cakes are a little bit different
7:49
only because you have to consider the
7:50
additional cost and time of any custom
7:53
details of that cake if someone wants a
7:55
particular cake topper that you'll have
7:57
to order and pay for shipping too that's
8:00
a direct cost which should be included
8:02
in your price if someone wants a layered
8:04
stencil design that you'll have to chill
8:06
in between each color and the design has
8:09
10 colors estimate how much time that
8:11
custom design will take and multiply
8:13
that by your hourly rate when I had a
8:16
cake shop I had set prices for simple
8:18
decorations more elaborate decorations
8:20
and very elaborate decorations based on
8:23
how much time I thought the decorations
8:24
would take me to make which saved me a
8:26
lot of time pricing out the decorations
8:28
individually for each cake order I would
8:31
add on the cost of any special materials
8:33
like an icing sheet for example it was a
8:35
quick way of doing it but I've also
8:37
worked at bakeries where they have set
8:39
prices for every single detail for
8:41
example they charged for each color used
8:43
on a cake and for the percentage of the
8:45
surface area of the cake that would be
8:47
covered with decorations and they had
8:49
different prices for a beaded border
8:51
compared to a ribbon border charging for
8:53
each detail added to a cake will give
8:54
you the most consistent and accurate
8:57
pricing but it's also very time
8:59
consuming to prepare a cake quote with
9:01
that method especially if the customer
9:03
wants quotes for a few different designs
9:06
back to my comment earlier about cakes
9:07
from supermarkets or grocery stores a
9:10
custom cake is obviously very different
9:12
because the ingredients are better
9:13
quality and the style of decorations is
9:16
very different and much more
9:17
personalized so don't panic when you see
9:19
that your costs are going Way Beyond the
9:21
price of one of those cakes you're
9:23
making and selling something completely
9:25
different and the price will reflect
9:27
that people know or should know that the
9:30
price of a cake will be a lot higher
9:32
when it's a custom cake that's homemade
9:35
or from a small business or from a
9:36
high-end Bakery for deliveries you'll
9:39
need to incorporate your costs which are
9:41
your gas or petrol and the wear and tear
9:44
on your car if you want to calculate an
9:46
estimate of that if you're in the US
9:48
there's a standard mileage cost for
9:50
employees to cover both of these then
9:52
you'll need to include your time which
9:54
is your hourly rate multiplied by your
9:56
estimate of how long the delivery will
9:58
take including sat up if necessary the
10:00
final thing to add to your price is
10:02
profit your price so far covers the
10:05
costs of making a cake the direct costs
10:07
indirect costs and labor but adding on a
10:10
percentage of profit is essential to be
10:12
able to grow your cake business so that
10:15
you can invest in new tools any training
10:17
or courses you'd like to take marketing
10:19
like social media posts hiring someone
10:22
to help you and maybe saving up to rent
10:24
a commercial kitchen or a storefront it
10:27
sounds like a great idea but how do you
10:28
know how how much profit you should make
10:30
on each cake this might be somewhere
10:32
between 20 and 40% depending on your
10:35
experience and your location and this is
10:38
where your competition comes into play
10:40
it's a good idea to look around and see
10:41
what your competitors are charging how
10:44
much similar cakes cost in your area
10:46
obviously a supermarket or grocery store
10:48
cake isn't going to be the same price as
10:50
a custom cake and a buttercream cake
10:53
probably isn't going to be the same
10:54
price as a fondant cake and a cake in
10:56
New York City or Los Angeles is probably
10:58
going to be more expensive than the same
11:00
cake in a small town because costs in
11:03
those cities are so much higher so look
11:05
around to find local cakes that really
11:07
are similar to yours and compare your
11:09
prices to those then see what percentage
11:12
you can add to your prices to be similar
11:14
to those okay here come the mathematics
11:17
if you've already set your prices you
11:19
can calculate what your current profit
11:21
margin is by using the costs you've
11:23
already calculated and the prices you've
11:25
already set your profit is the price
11:28
minus your costs divided by your price
11:31
time 100 to make it a percentage so if
11:34
your cake price is $50 and it costs you
11:36
$40 to make that cake your profit is
11:39
50us 40 which is 10 divided by your
11:42
price $50 which is 0.2 * 100 to make a
11:47
percentage 20% profit to do this the
11:50
other way around if you know your costs
11:52
are $40 and you want to make a 20%
11:55
profit flip the formula around to do the
11:57
opposite start with your desired profit
12:00
and divide by 100 So 20% divided by 100
12:04
0.2 take that away from one which for
12:07
this example is 0.8 then take your costs
12:10
$40 for this example and divide by 0.8
12:14
to get the price you should charge $50
12:17
which will give you a 20% profit I
12:20
really hope this has been helpful I
12:21
think the key points to remember when
12:23
you're pricing your cakes are firstly to
12:26
know your value you're not making a
12:28
th000 generic cakes in bulk each day
12:31
using cheap ingredients you're making
12:33
good quality personalized or Custom
12:35
Cakes and you can charge a lot more for
12:37
that if you don't calculate your direct
12:40
and indirect costs and if you don't
12:42
include your time you're losing money
12:44
when you sell cakes and if you don't
12:46
include a profit margin in your prices
12:48
you won't be able to save money to
12:50
invest to grow your business or to cover
12:52
unexpected costs along the way please
12:55
use the comment section to ask me any
12:57
questions about this or tell me about
12:58
your your cake business a success a
13:01
struggle or what stage you're at and if
13:03
you want to improve your cake decorating
13:05
skills visit my cake school on British
13:07
ges.com to learn hundreds of cake
13:09
decorating techniques and designs
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