How to avoid being The Cheap Cake Lady

Posted on May 17, 2019May 16, 2019 by lkern777

Most of us do not go into the cake business to be “The Cheap Cake Lady”. I would imagine that it usually happens completely by accident.

For me, there were several things that caused this phenomenon.

I needed a portfolio

In the beginning, I wanted to take every job I could just to get the experience and build up a portfolio. My family and I could only eat so much cake and I didn’t have the money to waste on ingredients that I wasn’t getting reimbursed for, so making cakes to give away to various people was not a good option for me. So my solution was to charge for just enough to cover my costs to get the “exposure”.

The problem with this is that I had plenty of people willing to “give me a shot” with their celebration cake, but they got accustomed to paying very little for very elaborate cakes. It was next to impossible to maintain these customers as repeat customers after I started charging for my time and overhead when I built my commercial kitchen and went legit.

Estimating my time

Almost every cake that I did was some new-to-me technique. This was several years ago, so there weren’t so many tutorials, free or paid, online and other cake decorators definitely were not as helpful as they are now. It was very much trial and error to give someone a quote that includes the time it takes to decorate when you have never tried the technique. For me, most of the time I severely under-estimated the time it would take to complete the cake.

Nowadays, there are lots of resources for determining how long a technique will take. Asking in Facebook groups and looking up YouTube videos for particular techniques can help you avoid the pitfalls of quoting a cake without having made one just like it prior.

My client sent me this photo as the cake that she wanted for her wedding. (Sorry for not giving credit to the original creator of the cake, but I was unable to find who made it.)

This border!

I thought there would be a mold for that.
Time was estimated based on a single mold.
Each piece was molded and placed individually.

Estimating Time

Cake Pricer spreadsheet calculates time for making and baking your cakes, fillings, and icings, but you have to estimate your decorating time manually.

In this case, I severely under-estimated how long it would take to do that border. Plus, since it was not a single mold to make those shapes, I had to purchase 2 separate molds to make the different sizes. I should have researched a little further before giving a quote to the client.

so how do you track your time?

If you have never done a particular style, you will pretty much have to guess or ask other decorators how long it takes them. Keep in mind that skill level plays a large part in how long it will take someone to perform any task. If you are asking someone else, ask them how long it took them the FIRST time they did it. If it is going to take you 30 hours to do a technique and you feel like you can’t charge a customer for that many hours, then maybe you need to evaluate whether or not you should do that cake at all.

I tend to make cakes for my family using new techniques, that way I can track my time and know how to quote it to someone else if needed. I have all boys in my house, so I don’t get to do many girly cakes, but occasionally I will do a cake for a niece or aunt or my mom that allows me to try new styles more suited to the ladies.

I track my time on all of my cakes, for every aspect of the cake, just to know if I am estimating correctly, and also to double-check the time inputs in the spreadsheet where it relates to recipes. I don’t make cakes for the general public any more, so I don’t make as many cakes per year as I did when I had my shop. If you make many cakes per week or even per month, you would not need to track every cake because you would probably do the same design multiple times. It’s up to you as to how often you want to track how long it takes you to complete a project.

I have an android phone, so I use an app called Gleeo Time Tracker (https://gleeo.com) it is free, and easy to use. I’m sure there is something similar for apple devices.

Pricing basics

There are 4 main parts to pricing your cakes and all of them are important if you want to stay in business.

Ingredients/Materials Cost
Labor Cost
Overhead Cost
Profit

Everyone typically covers the ingredients & materials costs when quoting, but a custom cake is much more than just the ingredients. It requires a LOT of skill and a lot of time. Just because you love what you do, doesn’t mean that you should do it for free or for less than a minimum wage.

You should remember that you are running a business. You probably don’t negotiate with the person who cuts your hair or fixes your car and you shouldn’t allow people to negotiate your prices.

Ingredients & Materials

This is all of the ingredients, cake boards, cake boxes, supports, gloves, icing colors, etc. that you use up when you make a cake. If you pay sales tax when you purchase these items, your cost calculation should also include the tax you paid.

Labor

This is all the time you spend making the cake, but it is also all the time you spend planning, shopping, making templates, and cleaning up. Do not short-change yourself on how much time you spend working on a cake. This is time away from your family. Make it worth it.

overhead

This is things like rent, utilities, loan repayment, health dept fees, tools replacement, etc.

Even if you are a home-based business, you need to account for the extra water and electricity you use making cakes.

profit

This is what is left over after all the ingredients/materials are purchased, your bills are paid, and YOU are paid. This is what will eventually allow your business to grow. I started out adding a 20% profit and then upped it to 30% after my skills improved. You can be a little flexible here if you have accounted for all of the other items.

See below for an explanation of how to calculate profit.

calculating profit percentage

Here is the math behind calculating profit. Luckily, the Cake Pricer spreadsheet calculates this for you. All you have to do is choose what percent profit you want and enter it on the Preferences sheet. You can also adjust it on the fly on the Pricing Details sheet where the final price is calculated.

Markup percentage is the amount of markup divided by the cost.

So, if your item cost a dollar and you sold it for $1.50 your markup percentage is 50%.

Margin is the amount of markup divided by the total retail price, so your margin on that item would be 33%.

An easier example to understand is for 20% profit. 20% = 0.20.

Take 1 minus your profit % to get the number to divide by. So, for 20% profit you have to divide your cost by (1 – 0.2) = 0.8.

So, if your costs are $60 then price = $60 / 0.8 = $75.

Cost: $60
Price: $75
Profit: $75 – $60 = $15
Profit %: 15 / 75 x 100 = 20%

flexibility & confidence

In the end, you have some flexibility in your pricing. In this example, I entered all of the ingredients, materials and overhead for the cake in the picture (my version of what the customer submitted to me above).

My standard hourly rate and profit amount are $20/hour and 30% profit. That made the total price $935.00 with a price per serving of $6.37 (145 servings).

I can adjust that price up or down by adjusting the hourly rate or the profit percent. In this example, with everything else the same as above, I changed the hourly rate to $15.00/hour and the profit amount to 20%. This lowered the total price of the cake to $653.00, making the price per serving lower to $4.52/serving.

I did not ever allow my customers to negotiate my pricing, but before I sent them a quote, if I felt like it was pricing out too high, I would play with the hourly rate and profit percentage to see how it effected the price. If I really wanted the job, I might adjust to the lower amount. But the point is, that I made the decision with confidence, because I knew that I had control of how much I was going to make on any particular cake.

A big thing to remember is that custom cakes are a luxury item and not everyone is your customer. Don’t feel guilty charging prices that make it worth your while to take the job. I made more money the last year I was in business by charging what I felt I was worth. I didn’t win as many orders, but the orders I did win were priced to make me money and everyone was happy.

Why I never quote per-serving prices.

Posted on October 28, 2018April 7, 2019 by lkern777

When bakers post on a forum, “What would you charge for this cake?” I often see people post that they would charge $x.xx per serving. I never quote a customer by a per-serving price for several reasons.

Smaller cakes cost more per serving

Just like in a grocery store, a smaller size of the same item cost more per serving. If you quote a per-serving price, the customer can just lower the number of servings needed to lower their price, but the cake itself may take you the same amount of time and only slightly less ingredients to produce.

The cake in the picture above was 10″-6″-4″ cakes, which serves 56. If I price the cake using Almond Cake with American Buttercream filling, the price would be $349.00 or $6.23 per serving.

If I change the sizes of of the cakes to 12″-9″-6″ cakes (and the associated boards to hold the larger cakes) it will serve 100, almost double the number of servings of the previous cake. But the price does not double. The new price would be $410.00 or $4.10 per serving.

This is because icing and stenciling the smaller tiers did not take any less time to decorate and the difference in time to bake the cakes is minimal. The amount of ingredients needed and the prices of the different size main board and cake boards is also minimal.

If you quote the customer $4.10 per serving and they don’t want to pay $410.00, then they can just ask for smaller tiers to feed fewer people. So now the first cake would cost $229.60 instead of $349.00. And your hourly rate is now $15.05/hour instead of $20.00/hour and your profit percentage went from 30% to 15%. While that is not horrible, it is an unnecessary loss of revenue.

Flavors matter

What is the difference in these two cakes?

I would price this cake $382.00 or $6.82 per serving.

strawberry cake strawberry jam filling

I would price this cake $292.00 or $5.21 per serving.

dark chocolate cake buttercream filling

Obviously this is 2 pictures of the same cake. But imagine that they have different cake flavors and fillings. If I quote a customer a per-serving price for a cake, based on the style of the cake and do not take into consideration what flavors they may choose, I can really hurt my bottom line. In the example above, I would be losing $90.00 on this cake if the customer chose the flavors on the right and I did not feel comfortable re-quoting them with the different flavors. Again, to get to the lower price, I had to reduce my hourly rate from $20.00/hour to $16.95/hour and my profit percentage to 20%. Not terrible, but who wants to take a cut in pay?

Experience makes a difference

When I first started selling cakes I did not take my time into consideration in my pricing because everything I did was new and it took me forever to decorate even a simple cake.

Even with my Cake Pricer spreadsheet, I have to estimate how long I think it will take me to decorate a cake. But since I have more experience, I can do that estimation with more accuracy.

When you ask someone what they would charge for a cake, they have no way of knowing your skill level. They may be able to hammer out a cake in a couple of hours where it might take you double that amount of time to complete.

In addition, when I started out I decided I wanted to charge $15/hour for my time. I knew I couldn’t charge for all of my time because I was slow and someone more skilled could do it much faster. So I estimated how long I “thought” it should take a skilled person to do the same cake and charged for that amount of time at the $15/hour rate. I also only charged for 20% profit.

After a couple of years I wanted to increase my prices, so I increased my hourly rate to $20/hour and my profit percentage to 30%. So, me telling someone else what to charge may be way more than their skill level supports.

After using the spreadsheet for a while, I set up templates for myself for generic cakes and quoted customers those prices as a guideline for what to expect. That way I didn’t have to do a formal quote for every potential customer. My quote would look something like this:

3-tiers (serves up to 74 if serving all tiers, 62 if saving top tier for the first anniversary)

6”, 8”, 10” round cakes, stacked construction

Traditional Wedding (Almond) Cake on all tiers

American Buttercream filling on all tiers

American Buttercream icing on all tiers

5/8” satin ribbon on all tiers (optional, but included)

Textured pattern: $340.00 + tax

Smooth or Stenciled pattern: $410.00 + tax

The price could possibly go up with any additions to design or changes in the flavors of the cake. I chose a cake flavor combination that was common, but not my least expensive option. It was also not my most expensive option. It was possible for the price to go down if they chose a less expensive flavor, however I presented this price as the starting point, so they would not be expecting a lower quote.

If you still want to use a per-serving quote to give your customer, you can figure out what your minimum price per serving should be by figuring out how much your recipes cost you and building generic quotes that cover your estimated hours, your overhead, and your profit. Then you can give your customer a MINIMUM price per serving and tell them, “A cake to serve 100 starts at $3.40 per serving, depending on the flavors you choose.”

Making sure that your customers understand that your price is a jumping off place, and not a formal quote is one of the keys to not leaving money on the table and under-pricing yourself.

Welcome to “What Would You Charge?”

Posted on October 17, 2018October 17, 2018 by lkern777

What would you charge?

This is our first blog post!

“What would you charge for this cake?” is a question that we see constantly on cake forums.

Unfortunately, it is a difficult question to answer. It depends on so many factors. It is very specific to your geographic area, your materials costs, your overhead, and your skill level, just to name a few things.

To help you understand the specifics of properly pricing a custom cake, we will be posting sample cakes that we have made in the past to show what we charged the customer at the time, what we should have charged at the time, and what we would charge today if we were to make the same cake again. We will use the Cake Pricer spreadsheet to price the cakes.

We will also explain the factors that went into the price so that you can see how using the spreadsheet can help you get a handle on your costs, as well as help you make more money in your business.

Screenshots of the spreadsheet will help you see exactly how much each aspect of the cake decorating process costs.

Our goal is to post the pricing for a new cake each week. Please check back frequently so you don’t miss a post!

Thanks for being here!

Leisl Kern

Owner, Cake Pricer