2017 Baking Business School 1
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1 2017 Baking Business School 1
2 Pricing your cakes, wedding cakes, cupcakes and more for business can be a big challenge. Just the thought of all those numbers and calculations sounds tricky! But honestly it is something you can master and will help you move your business towards success. There are many pricing model and structures, some very complicated, but I am going to narrow pricing your cakes into this simple 7 Step Formula you can use to price all your cakes. Here are the basics so you can make a start on pricing your cakes for profit. It is called The 7 Step Pricing Formula/ Pricing System 2017 Baking Business School 2
3 The 7 Step Pricing Formula/ Pricing System: Mindset + (Labour + Ingredients Costs + Sundry Costs + Utility Costs) x Profit = Total Cake Price 2017 Baking Business School 3
4 Step 1: Your Mindset Gaining control of our mindset is the key to unlocking your pricing struggle. Your Mindset is often the first hurdle we bakers have to overcome. We are very good at letting our own personal fear control our pricing. We are fearful of having no customers, we are scared of pricing too high or too low, we think we are not good enough, and to make it all worse we are actually fearful of pricing correctly! So you need to get your mindset right before you move on to the next step Baking Business School 4
5 Step 2: Labour Step 2 is labour, often the undercharged part of the cake pricing formula. However, when you know you are being paid a decent wage/salary then you making a cake becomes more enjoyable. But if you aren t getting any good wage, then it can be like a chore or a job and you will feel demotivated. You do not want to work for nothing. To help you gain a control on the labour aspect, make a note of what you honestly want your hourly rate to be. This can be anywhere from N500 N5,000 an hour. It all depends on you and what you think you are worth Baking Business School 5
6 If you are just starting out, you may charge N500- N1,000 an hour, When you start getting better in your skill level, you can increase your hourly rate to maybe N1,500 or N3,000 an hour. But let me tell you something. No matter what, we always never know our worth, so that is why, I will say, whatever the hourly rate you decide, increase it by 20%. If you are still unsure or feel it is too high, then just keep the rate as it is without increasing it by 20%. So now that you know your hourly rate. Next start to monitor how long each type of cake takes to create. Record everything, from the initial enquiry, shopping to the mixing, baking, cooling, cleaning, decorating, delivery, set up, etc. So if it takes you 5 hours to do a vanilla cake and your hourly rate is N1,000 an hour, then your labour wage/salary is N5,000. As you do this will you start to build up a spread sheet of times you take for different size cakes 2017 Baking Business School 6
7 Step 3: Cost of Ingredients I know this can be quite time consuming part. If you are making cupcakes or small individual cakes it is important to know the price of one so make sure you calculate every batch. So when you are shopping for ingredients, take note how much the eggs, flour, butter, margarine, etc costs. If you buy in bulk or a whole bucketful of margarine, you just need to calculate the unit cost. Let s say you buy 500grams of flour at N1,000 and you only used 50g of flour, then the cost of that is N100. The formula is: N1000 /500g x50g So use this formula for every ingredient you use. If this is too time consuming, then just come up with an estimate of how much your ingredients cost. And remember to cost out every single recipe and recipe variation you work with Baking Business School 7
8 Step 4: Sundry Costs or Extra Costs Similar to step 3 this is fairly simple to cost, and again. Sundry costs, are things like cakeboards, boxes, ribbons, dowels, etc 2017 Baking Business School 8
9 Step 5: Utility Costs I know calculating Utility costs are a little trickier to calculate as you have to look at your bills or think of an estimate or figure to cover your utility. If you get bills and want to be very accurate. Find your electricity bill or your meter, and water bill then calculate the total yearly costs. You can then calculate your daily or hourly costs. Daily Costs = Yearly total bill divided by 365 days Hourly Costs = Yearly total bill divided by 8760 hours in a year This is how you can calculate the utility costs per day or per hour (whichever you prefer). But how many of us have time for this, again if this is too much trouble, just come up with an estimate amount Baking Business School 9
10 Step 6: Profit If you want to grow your business this is the most important part. So far if you follow the process until this step you will be paying yourself a wage, covering your costs and not losing money. If you add this part this is where you will see your business grow. The profit will allow your business to grow without you sacrificing your wage. The profit is money that you can invest back into your business. So that you can afford that shop you want, buy new cake equipment, create a website, buy flyers, generally market your business, and outsource your bookkeeping, admin, etc. Do not overlook this step. How much profit you add to your cake pricing formula is your choice. But aim for at least somewhere between 20% 60% profit Baking Business School 10
11 Step 7: The Total Price The final step is calculating steps 2 6 (Labour + Cost of Ingredients + Sundry Costs + Utility Costs) x Profit = Total Cake Price 2017 Baking Business School 11
12 Practical Example, Bose of Bose Cakes and Bakes has an order for a 10 inch fondant vanilla birthday cake with small piping detail and a few fondant roses on an iced cake board and packaged in a box. Bose starts calculating: Labour N1,000 x 5 hours = N5000 Ingredients Costs = N2000 Sundry Costs = N600 Utility Costs = N450 Profit x 30% The Formula (N5000+ N2000+ N600+ N450) x 30% = N10,465 Therefore, the total price Bose will quote to the customer is N10, Baking Business School 12
13 So this is the 7 step simple formula I recommend you use to price your cakes. Once you have mastered this Formula, you can tweak it from time to time. Look at where you can save costs, think about increasing your profit percentage or your hourly rate and make sure to revisit your pricing structure every year or so to account for inflation. Remember your prices are not set in stone and this formula will grow as your business grows. If you find that your price is already higher than the market value you need to reduce your costs, find a new market, or both. However, please please please do not try to price your products below market value Baking Business School 13
14 The Easiest, Quickest Way to Price Your Cupcakes Add up ingredients + packaging, + add a percentage for your investment + add overheads + amount of time / divide by number of cupcakes = price per cupcake Simple! 2017 Baking Business School 14
15 Who Am I: My name is Rotimicakelady and I am a cake business coach that teaches cake business owners how to grow and have a profitable cake business so that they have a constant stream of customers buying their delicious treats. I have been running my own successful home based cake business for some years now. I have also been teaching bakers through my online courses who are struggling with low sales, with strategies on how to market, and price their cakes for profit. In addition I am also run a Facebook Group where I coach, offer support and help bakers in their businesses. I have helped over 50 bakers through my online course A comprehensive guide to starting your cake business in 30 days with much needed information on how to start a cake business in Nigeria. I also teach close to 4000 cake enthusiasts through my Facebook Group how to run a money making cake business Baking Business School 15
16 I have been featured in Naija Top Baker magazine, one of Nigeria s foremost cake magazines and also been a Guest Speaker at the Bakery World Convention. If you are struggling with getting customers for their cakes, I can help you solve this problem by showing you how to market, sell, price, plan, structure and brand your business so you are constantly selling to the right people who want your cakes Baking Business School 16
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