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What Should I Charge?
Wednesday, April 24, 2013 9:36:17 AM America/New_York
There are several schools of thought on both. Here, I will approach the dummy tiers question. First, some would take offense to calling them "dummies". I don't think they are very sensitive, so feelings likely won't get hurt if you call them "dummies". On the other hand, presenting to a client should always be done with taste, so it might come across better to refer to them as "Faux Tiers" (those unfamiliar with French should remember to pronounce that "foe", not that anyone here is a dummy. :) It also sounds a little classier than "fake tiers". Loftier language tends to fetch a better price! So, to the issue. I wouldn’t try to get your dummy tiers back, so include them in the cost. There are so many nooks and crannies for bacteria to hide in the styrofoam, no matter how well you wash them, you risk contaminating cake that your next client will ingest. NOT worth the risk. If you insist on getting them back to save the money, PLEASE don't use them on a real cake. Use them ONLY for display cakes. So, my opinion, charge for them, and say goodbye. How to charge: At the very least, your cost (dummies, boards, box, icing, fondant, pearls, whatever else is going on them) should represent 1/3 of what you charge your client. So, for example, your cost is $20. The cost to your client should be $60 by basic theory. The second thing you need to consider is how much time it will take you. Lets say one tier will take you 4 hours to cover and decorate. That means that extra $40 paid you $10 an hour for your labor. If you’re good with that, end of story. If you want more per hour, calculate that and charge more. Another school of thought on the whole dummy (or Faux) tier issue is that the only thing you are saving money on by using them is the cost of the ingredients and the time to mix and bake the cakes. As you get more experienced, you get more efficient, and that time gets quicker. Alot of people feel that by providing dummies, that they are undercutting themselves on the sale of cake! For that reason, alot of people will offer NO discount for dummy tiers. If a 12" cake serves X amount of people at Y dollars per serving, then, by golly, that 12" dummy tier will be the same cost!!! I can't tell you what to do on that issue - that is a business decision that you will have to make for yourself. The BIG question: What should I charge for my cakes? That is always such a loaded question, because so much goes into it!!!! The basics should start with the same concept of how you charge for dummy tiers: Figure your cost first. Don't know exactly how much? FIGURE IT OUT!!!! Any business should know what the cost of an item is!!!!! If you paid $4.00 for a sack of sugar, figure out how many cups of sugar you get out of it, and divide that by the cost. When you use 2 1/2 cups of sugar in your recipe (or better yet, go by weight because it is more accurate), now you know how much it costs per cup. Don't forget - PRICES OF INGREDIENTS CHANGE!!! Keep a check on them! Do this for all of your ingredients- it is time well spent to know what you spend on your ingredients. This should also be done for what you spend at Sweet Wise: your colors, boxes, boards, flavorings, etc. that go out your door with each cake. In addition to that, you have to put in the cost for production and delivery (the electricity for mixing and baking, as well as any fuel cost for gathering ingredients and delivery). The last three things to go into the cost of a cake are the most difficult: your capital investment, your educational investment, and your labor. (There is overhead, too, but should we deal with that in a separate issue because this is getting lengthy?) 1. Capital investment: You paid good money (and probably the bigger investment for you) for your tools: Cake pans, silicon molds, decorating bags and tips, that clay gun, etc. Should you NOT make money on that investment? Yes, you should. The difficult part is knowing how to divide it up. I can't say how many uses you will get out of that cake pan. 50? 100? 500? The theory is to guesstimate it, and then put that into your cost. (Here I will sneak in a little about overhead: Assuming you are a licensed business, those costs need to be incorporated, too: Rent, insurance, internet service, the cost of the licenses themselves, etc. : ****This gets complicated. Stay tuned for a youtube video on our channel, with great input from my husband John, who is a very talented CPA. He knows the cake business, and he has a great accounting pedigree, as well (insert proud wife's brag here: graduated from Maryland, Cum Laude, in 2 1/2 years, recruited by Big 6 firms, worked for Ernst & Young right out of college. He will make me delete that as soon as he sees it because he doesn't like his horn tooted :) Seriously, though; stay tuned for the video. He has great input on this issue, and will give good guidance on finding the right person to keep your books as well!). 2. Educational Investment: Same thing; you paid good money to travel to a class, invest in the materials, the tuition of the class was X. Just as a doctor spends alot of money going to medical school, investing his or her time into learning new skills and practicing to perfect them, so does a cake decorator (okay, not neck and neck, but you get my point). You should charge for that, because now you are a more gifted cake decorator, perhaps, than someone who did not invest in that education. Again, there isn't a rule on what percentage to charge for that, but it is something you HAVE to consider. The variable here is that 2 students could go to the same class, invest the same amount, and come out with two different results. Some people are just better decorators than others. Don't trust your family and friends as to whether your skills rank up there with the best. THEY WILL LIE TO YOU. "Oh, honey! You need to go to a Cake Challenge! They've got NOTHING on you!!!!" Sound familiar? It may or may not be true! 3. Your labor. I know from experience that some people work faster, or more efficiently, than others. What might take an experienced baker two hours to do, a rookie might take 12. Does the customer sufffer for that? Maybe, maybe not. Your duty as a cake decorator and good business person is to work efficiently, so that you can offer fair pricing. This also puts less strain on YOU. I've seen alot of decorators get burned out because they were working so hard, so many hours, and the profits didn't balance what they were putting in. You have to know how fast you work (let's say, mixing the batter, washing the pans and prepping for the next round, covering a cake in fondant, or piping scrollwork on the cake, making flowers, etc.) so you know how much to pay yourself. As you become concious of how much time you put in, you will move a little more quickly. Make a goal to KNOW what that time is, and then decide how much you are worth per hour. See? That's the last difficult question: Although your family and I think your are priceless, you have to be real with yourself: How good, really, are you at this? Do your cakes have puckers at the bottom, is your piping crooked like a 1st grader's? Are they, instead, flawless and beautiful? We have all taken the liberty of replicating a "magazine quality" cake. It's how we practice and challenge ourselves. Did it look just like it, or was it a poor copy? You have to put yourself in the shoes of your client, and ask yourself what you are worth. As you come to that conclusion, and you have figured out how much time it takes you, you have a hard and fast answer as to what to charge for your labor: X hours of work times Y dollars an hour= $Z for labor cost added on to the other things we discussed above. Do you own your business and have someone else actually making the cake for you? You just made $0 because the rest of it was cost. Now you need to factor in profit. Maybe your hourly labor makes $8 or $10 an hour, or more. How much profit should you factor in for yourself? Should you pay yourself by the hour or by the cake, say for every $100 cake you get $10, or $20, or more? Each question has a different answer for every business owner. I am just giving you the questions to ask yourself! So, as you venture further into turning your hobby into profit, let me recap what should go into what you charge: 1. Food cost 2. Cost of materials (cardboard, dummies, pillars, etc. that go with the cake) 3. Cost of production and delivery (fuel and electricity) 4. Capital Investment 5. Educational Investment 6. Labor This is SUCH a hard question to answer for people, because in the end, I didn't give you an answer, like $5 a slice. That's too easy, and I can't make that rule. Consider the things I mentioned above, and please take this into account: If there is one thing I can advise you to do, is stay away from the emotion involved. That means, "Oh, this person doesn't have alot of money, so I'll charge them less. Oh, I would only pay $20 for a cake at the grocery, so that's what I'll charge for this cake that I just put $35 of cost and 8 hours of my time into. Oh, people in this area won't pay that much for a cake." What you end up doing is either losing money or making $.75 an hour. That being said, I won't beat anyone up about doing that! If it's a hobby, and something that you love doing, and don't need to make a profit at, more power to you! Love it, enjoy it, feel good about it!!!! YOU and you only are in charge of what your cake is worth. Just don't let anyone else, especially the customer, decide that for you! I hope this helps you with some factors to consider in your cake pricing! Good luck!!! ....and stay tuned for a FREE video on how to price your product!
Posted in Kathy's blog