David Dirks Director, Global Market Development Satin Fine Foods, Inc.
One of the most challenging aspects of the bakery business is finding the right pricing strategy. At the many bakery shows I’ve attended over the years, this seems to be a key challenge in the context of pricing your products/services so that you actually can justify your time and expenses. Many cake decorators who do exceptional work, do it because cake decorating is their passion and it’s displayed in the quality of their work. I’ve asked many decorators what they ended up making per hour per project – and often I get either blank stares or the standard answer of “not enough”. It shouldn’t be that way.
Here are some guidelines to help you formulate a pricing strategy that allows you to cover expenses and pay yourself a living wage.
- This is about business, not just passion. Passion alone doesn’t pay the bills. It drives your creativity and inspires great work, but it’s your business model that earns you a living.
- Establish your current profitability baseline. How much are you paying yourself – outside of your ingredient costs – to actually bake and decorate your cake projects? Above all other expenses that are the cost of doing business - it’s the labor hours it takes to make a cake project from start to finish that often gets overlooked.
- Set a target labor rate per hour to pay yourself so you feel your getting paid for your time, expertise, and skills. Let’s say it takes you six hours from start to finish for a wedding cake design your customer wants. You charge $200 and let’s just say for arguments sake that the ingredient costs are $20. That means your labor rate is approximately $30.00 per hour ($180 divided by 6 hours). Is that enough to earn the living you need? Nothing is more discouraging than to let great work go out the door and you left feeling that you received wrong end of the bargain.
- Be prepared to turn work down if needed. This is tough one to digest. It doesn’t seem natural to walk away from potential business but it is a costly mistake to take on business that is entirely unprofitable consistently. There will always be customers looking want the absolute greatest work at the least price they can pay. They don’t care about your electric or car payments. Their goal is to get your great cake as cheap as they can. One excellent cake decorator I know has some specially designed “budget” cakes that she can offer customers who want a celebration cake that is better than an in-store bakery cake at a reasonable price. Be able to walk away if you can’t profitably make money on the cake project. Find customers who appreciate the distinctive custom cake you are building for them and are willing to pay a fair price for your time.
- Build efficiency into every aspect of your cake decorating business. Learn and incorporate production techniques into your operation as much as possible. The more you learn on how to lower your operating costs – including your labor effort – the more profitable your business will be. For example, if you know you are in a holiday season and there are common decorations or figurines that could cover multiple holiday cake/cupcake/cookie designs, make them in advance in larger scale production.
Making sure you are paying yourself a fair wage for the amount of hours you spending building customized celebration cakes is the key to long-term success.
By David Dirks, Director, Global Market Development at Satin Ice. He is the author of “The New Marketing Analytics: A CMO’s Guide to Harnessing Traditional & Big Data To Drive Business Results”. Dave can be reached at email@example.com.