I get tons of questions everyday via Instagram and e-mail about myself, my business & how I got to where I am now.
But, this one question I’ve been getting at least 6 times a day...
“How do you know how much to charge for your products?“
I get asked this about 5 times a day. It’s a great question & I remember back when I was starting out, I was in search for this exact same answer too. You’re not feeling skilled/talented enough to charge actual money for your products. I was totally there, I get it & to be honest when I was starting out I wasn’t skilled enough to charge top dollar for my products either, looking back at some of things I made in the beginning (before I started my business) are slightly cringe-worthy. I’m glad I made those products for fun & not for profit. Isn’t this how anyone starts out? No one starting out at something is an expert from day 1, charging top dollar for their product. It takes time & it takes practice.
In the very beginning I started out making birthday cakes for friends & family in lieu of gifts. I also made treats for the local women’s shelter I worked at. Any opportunity to bring dessert somewhere or bake a cake, I was eagerly volunteering. By making cake for free, it allowed me to experiment with different techniques without the added pressure of trying to impress a paying customer who may complain & want their money back (I know you’re feeling the same way, so stick with me here & I’ll tell you how and when you need to start charging).
The awesome thing about cake is, it’s usually at a party or event & shared with the guests, this means free marketing! I started getting guests at the parties asking me if I would make a cake for them.
This is it.
When people start asking you to make something for them, this is when you start charging. They don’t even expect you to make it for free when they ask this. Infact, people don’t value things the same way when things are free. When there’s a dollar amount attached to something it always seems more valuable. Plus, they’ve seen your work, they know what to expect & they obviously like it or why would they ask? Am I right? Yes I am.
So how much to charge- is THE question!
When people started asking me, I felt like this would be a great opportunity to expand my skills and build my cake portfolio (which is really important by the way, more on building a portfolio in another blog), I will link to my current portfolio at the end of the blog. I had this great idea that I would only charge people for the cost of my ingredients which was a win-win at the time, considering I was originally doing it for free anyways and paying for my own ingredients. Now I would be able to have my ingredients paid for, and get some real practise with real customers! This was also a win for my customers because although ingredients can get expensive, it was no where near the full price that they would pay elsewhere. Plus, they asked. Win-win. Now, I felt like I wanted to impress them, but not terribly pressured that I couldn’t still have fun & experiment with techniques. So, I did that until I felt like I built up a decent portfolio that clearly displayed my skill & style, and that I was proud enough to show off ( I’d recommend having a gallery of at least 20 cakes).
Then I decided I would start charging for both the product & my time, after all if people saw my portfolio and wanted to order they clearly liked my work, what more confirmation do you need?
The math is fairly simple, you just add up all the cost of your products/ingredients (including utilities like electricity & water to bake and wash your dishes). Then figure out what your time is worth (maybe you work somewhere else and make $16/hr & just want to make the same as you do at work, maybe you want to keep it lower at minimum wage until you’ve had more practice, either way, how much your time is worth is up to you). Then figure out how long it takes you start to finish to make the batter, bake the cake, make the icing, do the dishes, decorate the cake & clean up.
I started out where you are, with the same questions, feeling the same feelings and I learned how to do it successfully. I feel like it’s part of my purpose to share what I’ve learned & help teach other home bakers, bakery business owners (or moms who just want a little extra cash on the side) how to do it quicker, better & more professional from the start.
I recommend doing some research in your local market to find out how much money other reputable bakeries are charging. Once you have an idea, you’ll need to decide if you want to be at the higher end of that market, lower end or right in the middle. Both higher end and lower end markets have pros & cons, you’ll want to see where your products fit into your local market! If there are a lot of high end bakeries in your area, you may be better off differentiating yourself & going in on the lower end and capitalizing on the market that the higher end bakeries are missing out on by making simpler cakes that dont cost a lot of your time. Do not try to go in on the lower end market and make elaborate cakes for a low price. Not only does this undercut the market as a whole, but you’ll never be successful doing that because you’ll always be undercharging for your time. It’s a lose- lose.
A lower end market means cheaper cakes, that are simpler designs that you can make quickly & easily and therefore don’t cost as much to make so you can charge lower prices. The pros of being on the lower end is you will be able to sell more cakes by going this route since they’ll be affordable to everyone.
A higher end market means more elaborate cakes, that take more time & have more detail that cost more to make so you can charge higher prices. The pros of being on the higher end is you make more money per cake, the cons are maybe you don’t make as many cakes since they aren’t as affordable to everyone.
Being in the middle of the market means you charge a similar price for similar type products as most of the other bakeries in your local area. I don’t recommend starting out in this market because it’s a very competitive space. For example, if you don’t have a reputation yet why would a customer choose to pay for your products when they could get a similar product from a reputable bakery for a similar price? This market is good for established bakeries with a marketing budget to capitalize on these sales. It’s best to choose one end of the market and build your reputation from there, you can always decide to capture other markets later on.
I hope you’ve found this article helpful, I know you’re going to crush your goals because you’re here reading my tips on how I crushed mine! You’re investing in yourself by learning from someone who has been there & I believe in you!