How to Price Your Cake Decorating Business, Part 1

It can be quite daunting, when you are starting out in the cake decorating business, to set and ask for a price for your product. If you just want to do cakes for friends and family because you enjoy it and you like to do them a favour, no problem. Maybe they cover the costs for you, maybe this is your contribution to the celebration – whatever you want to do is fine - but if you are serious about turning your craft into a profit making business, or at least a self supporting, money making hobby, then you need to get serious about working out how to price your creations. It is important to keep two things in mind when doing this:

1. Be confident in the quality of your product, and don't be afraid to set a price that you think truly reflects the time, effort, and expertise that goes into its creation.

2. It costs you money to make, and you need at the very least to cover this cost.

When you start charging people who have traditionally received your services for free, some will accept it, some will be indignant, and some – believe it or not – will laugh at you. It's human nature – there will always be someone who resents people who they think are setting themselves up as being in some way superior – like asking for payment for something they have always done for free. I am reminded of a story I read a while back in a biography of the Rolling Stones: a woman was interviewed who knew Mick Jagger before he joined the band. She said "We all laughed when Mike Jagger changed his name to Mick because it sounded more rock and roll, we thought it was pretentious and he was getting ideas above himself." Nearly fifty years and hundreds of millions of record sales (and dollars!) later, Mick Jagger is one of the most famous men ever on the planet, and his name is synonymous with rock and roll. He is an icon and will be remembered for centuries, yet unbelievably, this woman is still laughing at him! Go figure.
(Check out the You Tube clip to see why Mick Jagger is such a legend!)

The point is – if you are confident in your product and service, then you are entitled to expect payment for it, and anybody who has a problem with this does not deserve to have your product or service.

So, now that you are confident enough to be offering your cakes to the market, the first step is to work out how much the cake costs to make. Quite simply, you need to calculate - to the cent! – the cost of every single ingredient that goes into it. Weigh everything exactly, and don't overlook something like food colouring because it seems too insignificant to bother with. Everything costs money, and even little bits add up. As my lovely old Scottish Grandma used to say "If you look after the pennies, the pounds will look after themselves." I wish I had taken more notice of her!

And don't forget – it is not just the edible ingredients that cost money. Electricity (or gas) to run your oven, and any other electrical appliances you use, cleaning products and equipment, telephone charges, rental of premises if you are not working from home, petrol for deliveries, printing of promotional material, an internet connection for your website and e-mail, tools you use for baking and decorating – there are a lot of peripheral expenses that are easy to overlook, but will end up being a significant part of your expenditure.

Whatever you do – make sure your business is paying you – not costing you money. In tomorrow's post, we will look at pricing from a market research perspective – how much you need to charge versus how much the market will pay.