Pricing a Cake: A Guide for Home Bakers

Aug 26, 2020
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Pricing a Cake: A Guide for Home Bakers

The most commonly asked question in the baking community is about pricing a cake. As home bakers, this question becomes harder to answer. That's because you can’t charge how much your local bakery or a chain store charges. There is no straight forward answer to cake pricing, but there are optimal ways for you to decide how much to charge. This article should answer any questions you have about pricing a cake. The one principle you should always remember in this regard is to never undervalue yourself and your work.

If you want an easy way of pricing a cake, we have an online course from Ashwini Sarabhai and a calculator on How To Price Your Cakes & Bakes which is available for purchase for Rs. 750 here.

If you are new to calculating all the components that go into pricing a cake - you should sign up to this online course from Ashwini Sarabhai, an award-winning cake artist. She goes into the details behind the different costs added, how to use the calculator from start to finish and how to customize it for your own needs. The Baker's Pricing Calculator ensures that the final price of your cakes takes into account the cost of ingredients, your time, other overheads, and whatever you would like to charge as a premium for your skill. It will help you quickly quote prices to customers and be rest assured that you’ll never lose any money ever again. The Baker's Pricing Calculator is tested and approved by Ashwini Sarabhai and other cake artists and cake makers in India. It's being used by over 200 home bakers to correctly price their cakes & bakes. You can get lifetime access to the course and the calculator for 495 only!

On what basis should I price my cakes?

A good way of pricing a cake is to consider all your costs. Ingredients and overheads are ones you will factor in regardless but don’t ever forget to value your time and skill. This is the number 1 mistake bakers make while pricing their cakes. Also, add delivery to your costs if your client is not able to pick up the cake from you.

Ingredients are straightforward to consider in pricing, as you can find the price you paid for all the ingredients. Overheads should ideally include electricity, gas and water. You should also be factoring in prices of special tools, such as a star-shaped pan that you had to buy for this order specifically. Delivery charges can usually be equated to taxi fare to and from your client’s location if you are doing the drop off yourself. If you are using a service, then their charges one-way is the right way to add delivery costs.

Are there other factors?

Valuing your time and skill is the hardest part. This will vary depending on whether you’re a beginner or an established baker in the industry. It also depends on the kind of cake you are making for the order. The price of a chocolate cake will not include a premium for skill, but making flowers out of sugar paste will. Find a fair price for your time, and price your skill depending on the difficulty level of your order.

After taking all of these into account, you will arrive at a total cost price of all the factors that go into making your cake. Above this, you will have to add a margin of at least 30%. Your goodwill - such as your brand name in the area, your speciality in making a certain type of dessert, etc, will play an important role in determining the maximum margin you can charge. For example, if you are popular for cake pops in your community, you can charge a higher premium because customers know you for cake pops and will be willing to pay higher. More importantly, it is fair to charge higher if you know you can make the best cake pops in your area.

Should I price my cake by using a formula like 2 or 3 times the cost of my ingredients?

This formula, for some reason, is really popular in baking communities across the world. Once you calculate your value fairly, you will realize that you’ve been underpricing your cakes, if you have used this formula before. The simple reason why this doesn’t work - it does not differentiate between a simple cake and one that requires a lot of customization. For example, if you are making a cake with intricate animal figurines out of fondant, just multiplying the cost of fondant by two or three does no justice to the time you spend making those figurines. This is why a simple formula like this will lead to losses for your business.

I’m not very good at math. Is there a way for me to automatically calculate my cake’s price?

It isn’t easy for every baker to sit down and calculate things on their own. Not only is it a question of math, but it is bound to take time which not everyone has. We have a Baker's Pricing Calculator (with a demo) which will help you easily arrive at the price of your cake every time. It takes into account the cost of ingredients, overheads, and your time. This takes a few minutes to set up and you’re set for life!

I’m a beginner and I feel like I’m charging too much.

Even if you’re just getting started, it is unlikely that you are charging too much. If anything, you can lower how much you charge for your time or your skills, but do not consider lowering anything else. Another important factor, never ever price your cakes much lower than the average price in your city or area. If you undercut your competitors, you’re bound to run losses and you will also face flak in your community. If you ever need baking help, your peers won’t be too happy to help you if you’ve been underpricing to steal their customers.

Do I charge by the number of servings or the weight of the cake?

In many countries, it is the norm to price cakes by the serving. It is similar to how bakeries sell cakes by the slice and not by weight. But in India, the industry norm is to price per kilogram. Sure, your customer might not know how big the cake has to be for their party, so they might ask you to make a cake to serve 30 people. But you will not price it as 30 x cake slice. Instead, you will approximate how many kilos of cake will be required and you will price by the kilo. Therefore, you should charge by the weight of the cake, even if you arrive at that number based on the information your customer gives you.

Do I charge for the weight of the cake only or the total weight, with icing and decoration included?

It is first important to decide how you will weigh your cake. If your client asks for a 2 kg fondant based cake with decorative figurines, you should make sure that the cake + icing adds up to 2 kg. The figurines will not count in the final weight of the cake because they are primarily decorative, although they are edible.

But when it comes to pricing a cake, of course, you should factor in all the components that go into the cake. That includes the figurines and the fondant that you use to drape the cake throughout. The cost of the fondant and your time for making the figurines will have to be factored in.

Should there be a different pricing scale for wedding cakes?

Wedding and novelty cakes are a tricky bunch. Especially as a new baker, you might think that you shouldn’t be charging more for such cakes. But you should be charging a premium depending on the kind of decorations and intricate work that goes into it, not based on the occasion. For example, if a client asks for a simple cake for their wedding, you shouldn’t charge a premium. The price of a chocolate cake, for example, will be the same as long as additional decorations are not required. But if it is a three-tiered cake with edible glitter on it, of course, you should be charging for those details. And this policy should apply regardless of the occasion. A theme-cake, such as a PUBG cake’s price, will have to be higher than the price of a chocolate cake.

How can I learn more about prices in my area?

The best way to learn about local prices to help you with pricing a cake is to look at how your fellow bakers price their cakes. You can compare prices on homebakers.co.in, where we have over a thousand bakers from across India listing their products and prices! You will surely find many bakers from your city or even area, and you can better understand how to price locally.

Another good platform for the same is social media. Many bakers have a basic price list uploaded onto their social media profiles, mostly on Facebook and Instagram. Do not compare your prices to bakers who run studios or have their own bakery storefront, because their overheads will be higher than yours. At the same time, don’t compare your prices to local bakeries as they do not use quality ingredients or make them fresh on order.

Should I charge lesser than the local average if I can afford to?

Never charge significantly lesser than the local average price. You can price yourself slightly lower if you are a beginner and can’t offer certain types of cakes as other bakers can. But anything lesser than 5% (as a rule of thumb) of the prevailing price will be undercutting, which you will want to avoid.

Is it okay if my cakes aren’t as cheap as the local bakery or supermarket?

Some truths about local bakeries and supermarket cakes. They are never made fresh, they use sub-standard ingredients compared to homemade cakes, they have preservatives in them, and they are not as tasty (for the most part). Never compare your cakes to these because the final product is vastly different. And never try to price your cakes as low as these.

Will people pay a premium for home-baked cakes?

For sure. Keep in mind that most people buy cakes for special occasions and not on a weekly or monthly basis. They want the cake to taste good, and cost-cutting there is not on the top of their minds. When they taste a homebaked cake at a party, they’re likely to consider one for their own special occasion because they can tell the difference in taste. And the fact that it is made with good ingredients will only boost their confidence.

Should I lower my prices if I get feedback that I’m pricing my cakes too high?

The sad truth of selling cakes, or pretty much anything, as an entrepreneur, is dealing with such feedback. Don’t ever lower your prices because someone told you the price is too high. If you are sure you’re charging the right price, taking into account all the factors that go into a cake, you shouldn’t change your prices. For every customer who complains about your prices, you will have ten who will pay for it happily.

Should I worry about selling the cake or ensuring that I charge enough?

Definitely the latter. Your cakes will sell if you are fair to yourself. Selling the cake at a cheaper price will only see you losing money over time. If you gain the reputation of the person selling cheap cakes, it will be hard for you to increase your prices in the long run without losing customers.

How should I deal with friends and family who ask for free cakes or discounts?

This is a tricky issue. It really depends on how close you are to the person, whether they are always exploiting you, and also on your schedule. There are many ways to deal with this, and you will be the best person to decide. But if you ever see someone exploit you for free cake or realize that they are demanding, don’t hesitate to charge them for it or refuse their request.

Some of the common ways bakers handle this are as follows. If it is for an occasion where you would have to buy a gift, you could always bake the cake for free and make it the gift. But make sure to be open about this with the person to avoid disappointment later. You can bake cakes for free for your close friends and family. But if you have extended family or neighbours asking for freebies, you could instead offer them friends and family discount of 15 - 25%, or tell them to cover costs. If you don’t want to give them freebies and it is difficult for you to ask them for money, you could just refuse to take up the order.

by Akhileshwari Anand Raj

If you are interested in starting your own home baking business or want to learn more about the different strategies that go into it, check out our article on how to become a home baker.

Our masterclasses are all currently being held online, and we have brought on board several acclaimed home bakers and tutors to teach you these skills! You will find classes ranging from healthy baking to sharp edges with whipped cream tutorials. The upcoming events will all be conducted live. We also have video tutorials available for previously held masterclasses, which you can access here. Whatever skill you’re looking to pick up, you can find it here.