Price wars Part 1

Pricing is a difficult one. Everyone does it differently and seems to differ depending on which part of the country you're from. For example, cake prices here (and food prices in general) in Warwick are a lot higher than back home in Stoke-on-Trent. There's no way I could charge there what I charge here.

So how do you decide how much to charge? Its been important for me to look at the competition in the local area and figure out where I fit on the scale in terms of my target market and my skill level. I don't want to undercut anyone, there's no benefit in it in the long run, and I don't want to undercharge and end up losing money. If you start with low prices, its much harder in the future to up them, so aim high to start with. I'm self taught and have only been baking and decorating for about 5 or 6 years so I cant justify charging at the top end of the scale but I'm nowhere near the bottom of the scale either.

Now that Ive figured out what my local area offers and the price scale here, where I fit, who my target market is and what I think I could charge, how have I come to a decision about my prices?

Its taken me months and has been the one thing Ive gone over and over again and almost been in tears with because there are so many things to consider. It hasn't been easy.

First thing I tired to figure out was how others do it. So I took to google and typed in "how to price a cake". Let the confusion begin. Some people work out all their ingredient costs, price for boxes, boards, decorations etc they add on their utilities and then they add on their time at an hourly rate of their choosing. Others price per portion to come to a starting price for the cake. This is usually the price for it iced and finished with a ribbon. That price includes ingredients and all the other bits plus the time taken to make and bake the cake, trim it, fill it, crumbcoat it, ice it, ice the board, stack the cake and apply the ribbon. Decorations are extra. I work on a 3 day rule. Day 1: Bake, Day 2: Crumbcoat and cover, Day 3: Stack and decorate so you need to bear in mind how much you'd like to be paid for 3 long days work. I tend to start early in the morning and I quite often work late into the night on cakes and decorations. Its certainly no 9-5.

I chose the latter option of pricing per portion thinking it would be easy to find out how many portions are in a cake. Right?

Wrong! Portions guides are all different. If you look on google at portion guides they vary and some are not even close to what you could realistically get out of a cake. There are also lots of portion sizes and methods for cutting cakes and depending on which method is used you may get more or less portions. Confusing, no?

I figured the only way to be sure of  my portion sizes was to spend hours drawing on cake dummies. I decided on a price per portion and then came the difficult bit of deciding on how to price my decorations and also to think of all the different types of decoration that could be applied to a cake. I'm sure at some point someone will ask me for something I haven't thought about. This is the only bit I decided to put an approximated hourly rate on. It takes sooooooooo long to make decorations and I'm rubbish at estimating how long it takes, its always longer than I think. Its the time taken to get it looking perfect and a lot of the time it involves time consuming techniques or going back 3 or 4 times to add finishing touches. For example, filler flowers take hours. The process involved in making them includes colouring the paste, hand cutting and shaping them, wiring them and leaving them to dry, then taping them, applying them to the cake and then piping a centre.
I cant even count the number of filler flowers here but they took me HOURS.

Theres nothing worse than asking for a quote and the other person plucking a figure out of thin air with no clear breakdown of how they've arrived at that number, so once I felt confident with my prices, after months of reworking, I took out some cake books and had a look at some other websites where cake prices were displayed and applied my pricing to those cake to make sure I was confident and happy that my structure was right. I worked out that Ive placed myself about £100 cheaper than the top end of the scale and I'm fairly happy with that.

Ive rambled enough for now, there will be more on pricing in another post, focusing more on what to do when you get your first customer, how to quote and how to stay true to your pricing when the customer has a limited budget.