How Most Birthday and Other All-Occasion Cakes Are Priced (1 of 3)
In all, there are 5 common methods for pricing your cake.
(This does not include wedding cakes.)
Depending on which cake boutique, bakery, grocery store or home baker you’re considering, each one of them could be using different pricing formula.
The first method to price your cake is the simplest. They take the total cost of the materials they’ve used to bake and decorate your cake and multiple it by 3 to 5 times.
As an example, let’s say the cake you choose costs a bakery $18 to produce. They will sell the cake to you within a price range of $54 to $80.
The second method is the same as the first method, but there is an inclusion of fixed overhead expenses (such as electricity, gas, mortgage or lease payments, taxes, insurance, and other expenses).
For example, if the cost of the materials is $18. They might add $1 to $10 per cake extra to cover overhead expenses, depending on the number of cakes they create per month.
As an example, if the final price was $54 as in the first example, a cake artist might automatically add another $5 to cover their fixed expenses to arrive at a total price of $59.
The third method uses a “Comparable Price” technique. These bakers look at what other bakers are charging in their local area and then price their cakes in the same comparable range.
As an example, if their competitors are pricing their 8-inch cakes in the $25 to $35 range, they will too.
The fourth method is a time and material method. This method looks at the actual cost of the materials, which is then marked up by a basis of 50% to 300%.
Then a labor cost is added to the material cost to produce a final price. These baker’s overhead expenses are included within the “labor cost.”
For example, a baker would arrive at a final price by taking the $18 cost of goods, adding a 100% mark up (making the price $36) then adding the time it took to create the cake, let’s say at $45 per hour.
If the cake took 1-hour in labor to bake, frost and decorate, the final price would be $81.
The fifth method is a price per slice method. This method is commonly used to price wedding cakes, but is also used for all-occasion cakes.
For example, if you need a cake for 25 people and the baker charges an average of $4 per slice, the final price of the cake would be $100.
The Cake Gallery uses the time and material method. We believe by offering complete transparency for how our cakes are priced is the fairest to you.
Please read Article 2 “How Most Birthday and Other All-Occasion Cakes Are Priced” to continue the conversion. Since price is rarely the final determining factor for why consumers pick the businesses they choose, I’ll discuss how the price of a cake has a strong relationship to the overall value you’re receiving.
Mr. Otto is the proprietor of The Cake Gallery in Omaha Nebraska and WeddingCakeSalesAcademy.com. Ed is an author, speaker, coach and consultant to cake boutiques, bakeries, grocery store bakeries and home bakers. He can be reached at email@example.com