UPDATE: Pricing Calculator now available here!
One of the most difficult things to deal with when it comes to owning your own baking business (or ANY business) is probably deciding what to charge.
I’d like to do an entire post in detail on how to decide your prices and what you should be charging, but for now I want to talk about something that every industry has to deal with….
The CHEAP “Cake” (or fill in the blank) Lady.
I want to talk about some of the reasons why you don’t want to be her, because they are numerous.
So here we go!
Why You Don’t Want to be The Cheap Cake Lady
Being cheap drives down everyone’s worth.
If you’re charging $1/serving, other home bakers are charging $4/serving, and the local bakery is charging $5/serving for cakes, of course you are going to get as many orders as you can possibly manage.
But at what cost? Even though you’re getting a ton of orders, you can’t possibly be making any profit and you most definitely aren’t valuing your time, talent, or worth. You also aren’t valuing anyone else’s time, talent, or worth.
When you charge a tiny fraction of what others in your area are charging you’re telling all potential customers that the decorating community doesn’t deserve to make a living wage. You’re confirming what many customers already believe: IT’S JUST CAKE and it’s not worth any more than the cost of that one dollar box of cake mix at Walmart.
Charging way less than any other baker will certainly bring you business and drive out your “competition” by undercutting them, but you are cheating yourself and everyone else. No one will want to pay the others, who are actually trying to make a living a fair price, because they will have you, the cheap cake lady, to throw in their faces. They will have you to refer to when they decide to be condescending to the baker that’s charging properly. Why would they pay a fair price when they can get it practically free down the road? And why would they pay you more than they already do once you realize your mistake of being the cheap cake lady? You’ve already let them know exactly how much you truly believe you’re worth. Do you really feel like it’s fair to yourself to work for pennies?
Everyone in the cake decorating/baking community has been trying for years to get customers to see that their time and talent are worth paying for. They have been working very hard to be recognized as people who deserve to be paid a living wage. They have been working to help people see their work as the art that it is. And by you undercutting everyone around you, you are saying that none of that is true. You are destroying all the progress they’ve made over the years.
You will earn many enemies as The Cheap Cake Lady.
I know right now if you’re just starting out you may not realize you are creating enemies. You may not even realize you need or want friends in the baking community. But you do.
It is so important to find other decorator/baking friends. They are extremely valuable in so many ways. In the beginning you may see all others in your industry as competition and not as the asset they can be. In reality it’s wonderful to have friends in your industry. You may someday want to partner up with another decorator; you may be so busy you need another trusted decorator to refer customers to; you may need advice on how to proceed with an order; or you simply may need someone else to vent to that understands exactly what you are experiencing. But if you are The Cheap Cake Lady it’s going to be really difficult to make friends.
Why? Because of reason number one.
In choosing to devalue yourself, you are devaluing everyone else in your industry.
And trust me, they will know about you.
They will know you’re the one undercutting everyone else, just to get more orders than you can handle. And those customers you turned away? They went back to the bakers who are attempting to make a living, and complained and hooped and hollered about those prices until it beat those bakers down so much they lowered their prices and lost profit.
They had to, because now instead of being respected as an artist and being able to charge a fair price, they have to try to undercut themselves to keep up with your rock bottom prices. If they don’t lose business to you, they’re now going to lose customers to Walmart or the grocery store. Because you, Walmart, and the grocery store have once again convinced them that IT’S JUST CAKE and your time and talent isn’t worth diddly squat.
Now you won’t be able to make any friends because they all know you’re responsible for driving down profits and now they resent you. 🙁
Your business will fail.
I feel like this should be a no brainer. But just in case it isn’t obvious: if you don’t charge enough, you won’t make any money.
You really must know exactly how much you have in your final complete products. You can not possibly charge $1/serving no matter where you live or what your market is. If you don’t charge at least what you have in your materials you won’t have any money to buy more materials and you won’t be able to continue to do business.
Even if you’re “just” a hobby baker, you still need to be charging appropriately for your products, or don’t charge at all. Hobby bakers generally turn into semi-pro amateur bakers and begin a small business. If you’re only charging for your costs as a hobby baker, that same price is going to be expected when you decide you aren’t a hobbyist anymore. Others won’t realize when you have decided you aren’t just doing this for fun anymore, because they’ve looked at you as a business person all along, who just happens to be really cheap.
You’ll have a really hard time raising your prices later.
Obviously, if you’re just starting out, you shouldn’t be charging premium prices for beginner talent levels. But you can still be competitive and charge appropriately.
If you’re a beginner, you shouldn’t be charging any less than the grocery store bakery. By charging at least equally to the grocery store you won’t be undercutting anyone else or yourself. I say at least because you definitely should be charging more than that if those prices don’t even cover your costs. If you bake with expensive ingredients, have expensive packaging, etc. those prices still may not be enough to cover your costs. But you most definitely should not be charging less than the grocery store bakery because of reasons we’ve already covered…
The longer you’re in business and the more your talent develops you most definitely need to raise your prices accordingly. You would expect to pay more for a designer dress than a Walmart t-shirt. You would not expect to get either one for less than cost, and at the same time, you wouldn’t expect to pay the same price for both items. You’d pay more for the better quality item and less for the lower quality item and not the other way around.
If you start out charging next to nothing it’ll be really hard to raise your prices significantly later on. If you charge what you’re worth from the beginning it’s easier to slightly raise prices as you get better. It’s really difficult to go from charging $1/serving to $5/serving later on. I’m not saying it can’t or shouldn’t be done (it really SHOULD be done!!), but if you’ve already built clientele, they’re going to be really unhappy. You WILL lose clients because of it. That doesn’t mean you should keep your dirt cheap prices though.
Honestly though, you don’t want a client who doesn’t value your time, talent, and worth. You truly don’t want customers who equate your work to Walmart or the grocery store bakery. Those are the customers who tend to be bad news. They’re the one’s who usually end up complaining and wanting refunds, or spreading bad rumors all over town, just so they can get their money back. They’re the one’s that didn’t even want to pay Cheap Cake Lady prices, they really wanted it for free.
So you aren’t going to be The Cheap Cake Lady anymore…
Now that you have a few reasons why you shouldn’t be the dreaded Cheap Cake Lady, what are you going to do?
Well first you’ve got to accept that you are more than that. Your time and talent are worth more than the low prices you’re charging. You’ve made big investments in tools, ingredients, experience, and learning that you aren’t taking into consideration. Now you’re going to reassess your prices and how you decided on those prices. You’re going to stop basing your prices off of feelings and start basing them on actual mathematical equations! 🙂
And guess what??
I’m going to help you figure out how to raise those prices and start charging what you’re worth!
Are you ready?! Great! Here’s the next article about how to charge for your cakes!
Oh, and don’t forget to Pin!