Cake! magazine by Australian Cake Decorating Network August 2014 | Page 66
Something I have found common among many small business owners is the misconception that if
your business is paying you a wage, then your business is profitable. If this is the case, you do not
have a “business”. You have a job that you own!
Your hourly rate is a cost. Not a profit. Once you have worked out a price for your cake, you now need
to figure out how much profit you want your business to make. Depending on your market, you should
aim between 30-60% profit on your cakes.
So how do you work out a price for your cake?
COGS + COS + HOURS = $ + % Profit
(plus tax if applicable)
COGS or cost of goods. Firstly you need to know just how much your raw costs are. This should
include ingredients, icing, boards, boxes, flower paste etc.
It has always surprised me at the amount of decorators who do not realize that they need to be making a
profit in order to really have a business. They see their hourly rate as reward enough. Business owners are
in business to make money. To make a profit. Not to receive an hourly wage alone. And just because you
work from home does not make you any different from any other business.
On a final note, ultimately, we are all in business to make money. The passion for your craft will wane if
after a time, if you are feeling undervalued, overworked and underpaid. But being in business also comes
with a responsibility. A responsibility to deliver what the client has paid for. Like any business, it is your
responsibility to deliver the best product and service you possibly can. Practice your craft, invest in
yourself and your education, and give yourself time to learn and aim to be the best in the your chosen
segment of the market. Decide in fact if you do really want a cake business or if you want a fun hobby.
After all, success is about more than just getting your prices right. Its about being attentive to every area
of your business. In any creative business, it first starts with learning your craft.
Louise
COS or cost of sale. This includes ALL of your overheads for example, a percentage of electricity,
rent, marketing and advertising spend, time spent in consults and admin, website costs, training and
development.
Hours, this is your hourly rate. How much do you want/need to be paid per hour? Consider this based
on an after tax amount also. It’s funny how many people will say they made 200 on something
forgetting they have to pay the tax department 30% on their income!
Let’s consider an example:
2 tier wedding cake with sugar flowers
COGS = $120
COS = $80
Hours = 6 hours @25ph $150
Base price $350
Plus 40% profit
Price $490
plus any taxes that may be required
**Note this is an example for illustration purposes only.
Rates and costs will vary depending on your locale.
Louise runs the popular cake
decorating website
www.learncakedecoratingonline.com
and the comprehensive course
www.startyourcakebusiness.com
"One of the biggest
problems in pricing
cakes is that we
undervalue ourselves"
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