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" Ask Louise! Do you have a business related question? Fill in this form and your question could be answered in the next issue of Cake! magazine!