How much profit should you make on a cake

As a baker running a business, it can be easy to forget that your time and hard work are valuable, and you should be paid fairly for your skills. Baking is a labour of love, but your business must be able to continue growing and, most importantly, make a profit. So, where do you start?

Here we have created a simplified guide for beginners and veteran bakers on how to price cakes to sell and how much profit you should aim to make on each cake.

How to price cakes to sell

Ensuring that you have priced your cakes correctly is crucial to helping your business to grow. If your prices are too high, customers will have a negative impression of your business and are unlikely to return. Equally, if your prices are too low, you are jeopardising your business, and it won't be long until the losses are too great to stay open.

So, how do you figure out pricing? You start by determining how much it costs to make your cakes which includes factoring in the following:

·        The cost of the ingredients- how much did the flour, butter, eggs, icing etc. cost?

·        Cost per cake- how much of your purchased ingredients were needed to make the cake?

·        Labour costs- how long did it take you to make the cake? You will need to set an hourly rate.

·        Packaging costs - how much is the packaging cost per cake?

Once you have worked out each of these figures, it is important that you factor in your overhead costs. These costs are broken up into fixed, variable, and start-up costs.

Fixed costs include expenses such as monthly rent, utility bills, insurance etc. Variable costs include fluctuating expenses, such as increasing ingredients or packaging in busier months. Finally, start-up costs, as the name suggests, are expenses incurred in the early days of your business, such as buying equipment.

So, now you have figured out how much it's costing you to make a cake, you can use these figures to come up with a fair price for the customer and, most importantly, yourself!

How much profit should you make on a cake?

To ensure that you are making a profit on your cakes, it is important that you add a percentage to the previous calculation (time, labour and overheads). Everyone's profit margins will look different, but bakers generally add anywhere between ten to twenty per cent on top.

As you grow, these margins can fluctuate but should gradually increase as processes become more efficient. In the current financial climate, it is also good practice to reassess the figures for your costs every few months and adjust them accordingly to ensure you aren't losing profit along the way.

Hopefully, this simplified guide has been helpful in allowing you to understand the basics of pricing your cakes and making a profit. As a business, we recognise the importance of getting your pricing right and making a profit which is why we pride ourselves on offering budget-friendly cake supplies and packaging solutions.

If you are interested in learning more about how we can supply the perfect packaging for your cake business or have any questions, don't hesitate to get in touch with our team today!

Have we given you some ideas on how to start a bakery business at home? If so, check out our wide range of cake packaging supplies, available to order with free shipping and next-day delivery!

Whether you want cupcake boxes, cake boxes with lids, eco packaging, or mailing boxes, we have a package to suit.

If you want bespoke packaging, get in touch with our team and we will help to produce a full range of branded packaging options too.