How to calculate prices on your baked goods home business

Written by allan kelin Google
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How to calculate prices on your baked goods home business
Let them buy cake! (Stockbyte/Stockbyte/Getty Images)

Your baking skills are already well known to friends and family - they've even paid you to supply cupcakes for children's parties. Now, whether for a little additional income or as an attempt at starting a proper business, you're about to try selling your wares more regularly. You'll need to price goods to cover your costs and make a profit, while remaining attractive to potential buyers.

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What is your market?

Tour bakeries and cafés in your area to determine the average prices for goods that are similar to yours. If there are other home bakers in your market, find out what they're charging. Evaluate the ingredients and aesthetics of the finished products, as well. It's possible that commercial outlets don't use all natural ingredients - especially for their icing - which you need to consider for your pricing and marketing. If your prices are higher than those in the supermarket, that's fine - they are not your competition as your product is superior and not mass produced.

How to calculate prices on your baked goods home business
Check local prices. (RAYES/Digital Vision/Getty Images)

Your costs, your time

Calculate the ingredient cost for each item you bake and commit it to a spreadsheet or index card. Consider the cost of packaging each product. The container, decorative wrapping and labels need to be accounted for. Finally, determine the time required to prepare and package each product, and how much you reasonably expect to be paid for your time. Add to this, time and delivery costs. You might not be able to charge as much as you'd like but, as you produce more, you'll decorate and package more quickly.

How to calculate prices on your baked goods home business
Calculate your ingredient costs. (Jupiterimages/ Images)

Tiered pricing

If you can produce a superior product and can cut the selling price with the promise of selling in greater volume, market it to local cafés, food shops and restaurants. Obviously a re-seller will need to mark up from the price you charge to achieve both a competitive price and a profit, so you'll need to determine a price below what you would normally charge that works for both of you. Bring samples to the re-seller along with a price list and detail the selling points for your products: all natural, real buttercream, fresh and made to order.

How to calculate prices on your baked goods home business
Consider selling to cafés. (Jupiterimages/Goodshoot/Getty Images)

Reducing costs

After you've determined what prices best work for you and your clients, try to lower your costs to maximise profit. For dry goods, such as flour and sugar, you can expect savings of 5-7% when purchasing larger bags. Expect even higher savings for perishables like eggs, but be certain you have the space and means to preserve them. Visit bulk suppliers for packaging items - your savings per package can easily near 50% when purchasing 50 boxes rather than only five or 10 from a local shop.

How to calculate prices on your baked goods home business
Bulk buying to maximise profit. (Justin Sullivan/Getty Images News/Getty Images)

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