How to Price a Cake: A Beginners Guide

“How much should I charge for this cake?”

It's a question that comes up in almost every baking Facebook group, conversation thread and baking search query - and honestly, it's a question I asked in the early days of my cake business too.

At one point, I was simply doubling the cost of my ingredients to work out what to charge. When that didn't give me much confidence, I thought perhaps someone else could look at one of my cakes and tell me what I should be charging for it.

But what was I really asking them to base that number on?

They didn't know what my ingredients cost. They didn't know how long the cake had taken me to make, what I'd spent on everything else that went into producing it or what it cost me to run my business.

And their opinion of what they would personally pay for my cake wasn't necessarily an indication of what I should be charging either.

What I was really doing was searching for an easy answer. If another baker couldn't give me the number, perhaps there was a pricing formula I could follow or somebody else's price list I could use as a guide and choose a figure that felt comfortable.

It took me a while to realise that pricing a cake doesn't begin with someone else's opinion, their price list or a number that feels comfortable.

It begins with understanding your own costs.

If you're still at the beginning of turning your baking hobby into a business, you may also want to read my guide to how to start a cake business from home first.

1. Understand the difference between cost and price

Needless to say, the cost of a cake is more than just the ingredients.

So what is the difference between cost and price, because the two are not the same:

Cost = what it costs you to make and sell the cake.
Price = what you charge the customer.

Doubling the cost of your ingredients isn't enough. It doesn't take into account the time it takes to create the cake from start to finish - including planning, shopping and preparation - or other costs such as overheads, admin and the cost of running your business. And importantly, it doesn't leave you with a clear understanding of whether you're actually making a profit.

2. Work out your ingredient costs

When working out your ingredient costs, include the amount you actually use rather than simply looking at what you spent at the supermarket.

For example, if you purchase a 1kg bag of sugar for £2 and your recipe uses 650g, it's the cost of that 650g that needs to be included in your calculation.

You'll need to do this for each ingredient used in your recipe and remember the ingredients and materials that can easily be forgotten, such as:

• Buttercream or ganache

• Fillings

• Fondant

• Decorations

• Dowels and supports

These smaller costs may not seem like much individually, but across an entire cake - and multiple orders - they soon add up.

3. Don't forget the other costs involved in making the cake

Ingredients are one of the most obvious costs, but they're not the only costs involved in producing an order.

There are direct costs that can be linked specifically to a cake, such as:

• Cake boards

• Cake boxes

• Ribbon and packaging

• Decorations or equipment bought specifically for that order

• Delivery or travel where relevant

Then there are the wider costs of running your business, often referred to as overheads. These could include things such as electricity and gas, insurance, subscriptions, equipment, printing, marketing and other business expenses.

Unlike a cake box that you can attribute directly to one order, these costs may need to be spread across the cakes or orders you sell rather than charged in full to one customer.

Don't be afraid or feel awkward about accounting for these costs. You're not cheating your customer by including them. They're part of what it costs you to run the business that produces their cake.

4. Put a value on your time

I know it can sound and even feel strange to charge for something that you enjoy doing and honestly that is what can make it difficult to price properly.

But if you take your baker's hat off for a second and put your business hat on, what you are creating is costing you time and energy.

Once you accept payment for a cake order, the hours spent baking, filling, decorating, communicating, shopping, cleaning and preparing the order all form part of producing the cake.

To make sure your time is being accounted for, you'll need to decide on an hourly rate for your labour. As your skills, experience and business develop, you'll also need to review that rate rather than assuming it should stay the same forever.

5. Allow for profit

If you're running a cake business, the aim is for that business to make a profit. Profit isn't simply a random number added onto your cake price. It gives your business room to grow, invest in training or equipment and build some financial resilience when unexpected costs arise.

You can cover your ingredients, expenses and your time and still not necessarily have created profit for the business.

Paying yourself for your labour and the business making a profit are two different things.

Your labour is the cost of the time you spend producing the order. Profit is what the business makes after the costs of producing and running the business have been accounted for.

That's why profit needs to be considered when you're setting your prices rather than simply hoping there will be something left over at the end.

6. Bring everything together to understand your cake's true cost

Once you've accounted for all of these elements, you'll have a much clearer picture of what it actually costs you to produce the cake.

As a simple way of thinking about it:

Ingredients + direct costs + labour + an appropriate share of your overheads = the cost of producing your cake

Your selling price then needs to take that cost into account while also allowing the business to make a profit.

This is why simply doubling your ingredient costs or copying another baker's price can be so misleading. Neither tells you what your cake actually costs your business to produce.
Decide how you'll find your first cake customers

Making great cakes is one part of building your business. You also need to think about who is likely to buy them and how those people will know that your business exists.

When you're starting out, you don't necessarily need to hire a web designer or invest lots of money into marketing. You can begin by building your presence through social media, your Google Business Profile, local networking and listings, and good old-fashioned word of mouth.

Think about the type of customer you want to attract and where they're likely to look when they need a cake. You don't need to be everywhere. Choose one or two places that make sense for your business and concentrate on showing up consistently there.

As your business grows, you might decide to create your own website. Unlike a social media profile, your website is a space that you control and can use to showcase your work, explain what you offer and give potential customers a clear way to enquire.

7. Should you look at what other cake businesses charge?

Looking at your competitors as part of your market research can give you useful context, but it shouldn't be done with the intention of simply copying someone else's prices.

Another baker's price doesn't tell you:

• Their costs

• Their hourly rate

• Their overheads

• Their skill and experience

• Their business model

• Whether they're actually making a profit

By all means understand the market you're operating in and what customers are being offered, but use that information as context rather than your pricing method.

Someone else's price list can tell you what they charge. It can't tell you what you need to charge.

8. What if your calculated price feels too expensive?

Once you've worked through your costs and arrived at a price, there's a good chance you'll look at it and think, “Nobody is going to pay that!” Believe me, I did it too.

The temptation will be to immediately bring the price down to something that feels more comfortable. Before you do that, go back to the numbers and ask yourself what's actually making the cake cost what it does.

Consider whether:

• The product is too time-consuming to produce

• Your process could become more efficient

• The design could be simplified

• This is the right product for the customer you're trying to attract

• You're comparing your price with businesses operating very differently from yours

Sometimes you may discover that the market you're trying to sell to won't support the price you need to charge for a particular product. That's useful information too.

It doesn't necessarily mean you should simply charge less. You may need to reconsider the product, your process, the customer you're trying to reach or whether that particular cake makes sense for your business.

9. Don't price based on what feels comfortable

Pricing your cakes properly can feel uncomfortable, particularly when you're used to baking for friends and family. That's why it's so easy to choose a price based on thoughts like:

£40 sounds reasonable.

£80 feels like too much.

I'd never pay £150 for a cake.

My friend said that's expensive.

But what you, I, your friend or another baker would personally pay for a cake isn't a pricing method.

Go back to your numbers. What did the cake cost to produce? How much time did it take? What share of your business expenses does it need to cover? Is there room for the business to make a profit?

Your price should be based on understanding the business behind the cake, rather than choosing the number that feels easiest to say out loud.

So, how much should I charge for a cake?

There isn't one amount that every baker should charge for a cake. Two bakers can make cakes that look similar and need to charge very different prices because their costs, time, business expenses and circumstances are different.

That's why nobody looking at a photograph of your cake can reliably tell you what you should charge for it.

Pricing becomes much less about guessing once you understand the numbers behind what you're making. You may still need to review and adjust your prices as your skills, costs and business develop, but you'll have something much more useful to base those decisions on.

Don't start with the price. Start with understanding the numbers behind it.

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