How to price a custom cake without guessing

Ingredients, working time and packaging in one formula. Work out a price that leaves a margin, and the cost of a single serving.

Most home bakeries price a cake by eye, and a month later it turns out that a full calendar of orders left very little in the pocket. The formula for a fair price is simple. You only have to work it out properly once and then keep the numbers up to date.

Start from the cost, not from competitors' prices

The price at a bakery in the next town says nothing about your costs. Someone else buys from a different wholesaler, bakes in a different oven and counts their time differently. It is worth knowing the competition, but only at the end, to check that your price falls within a sensible range. The starting point is always the question: how much does making this one cake really cost me?

Three things to add up

Ingredients. From the recipe, in the quantities this particular order needs, at current prices from your invoices. Not at prices from six months ago.
Working time. Baking, making the creams, assembling, decorating, packing, cleaning up and talking to the customer. Use the hourly rate you would pay someone else for the same work.
Packaging and extras. Cake board, box, collar, ribbon, topper, candles. One by one they are small things, together often a dozen or so euros per order.

On top of that come the fixed costs: electricity, gas, water, wear of equipment, accounting, subscriptions. The simplest way is to divide the monthly total by the number of cakes in a typical month and add that amount to every order.

Example: a cake for 18 servings

Raspberry cake with mascarpone cream, 18 servings, simple fruit decoration.

| Item | Amount | | --- | ---: | | Ingredients | €24 | | Labour, 3 hours at €18 | €54 | | Packaging | €9 | | Total cost | €87 | | Price at a 40% margin | €145 |

We work out the price with the formula price = cost / (1 - margin), that is €87 divided by 0.6. That gives €145, and the cost of one serving is about €4.83 at a serving price of €8.06.

> Note that you divide by 0.6 rather than multiply by 1.4. A margin calculated on the selling price gives €58 of profit. A 40% markup on the cost would give only €34.80, more than €20 less on every cake.

The difference seems academic until you multiply it by thirty cakes a month.

Price per serving or per kilogram

Customers most often ask for the price per kilogram, because that is what they are used to. For the bakery a price per serving is more convenient: it is easier to compare with the cost from the recipe, and the customer knows straight away how many people it will feed. A good compromise is to show both in your price list and always calculate the quote per serving.

For tiered cakes and very small orders, set a minimum price. A cake for 8 servings takes almost as much work on the creams and decoration as a cake for 14, and its cost per serving is noticeably higher.

Surcharges that are easy to forget

sugar paste or modelling chocolate decorations, charged per hour of work rather than per piece,
edible flowers and out-of-season fruit, which can cost more than the whole cream,
gluten-free, lactose-free or vegan versions, which need separate ingredients and thorough cleaning of the equipment,
delivery, charged per kilometre or as a fixed amount per zone,
express orders, for example an order placed less than 48 hours before pickup.

Where the margin most often leaks away

Most often in working time nobody counts: in decoration corrections, long conversations about the design and cleaning up after work. In second place are ingredients that have gone up since the recipe was last updated. Butter, chocolate and fruit can change price by tens of percent within a few months.

Once a quarter, compare the prices in your recipes with the latest invoices from your suppliers. If the cost per serving has risen by more than a few percent, update the price list. Customers accept small, regular changes more easily than one big increase every two years.

How Lagom makes it easier

In Lagom every recipe shows the total cost and the cost per serving based on current ingredient prices. Once you enter the selling price, you see the margin straight away, and when you update the price of butter, the new cost shows up in every recipe that uses it.

Lagom blog