Pricing for small food producers: a step by step guide
One method for every product, from a cake to a jar of sauce: cost per unit, a target margin, a price for each sales channel and a regular check.
Whether you make cakes, jam, granola or catering, a fair price comes from the same four steps. This guide puts them in order and links each one to a detailed example.
1. Cost per unit
Add up everything a batch costs, then divide by the units that actually came out of it.
- Ingredients at the price you paid last time, not last year.
- Yield after production. Granola loses weight in the oven, jam stays in the pan. See how to price granola.
- Packaging. In small batches the bottle can cost more than what's in it. See how to price hot sauce.
- Your time, at an hourly rate you would accept from an employer. See how to price a custom cake.
- Overheads: market fees, insurance, rent, card fees. Add up a month and divide by the units you sell in a month.
2. A target margin
Price = cost ÷ (1 − margin). At a 35% margin, a product that costs £10 sells for £15.38, rounded up to a sensible price. Margin and markup are not the same, see margin or markup.
3. A price for each channel
- Market or your own shop: your price with your margin.
- Shops and cafés: they add their own margin, so their shelf price is higher than yours. See how to price jam.
- Events and catering: fixed hours per event, so the price per person depends on the group. See how to price catering.
- Custom orders: take a deposit. See deposit or the full amount.
4. Check prices regularly
Recalculate after every larger purchase, and once a season compare each product's margin with your target. Fix the ones below target first.
Try it now
The free price calculator works out cost and price for one product, without an account. In Lagom, every recipe keeps its cost and price up to date as your ingredient prices change.