Thursday, July 7, 2011

What is Your Real Cost?

I'm excited to announce that a couple of days ago, marks one year since I walked out of the corporate machine and entered the cake decorating world at full speed.

A couple of months ago I posted about my 10 month mark and I thought I had learned lots. But in the last 2 months, there have been many more eye opening moments. One of them in particular, especially due to reaching the end of our financial year, was the 'real' cost of everything.

I know I have current and future clients reading this post as well as other cake decorators, inspiring bakers and bloggers of all sorts. This post isn't about me having a whinge about how 'expensive' things are but it's more a question for my fellow decorators and anyone else who is in the similar business to consider.

 A cute little picture of my cousin's dog Flynn to ease the seriousness of this post - Woof! :)

What is your 'real' cost? I'm not just talking about how much it costs to bake a cake but also how much did it cost you in electricity, rent, admin time, labour, training, cake boards...etc? It may sound petty to consider things like electricity, rent, training and admin time, but if you don't consider these costs upfront, they will still exist later, and will only end up coming out of your profits.

Working out how/what to charge is always a hot topic with cake decorators and this is my take on it based on my experience. Yes, look at what the competition is charging and what they are doing (and what your clients expect to pay), but don't base everything off that. Cutting your competitors prices by 10% every time is not a very solid strategy. You need to know what YOU have to charge to cover costs and what additional margin/profit you want on top of that. Once you work out the numbers, they speak for themselves. You will also quickly realise that just because a customer wishes to pay a certain value for your work, you might actually be losing money taking in that order or not even making any money at all.

Your competitor may be skimping on quality ingredients, decorating as a hobby or may not have even worked out their true costs and may in actual fact be working for less than $5 an hour. Do you want that for yourself? By just copying what is out there and not knowing for sure if they are correct, it is not a sustainable strategy. We all want to be proud of our work and be respected for what we do but by undervaluing yourself, you're just digging a big hole for yourself to jump in to. So just think about it ...

I'll now leave you with an interesting article I stumbled upon recently from Melissa Capyk of Wild Cakes in Canada - Why Does a Cake Cost so Much?

4 comments:

Di-licious said...

A really important consideration for all bakers and decorators. I know someone who recently got married in a really humid climate. She baulked at paying $450 for a 3 tiered cake, thinking she could make it herself for much less. I really had to bite my tongue when I got a phone call a few days out asking what would be the best thing to put under the fondant given the climate? Would Betty Crocker frosting in a can be ok?
Suddenly $450 sounds incredibly cheap!

Lena said...

thanks for sharing this, Sharon... and I like the pic of Flynn ;-)

Sweet Cake said...

Thanks for posting! I know many people (including myself until I started baking and looking at all of these costs) realize how expensive it is to bake and decorate a cake! We live a in a Dollar Store/Wal-Mart world where people are used to paying very little for things. It is a shame that they don't value the amount of time it takes to make such beautiful cakes! (By the way, I LOVE your cakes! They are stunning!)

Anonymous said...

First of all, your cakes are gorgeous. And I wish you every success.

This post reminds me of a recent trip I made. While strolling around the town I was visiting, I chanced upon a cake shop. Naturally I was drawn to it. The lady boss was nice enough till I told her that decorating is a passion and I do this out of my home. And then she went on and on about how home decorators were undermining professional decorators, undervaluing the industry and that home decorators should take pride in their work and charge higher prices etc etc. I was taken aback at this stranger. I walked out of that shop feeling degraded. A home decorator possibly is no less talented than a professional one. Being artistic and creative is a talent and is not something one has to pay a high price to achieve, unlike being a doctor or dentist. I decorate cakes for people in my community as a service, and while I do charge for them, I'm not an all out business.

Perhaps someone can come up with a guide as to what is a just wage. It is not easy. Location, skill level, and what the market is willing to pay all comes into play. So, until someone comes up with a reasonable figure, it is anyone's game and it is not fair to berate anyone for doing what they love.

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