One of the hardest things about starting any side business is figuring out how much to charge; and baking is no exception. Whether you sell cupcakes, cakes, cookies, or any other baked goods, you need to put a price on your wonderful confections.
That being said, you shouldn’t just guess on a price and hope it works out. I mean, the last thing you want to do is start selling cupcakes at a price that pays you less than minimum wage. This is a business after all, and in order to keep it running, you need to charge enough to make it worth your while.
This article is the first part in a series of posts we’re calling, How Much To Charge For My Side Hustle. Our goal for this series is to help our readers determine a profitable price for whatever side business they have chosen to pursue. And what better way to kick things off, than with an article about cupcakes!
So, let’s get right to it.
How Much To Charge For Cupcakes?
For a standard cupcake, you should plan to charge between $2 and $2.50. Though, your pricing should increase or decrease based on three factors: the event at which your cupcakes will be served, cupcake size, and decoration.
In other words, if you are baking large, high-end, highly-decorated cupcakes for a wedding, you might want to charge between $3 and $6 per cupcake. Whereas, if you are baking smaller, frosting-only, cupcakes for a children’s birthday party, you will probably need to charge your base fee of $2 in order to win the business.
Now, this is not the end-all-be-all of cupcake pricing. If you spend hours baking and decorating the most beautiful cupcakes on the planet, you should set a price that reflects their beauty. Or, if you have a client that hates frosting, and only wants cupcakes in their most basic form, you can probably charge your minimum. Remember, this is your business, and you get to set the pricing. Just don’t be wishy-washy. Pick your pricing, and stick to it.
Pricing Your Cupcakes
At this point you should have a general idea of what to charge for your cupcakes. But since you probably have multiple flavors, sizes and decorating options from which your customers can choose, it’s time to get specific. You need to zero-in on a price for each cupcake option you offer, and here’s how to do it.
Research Your Competition
As nice as it would be, you are not the first person to sell cupcakes. So, if you plan to compete in your cupcake market, you need to research your competition. How much do your competitors charge for their cupcakes, and why? What kind of options do they offer? What makes your cupcakes better than theirs?
These are all questions you need to answer in order to determine your pricing. However, be careful not to focus solely on price. You aren’t researching your competition just to undercut them. You are researching them to determine how much you should charge. If you make better cupcakes, you should charge more for them, plain and simple.
Calculate Your Baking Costs
This is probably the most tedious part of pricing your cupcakes, but it is the most critical thing you can do. Before you determine your pricing, you need to know exactly how much it costs you to make each individual cupcake, and here’s how to do that.
Starting from scratch, I want you to add up the cost of ingredients for every flavor of cupcake, and every decorating option you offer for your minimum order amount. For example, if your minimum order is 12 cupcakes, add up the cost of ingredients it takes to bake 12 cupcakes in every flavor you offer, without any decoration. Now, write those numbers down.
Next, I want you to add up the cost of every decorating option you offer for your minimum order of 12 cupcakes. Now, write those numbers down.
Lastly, the often forgotten part about baking, is the equipment. Mixers, ovens, pans, spatulas, and any other baking tools or utensils cost money. And therefore, you these costs need to be accounted for. So, write down the cost of every tool or utensil you use to bake your cupcakes. Now, divide each of those numbers by the number of minimum orders you expect to make over the life of each item.
Now, divide every number you have written down, by your minimum order number (in this case, 12). And there you have it. You can now pick and choose between each option you offer and determine the exact cost associated with it.
Important Note: As the owner of a cupcake business (or any business for that matter), one of the most important things you can do is keep track of your income and expenses through some kind bookkeeping software. Additionally, you need to have the ability to invoice your clients, and take payments. That’s why, I highly recommend FreshBooks. It is inexpensive, feature-packed, and will make your life much easier! Seriously, here at Be The Budget, we use FreshBooks to manage our finances, and we love it. If you’re interested, you can click here for a FREE 30-day trial of FreshBooks.
Calculate Your Time Per Cupcake
Time is money, so if you want to increase your profit, you have 2 options: decrease the amount of time it takes to complete each cupcake, or increase your price. But before you do that, you need to know the average time it takes you to bake your minimum order-size of cupcakes with each option.
This means you are literally going to have to time yourself. Time yourself baking the most basic cupcakes you offer, and then your most complex cupcakes. Then, divide your times by your minimum order number.
Calculating your time is critical, because it will help you determine the volume of cupcakes you can produce in any given time period.
How To Determine Your Cupcake Pricing
Now that you’ve researched your competition, know your cost per cupcake, and the average amount of time it takes you to bake your minimum order, it’s time to set your cupcake pricing. This is how we recommend you do it.
- Set a daily profit goal, and write it down. In this example, we will set our profit goal at $100 per day.
- Determine how much time you can reasonably dedicate to baking cupcakes each day. Keep in mind, this number needs to be the actual time you spend baking. This does not include marketing your business, delivering cupcakes, or anything else. Now, divide that number by the amount of cupcakes you can make, based on your average time per cupcake. The resulting number is your cupcakes per day. So, if you can bake 50 cupcakes per hour, and you can dedicate 2 hours to baking each day, your cupcakes per day would be 100.
- Now that you know how many cupcakes you can make per day, you need to determine your cost per day. Multiply your cupcakes per day, by your minimum cost per cupcake. For example, if it costs you $0.75 to bake a standard cupcake, and you can bake 100 cupcakes per day, then your cost per day will be $75.
- Finally, add your cost per day to your profit goal, and divide that number by your cupcakes per day. For example, if your cost is $75 per day, and your daily profit goal is $100, then you need to charge at least $175 for 100 cupcakes. Now, if you divide $175 by 100 cupcakes, you get $1.75 per cupcake. So, in this case, if you were to charge $2 per cupcake, you would stand to make a profit of $125 per day.
One of the most important steps in starting a cupcake business–or any business for that matter–is figuring out how much to charge. And the more specific you get, the more successful you’ll be.
Pricing your cupcakes properly will ensure you remain profitable, and make enough money to keep your business running. Remember, this is your business, and if you want the world to experience your wonderful confections, you need to charge enough to make it worth your while.
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