A home bakery is a business, which means you need to make money. Otherwise, it is an expensive hobby that will drive you to poverty and burnout very quickly. One of the critical factors in determining your pricing is how much you pay yourself per hour. This number is vital since it’s a critical part of the overall pricing equation.
Don’t make the same mistake I did early on in my baking career. I shortchanged my growing business by not taking the time to research and thoughtfully determine the price of every product I was selling to maximize my profit potential. Often, I was in a rush and took an educated guess.
It takes work to figure out how you should be pricing your menu items. We bakers want to be in the kitchen, creating masterpieces, not hunched over a calculator figuring out how much a cup of sugar costs.
But trust me, knowing the numbers behind your delicious treats and determining a “cents-sible” price point is the cornerstone of your business. This includes knowing how much you should be paying yourself. Be sure to read my blog post: 5 Money Mistakes I Made with My Home Bakery, where I share some lessons learned, including undercharging early on.
Let’s first break down what factors go into determining the price of your home bakery goods.
- Cost of ingredients
- Cost of supplies and packaging
- Overhead expenses such as electricity, insurance, etc.
- Your skill level
- How much time you spend on the order
- Your local market
>>If you want a handy pdf that goes into more details about these factors, sign up for my email list and you will receive my pricing guide.
If you are anything like me, you underestimate how long it takes you do something. It’s easy to make assumptions. I recommend you track your time for a few weeks to get a better sense of how long various tasks actually take you.
When determining how long it takes you to fulfill an order, these factors must be weighed to determine the correct hourly rate:
- Time spent with customer finalizing details and confirming the order
- Time spent preparing the kitchen for baking a particular order or recipe
- Time spent shopping for ingredients
- Time spent ordering supplies
- Value on the baker’s knowledge, training, and experience relative to baking
- Time spent labeling and packaging items for sale or delivery
- Time spent on delivery (if applicable)
- Time spent cleaning up after the baking work is completed
If you don’t know where to start determining how much your time is worth, at least begin with your state’s minimum wage. Do not go lower than that but consider starting above if you understand your skill level and market. As you gain more experience, you can revisit this benchmark amount and reward yourself with a raise.
You may be an experienced baker that offers sculpted cake or hand-painted cookies. You can charge more for those skills immediately.
You also need to have confidence in your product and price thoughtfully, given your expenses, time, and talent. Not everyone will be on board with what your charge, and that’s fine. Don’t second guess yourself. Don’t become known as your town’s “cheap” baker. Work to find customers who recognize quality, customized, professionally baked products.
Your time needs to convert to money if you want to stay profitable and fulfilled by building your home bakery business. Pay yourself fairly from the beginning and evaluate as you go.
I’ve created something that takes the guesswork out of pricing products from your home bakery. Get the formula you need to determine what you should be charging for your cakes and cookies. Snag my Five Essential P’s for Perfect Product Pricing when you sign up for my email list. This powerful cheat sheet will help solve one of the most confusing aspects of your home-bakery business: how much to charge.