A: I get asked this question all the time, as many of my students also want to turn their passion for cake decorating into a successful businesses. Firstly I would not advise selling your cakes at a loss as this under values your skills, after all bespoke cakes are edible works of art and should be valued as such.
To help you set your prices I would suggest initially doing a little research to see what other cake companies in your local area are charging as this will give you a feel for the market that you are in. Then you need to work out your costs accurately including all the cake ingredients, including the box and board and your overheads such as the use of your oven and dishwasher. The next point to consider is the amount of your time you will spend on creating a cake, this is time spent planning, shopping, baking, clearing up as well as the decorating time.
Then think about how much you need to earn and try and set yourself an hourly rate you are happy with.
There are then various ways to use this information to help you price your cakes, I recommend that you calculate what it costs to bake and decorate a cake and then add the time it takes x your hourly rate. I would also recommend adding in a profit element as well. It is tricky, especially to start with, but the more commissions you take on the more confidence you will become.
Good Luck and Happy Baking
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