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Pricing Help, please

post #1 of 5
3/1/02 at 10:28am
Thread Starter 
As I'm out trying to sell wedding cakes it seems desserts in general are wanted. I really need some help with pricing. How it's phrased to me is "the chef and I were just talking, we'd like to get away from the frozen junk we get in and have something better...we'd like to have a couple signature items....let's get together and talk....".

I understand how to cost out my product based on ingred., overhead, time, etc... but since I'm a newbie with NO regular business (yet) I want to come in with realistic yet attractive pricing (even though at this moment my expenses are high since I don't have any volume). But I don't know how to double check my prices with similar companies providing similar 'fresh' baked items, any ideas?

I can look online at a few wholesale sources (although many sites block your view unless your a registered buyer) for frozen cakes...but that's what they don't want (precieving a fresh product from me would be a higher quality, therefore more $, yes?) and I can call locally at bakeries but then their shooting me retail pricing.

So do any of you have some advice or leads on how I could double check my prices? TIA
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post #2 of 5
3/1/02 at 4:25pm

Rule of thumb...

is 3x ingredients for catering and 4x ingredients for sit-down restaurants. This means some calculating but it's worth it to see what your true costs are.

Arrive at a per person price and stick to it.
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post #3 of 5
3/1/02 at 4:38pm
Why don't you call some bakeries and ask them? Something like "hi, I have a list of your product and I'm wondering if you could give me a wholesale price list?" That's how I figured out how much I should charge for guitar lessons.

Kuan
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post #4 of 5
3/1/02 at 9:50pm
When I first started out, I found that I sometimes had to eat the cost of having no volume and therefore higher expense. So, the 3x, 4x thing didn't always apply (although it is always good to know those figures, and I'm happy to be able to use them now). I knew customers were not going to pay more for my products just because it cost me more than my competitor to make them. I was lucky enough to have some friends in more established businesses that could give me some pointers on what higher volume business would pay for products and then do 3x or 4x on those numbers. But sometimes I had to suffer as much as 70 percent FC just to build clietele - because it cost me more to buy products. One thing I learned very early was to not price too low just to get the business, though. The couple of people I made that mistake with expected those discounts from then on! Honestly, though, when I got confident about pricing was when I begin to see what it was about my product that was different than what my competitor offered. Then I got much better at saying "Here's what I make, here's what it costs, and here's why you want to pay me to provide it to you as opposed to someone else". I'm pretty shy, really, so it wasn't that easy for me to do. But when I did, it sure helped me move along. I'm not a baker, but I think the same methods apply. Good Luck!
RF
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post #5 of 5
3/1/02 at 10:38pm
I thought of one other thing. If you are going to sell desserts to restaurants, which it sounds like perhaps one of the options available to you, why not get an idea of what the nicer restaurants are charging for higher quality 'signature' desserts, and then multiply those amounts by .25 to get an idea of what their minimum expected profit would be for those items (warning- sometimes restaurants expect to make their best profits off appetizers and desserts)? Whatever is left over would normally be used by them for the cost of producing the items- labor, etc. If you are doing all that for them, they only have to worry about the profit margin. Overhead gets a bit sticky, actually, but you get the drift. If they aren't baking the brownie, they don't have to preheat the oven, right? So, if a place charges $4 for a dessert, as long as they make their $1 profit, maybe your charge should be around $3- possibly a bit less to compensate for the fact that they have to pay the light bill regardless of where the dessert comes from. That way, you are able to get info that is available to everyone- just by reading menus. I guess this would apply to catering as well - just multiply by .33??

Just brainstorming,
RF
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