What's this?
Each segment of the Pricing Foundations for Creatives Course has been designed to help you learn and get results as quickly as possible.
But sometimes, you may want to know more or still have questions. That's what the Extra Details section is for, it's where we go into a bit more depth on the topic.
So, at the bottom of each segment you'll find buttons that allow you to dive into the extra details or move on to the next segment.
Not all of you are bakers, so in the extra details area you'll also sometimes find information that's relevant to crafts people and artists.
and if you don't find the answer to your question here, you can always email me at info@kmcakes.nl
VARIABLE COSTS
extra details
Note: In the full version of the course you'll begin by learning about fixed costs, so by the time you read this segment you'd understand all about them. I still wanted to share this Extra Details segment so you can see what's included.
Fixed or variable? How to decide
How do you know if a cost should be registered as fixed or variable?
Sometimes you'll have an item where it's less clear where to register it. It may be helpful to know that there isn't a right or wrong, it's your choice. You can choose where is the most convenient place to register a cost. The main thing is that all costs are registered somewhere.
One example is how to register sugar sprinkles. You can choose to register them as a Variable Cost or as a Fixed Cost.
In my business, I would use 15 or 20 tubs of sprinkles in various shapes and colours each year, which could amount to as much as €100. So although the amount used per cake may seem insignificant, it's still important to register this cost.
Sprinkles as a fixed cost:
In my business I would often decide to add a little shake of sprinkles as a finishing touch. The amount used was usually under half a gram.
In order to avoid wasting time weighing and calculating the cost of tiny amounts of sprinkles, I found it more efficient include sprinkles in my fixed costs. This not only saves time, but also allows me more freedom in design decisions. I don't have to predict how many I will use at the design stage before preparing a quote for a customer. Instead, I have the freedom to add whatever I feel is needed when the cake is finished.
Sprinkles as a variable cost:
If sprinkles were needed in a specific shape or colour for an individual order and any left-over sprinkles wouldn't be useful for future orders, then the cost of the whole tub of sprinkles could be included in the variable costs for that order.
If you need to use a whole tub of sprinkles for one order then the cost of the sprinkles should be included in the variable costs for that order.
How can I know how much I will use?
For a custom order, it's wise to always take complete payment up front (before you start making the order.)
This means you need to decide how much to charge before you've made the order, which can sometimes be tricky.
When baking using a recipe you will already know the amount of ingredients used, and we have already discussed how to handle things we may use in tiny amounts like sugar sprinkles.
However, it can be more tricky to know how much icing/frosting you will need to coat the cake or how much modelling paste would be needed to sculpt, for example, a mad scientist.
Here are a few ways you can work out how much you will use for these situations.
KEEP NOTES
We can get around this issue by keeping a record of how much material is used in each project. Over time, you will build up experience and knowledge to be able to estimate material usage accurately.
Keep a clear record of material use alongside a photograph of each project. When you get an request for a new commission, you can refer back to your notes to see how much material you used in a similar project to use for your quote.
Turns out that a mad scientist uses roughly the same amount of modelling paste as an astronaut, a pony or an anime girl. So in my business, I could easily estimate the amount of modelling paste when making characters of this size.
For the handmade artists
GAUGE
If you are not a baker, Here's some extra support.
To figure out how much material is used in each project you can weigh, measure and counting.
If you've bought this guide as a producer of hand-made or craft items, I've used some non-cake examples below to help you gauge your material costs.
Here are some examples of weighing, measuring and counting to help you decide how to work out your material use.
Weigh:
If you are a Jewellery maker, you could weigh your final product to find out how much precious metal you have used (minus the weight of any stones used).
Crochet or knitter: You could weigh your balls of yarn before and after your project. Making stuffed toys? Weigh the shell, add the filling and weigh again. Now you know how much filling you used.
To work out how much buttercream is needed you can weigh a cake before and again after the buttercream is added. If you do this a few times noting down the size of the cake and the amount of butter cream used, you can quickly build up a record to help you price accurately in the future. Buttercream is a Variable Cost.
Measure:
If, for example, you make laser cut items, you could measure how much of the base material (wood/metal/plastic/card/etc) you use in cm². Often the cutting programme will be able to calculate this for you. Can you re-use the off-cuts for a smaller project? If so, subtract this from the amount used, if not, make sure you include this wasted material too.
Seamstress: If you are using patterns you will probably be able to measure the amount of fabric you will need at the beginning of the project and include it in your Variable Costs.
However, it may be more difficult to calculate how much sewing thread you will use. In that case, it might be better to record thread under the Fixed Costs. Should you have a project that requires you to buy a whole new roll of a particular coloured thread that you may not use again, then include this in the Variable Costs.
Count:
This doesn't really need explaining, you know how to count. Things like buttons, packaging bags and boxes, tags, zippers, stickers, labels, etc, can all be counted.
How to calculate and why
Here is an example to explain the calculations you need to make to help you gauge how much material you will use. It also demonstrates why it is so important to include this step.
In this example an artist will work out how much paint she uses on her paintings and what the paint costs.
The artist will paint a 30cm x 40cm canvas with acrylic paint. The paint will be applied quite thickly.
She starts by working out the cost of 1 gram of paint. She does this in the same way as the flour example earlier:
Flour example:
A bag of flour costs €0.83 for 1000g
Divide €0.83 by 1000 to find that flour costs €0.00083 per gram
Paint example:
A tube of paint costs €5 for a 130g
Divide €5 by 130 to find that paint costs €0.0385 per gram
Next she will weigh the canvas before painting. It weights 150g.
She will weigh the canvas again when the painting is complete. It now weighs 275g.
275 - 150 = 125. So she has used 125g of paint.
The paint costs €0.0385 per gram.
0.0385 x 125 = 4.8125
So she has used €4.81 of paint on this canvas.
How can she use this information for future use?
Now she knows the cost of paint, and that it was applied to a 30 cm x 40 cm canvas, she can calculate the cost of paint for any sized canvas really quickly.
How?
She will work out how much it costs to cover 1cm² of canvas.
The canvas was 30cm x 40cm and used €4.81 of paint.
30 x 40 = 1200
So the canvas area is 1200cm²
€4.81 ÷ 1200 = 0.0040083
So it costs €0.0040083 in paint to cover 1cm²
Now she can work out how much her paint will cost for any canvas size.
(assuming she paints in a similar style each time so that she uses a similar amount of paint)
She has a comission for a large new artwork. It will be 200cm x 150cm. Here's how she will calculate how much the paint will cost:
200 x 150 = 30000cm²
30000 x €0.0040083 = €120.25
So the large painting will use €120.25 worth of paint.
Something that seems so small and insignificant can add up to a significant amount. This is why it's important to calculate the material cost even for the little things that we don't think we use much of.
For those of you who appreciate the help with the math, here is another example:
This time she has been asked to paint a mini canvas. It is 15cm by 20cm. Here is the calculation:
15 x 20 = 300
300 x €0.0040083 = 1.20
So she will use €1.20 of paint on this mini canvas.
Of course in reality, each painting will be slightly different and use different amounts of paint. To account for this she can do the above calculation for a number of her artworks and take an average.
The more often she does this the more accurate her figures will be.
This method can work for many different products. When I started out I didnt know how much buttercream I needed to cover each size of cake. By weighing my cake before and after adding buttercream each time, I could build up a record of how much I was using. Keeping a clear record for future use is really helpful.
How to work out an average
"The average of a set of numbers is the sum of the numbers divided by the total number of values in the set."
Sounds complicated but it means if you have 6 numbers you add them together and divide by 6.
If our artist weighted lots of her artworks, she would see that she uses slightly more or slightly less paint per 1cm² each time.
If she works out the price per 1cm² for each painting, she can take an average and use this as her 'per 1cm² price'
She weighs 3 paintings:
On painting 1 the cost per 1cm² is €0.0040083
On painting 2 the cost per 1cm² is €0.0050036
On painting 3 the cost per 1cm² is €0.0038824
We can add those numbers together and divide by 3.
0.0040083 + 0.0050036 + 0.0038824 = 0.0128959
0.0128959 ÷ 3 = 0.0042986
So on average it will cost her €0.0042986 in paint to cover 1cm²
When you are preparing a quote for a comission it is not always possible to know exactly how much of each material you will need to use.
By building up a record over time, this method will help you to make an good estimate.
I do the same for the decorations on my cakes. I can't know how much modelling paste it will take to make a mad scientist if I've never made one before. But if I weigh each pony and astronaut I make, over time I can estimate how much the scientist will weigh to make an accurate quote before I start work on the model itself.
Build your business on solid foundations
with pricing knowledge
that will last a lifetime
How great will it feel to :
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Build a successful business so you can continue doing what you love (and be your own boss.)
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Have more time to spend on the fun part of your craft; creating, baking and decorating.
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Know you are charging fair and accurate prices that will cover your costs and earn you a profit.
