Let's get started

You already make gorgeous cakes, so let's make sure you're charging enough to cover your costs starting with variable costs.

First I'll show you how using one of my recipes, then you're invite to download the free workbook and do the same for your products.

Let's get started!

VARIABLE COSTS
Segment 2

In order to price accurately, we need to know exactly how much each product costs to make.

How to calculate variable costs_edited.jpg

What are variable costs?

Variable costs are the cost of the materials to make your product (so not your time or re-useable tools/equipment)

Variable costs are everything that is used up when the product leaves your hands. E.g. ingredients used in the cake, plus any dowels, disposable piping bags, cake boards, cake box, etc.

Variable costs are so called because they vary depending on what product you are making, the size and the quantity:

300 cakes uses more ingredients than 3 cakes.

A big cake uses more ingredients than a small cake.

Luxury ingredients cost more than basic ingredients.

In this segment you will learn how to work out your variable costs for one of your products. I will show you how to do this using a small birthday cake as an example. I'll base the costings on a very simple design with just a name plaque on the top.

Example: Variable costs for a small cake

Let's work out the variable costs for a simple 12 portion cake like these. I've built a spreadsheet to do the calculations automatically. Download it below or use pages 4-7 of your workbook.

First we need to work out what materials will go into making this product and how much those materials will cost to buy.

To make a cake like this I would need the following:

Vanilla- strawberry cake with name plaque:

Cake: 240g flour, 240g butter, 240g eggs, 240g sugar, 15ml vanilla extract

Buttercream: 250g powder sugar, 250g butter, 15ml vanilla extract

Filling: 50g strawberry jam

Decoration: Plaque with 'Happy Birthday' which uses 25g of modelling paste

Packaging: 1x cake card, 1x box

Let's pop the amounts needed into the spreadsheet:

Next we enter what each product costs and how much was in the package. For example a bag of flour costs €0.83 and contains 1kg flour (1000g). So I'll enter 0.83 into the 'Product price' column and 1000 into the 'whole quantity' column.

When this information in entered, the spreadsheet will work out the cost per item/ingredient.

Click the button to download the spreadsheet. Use it to work out the costs of one of your products or if you prefer, have a practice using my recipe first. You'll find it in the 'Example' tab

Get Spreadsheet

Spreadsheet available with the full guide. Use the workbook with this free sample of the course.

Fill in the columns 'Item,' 'Product Price,' 'Whole quantity' and 'Number of units needed.'

In the example below I've included g, ml and € for demonstration purposes. In the spreadsheet you'll only add the number.

Total:

€10.98

The spreadsheet will automatically add up all the ingredient costs and give the total. The total Variable Costs for this cake are €10.98.

For this example I would note 10.98 on page 9 of the workbook ready to enter into Field 5 Cake Pricing Calculator.

Because this is just one product, also enter '1' into Field 7 of the calculator.

For a detailed explanation of the maths used, see the Extra Details segment at the bottom of this page.

Tax

If you live in a country where you are allowed to claim back the sales tax on business purchases, then remove the tax before entering the product price.

If you can't claim the tax back (or are registered for KOR in the Netherlands) then use the full purchase price you paid for the product.

Here's a handy calculator to remove the sales tax for you.

Batch production

If you make batches of items that will be sold individually (such as croissants) you can use this same method. Include the materials needed for the whole batch in your variable costs. Mention the number of products made into Field 7 of the calculator. It will then give you the selling price per item.

If you make a batch of cupcakes but sell them all together to one customer. You can enter '1' into Field 7 of the calculator.

Time

You will find a space to note down the time it takes you to make the product on the spreadsheet/worksheets.

If you don't know how long it takes to make, set a timer next time you make this cake. Only count the hours that you are actively working on the product. So don't count the time the cake is in oven if you can spend that time working on another project. But do count time spent washing up.

If you make standard cakes (like the ones above with the simple plaques) you can include the time the decorations take to make.

If you make custom designed cakes, the time spent making decorations will vary considerably per cake. In this case it can be more useful to make a separate variable costs sheet for just the decorations.

Read the section below for how to include this.

Time decorating

It's impossible to know exactly how long a design will take to make when you've never made it before. The best you can do is make a well-educated estimate.

To do this, time yourself while you work.

Start keeping a record by saving a photo of your work alongside how long it took you. Weigh the final piece and note the amount of modelling paste / flower paste used.

It can be helpful to note the time it took to make individual items (such as a sugar rose, a unicorn, etc.) and also for the complete cake with all its decorations.

Over time you will have your own database of timing information which you can refer to when preparing customer quotes. You may also find that your work speeds up with more experience, so you may choose to repeat this exercise after a year or so.

Before using the calculator, remember to add together the variable cost and time taken to make both the cake and the decorations.

For example, these four cakes each took a similar amount of time.

These four were faster to make and took a similar amount of time to each other.

Going forward

For now I suggest you work out the costs of one of your products. Going forward, you can make a Variable Cost sheet for each of the products you offer.

If using the printed sheets in the workbook, print as many as you need and keep them in a folder to use as a reference. If using the spreadsheet, add as many sheets as you need with each product on a separate sheet.

You may find it helpful to note down the cake, filling and decoration on separate sheets so you can mix and match flavours with fillings.