An issue that many new cupcake businesses encounter very soon into their venture is that their cupcakes aren’t priced correctly.
When this occurs it’s usually because businesses are underpricing their cupcakes rather than overpricing with the hope of selling more cakes.
Many think that because they’re starting a new business and want to get the first initial orders coming in, they must charge a cheaper price than they would like. This isn’t the case. You should be charging what your cakes are worth and what you deserve.
3 Reasons to NOT Under Price Your Cakes
The big problems with underpricing your cupcakes in the beginning are:
1. You won’t be making anywhere near as much profit as you should be, making it almost pointless to carry on taking orders if you’re only just managing to cover the cost of the ingredients.
2. If you start with a low price and have lots of customers, it’s going to be very hard to increase the price considerably all of a sudden. This means that you will have to slowly increase the price over a long period of time, meaning that you won’t be making the profit you should be for a very long time.
3. A cheap price tag won’t reflect the quality of your cupcakes, confusing your potential customers as to whether you are actually selling a high quality product or not!
Why You Shouldn’t Sell Cheap Cupcakes
Customers will often pay more for cupcakes from businesses that have a brick and mortar shop. This is for the simple reason of having the convenience of being able to sit and eat them in the shop (usually with a coffee) or quickly drop by to pick up some cakes.
Just because you’re running the business from home doesn’t mean you have to be cheap, if you are offering a bespoke service then you should charge more too. Plus if you’re offering a premium delivery service, this is something that may be unique to you in your area, this is something you can charge more for.
Below are the obvious outcomes that could happen depending on your price decision:
• If your cupcakes are priced too high you can quickly and easily bring the price down much to the happiness of your customers.
• If your cupcakes are priced too low and you have built up a good reputation it will be very hard to increase the price suddenly.
Making a Profit from Selling Cakes
Make sure that you are still making a good profit even in your early days. If you’ve planned correctly, you will have factored in the cost all of the ingredients needed for making the cupcakes, the price of the decorations, cupcake boxes, tools, ribbon and energy (gas & electric) meaning that you should know how much you need to be charging for each cupcake to cover your costs and make a profit.
If you’re using high quality ingredients for your cupcake recipes you should definitely be selling your cupcakes for as much as possible, but still stay within the threshold of what customers are willing to pay.
Do you need some help working out your costs? Write these points down and put your costs next to them, this will help to keep you on track.
Remember, each cupcake recipe will need different ingredients so you’ll need to work out costs for each cupcake flavour.
Base these costs on the production cost for a batch of 6 or 12 cupcakes then either divide the cost by 6 or 12 to get the individual cupcake cost.
- YOUR TIME (don’t forget you need to pay your self!)
- Cake batter ingredients
- Cupcake buttercream / frosting ingredients
- Pre made decorations (sprinkles, edible glitter, chocolates etc.)
- Custom decorations (icing, decorating tools, food dye)
- Cupcake cases / wrappers
- Gas – gas oven
- Electric – mixer and electric over
- Cupcake box
- Gift card
- Delivery – Don’t factor this into your individual cupcake cost. If you’re delivering – petrol, insurance, MOT and vehicle cost (factor all of these into your delivery charges to make sure you’re covering the costs, also, don’t forget about the time that you or your delivery driver will spend doing the delivery)
Finding the sweet spot for your prices will take some time. Test out different prices, then once you’ve found a price where your customers are happy and you’re making money, you know you’re going in the right direction!
Showcase your cakes as much as possible, once you’re able to show exactly what you have to offer (a high quality product which brings happiness), your customers will be much more willing to pay that little bit extra for someting special.
“your customers are happy and you’re starting to make money, you know you’re going in the right direction!”
Don’t be afraid of customers not coming to you for their cupcakes if you start with a higher price or decide to put the price up.
As long as you’re selling a superior product (cupcake) they will be more than happy to pay what you are asking. If however you do notice that orders drastically drop, then lower the price slightly making sure that you are still making money.
A Great Way to Make Money Working from Home, Doing Something You Love
You’ve put the time and effort into starting your cupcake company, you’ve perfecting the cupcake recipes, you’ve invested in the equipment AND you will have invested a lot of time before even making any money.
But this isn’t the time to give up, now is the time to get even more excited because this is when the real fun starts. Now you’ll be ready to start taking orders, making sales and make money from something you love doing!
It may seem daunting if you’re doing this by yourself, but keep going with it, stick to your plan and push forward.
Know how much your products are worth and make sure you charge accordingly.
• Being paid what you feel is fair will make you feel really good about what you’re doing. This will help you to contiue to drive things forward and grow in the future.
• If you don’t charge enough it will make you feel disheartened and your passion will start to be tainted with negativity. This will make it much more difficult to stay positive about about the business.