Pricing Your Products by Quincella Geiger
Pricing Your Products
By: Quincella C. Geiger
One of the most frequently asked questions when starting a business is…How do I set prices for my products/services? Further…Is there a simple formula that I use to help with pricing? If these questions were asked of 10 different bakers, chances are 6-8 answers would be different. Why? Because there are no forumlas guaranteed to work for everyone. There are no absolutes. When it comes to putting a price on what you make/create, you should do so based on research, thought and careful consideration of information gathered.
If you’re interested in getting started, here are some of the important things that should be considered:
- The Type of Product(s) That You Offer – Are your baked goods created with the help of some type of pre-mixed ingredients OR are they made-from-scratch with fresh quality ingredients? Made-from-scratch products done the right way can usually fetch a higher price than products made from pre-mixed ingredients.
- Your Market – Where will you sell the products? Will you sell at farmer’s markets, food fairs, special events or from home only? Are your potential customers low-to-middle income or mid-to-upper income. In other words, do you anticipate a customer base that’s more likely to pay $20.00 OR $40.00 for a made-from-scratch Pound Cake?
- The Competition – Are there bakers in your area selling products comparable to yours? If so, what are their prices? Do they offer discounts on quantity purchases? Can you price and sell your products to compete with theirs?
- Ingredient Cost – Taking the time to calculate the exact cost of each ingredient/item involved in producing your baked goods isn’t the most fun thing to do; but it’s necessary. It’s important that you know exactly how much you’re investing in each product. The cost of packaging (cake boards, boxes, bags, etc.) should also be included.
- Labor – How long does it take to make a pound cake, a dozen cookies, a dozen cupcakes, or a specialty birthday cake from start (preping ingredients) to finish (cleaning up the baking area)? Time the process. Now give some thought to what your time is worth.
If this sounds like too much work, you can bypass all of it and simply charge what other bakers in your area charge for products similar to yours. It’s quick and easy; but Not Recommended.
Copying someone else’s prices is simple but gives you no idea as to how much you’re investing in each of your products. Which means, you have limited knowledge of what’s really required to operate your business and generate a profit.
Need more help? The SBA (Small Business Administration) offers in depth step-by-step help, States with Cottage Food Laws sometimes offer tips on pricing. Additionally, there are self-help sources like books and websites.
Getting the price structure right for your products can be a process. Be patient. It’s all a part of the learning process.
Much success with your baking businesses!
With more than 20 years of experience, Quincella is an expert in home baking ventures. Her book “Bringing Home the Baking” deals specifically with Commercial Kitchen start-ups and operation. For information on Cottage Food Laws and Cottage Food Kitchen operations please visit her at http://www.bringinghomethebaking.com.
Learn more! Take this Craftsy class!
Originally posted 2017-07-31 17:11:56.