10 Terrible Mistakes You Are Making in Your Cake Costing

  • You are copying other bakers! Instead of sitting down to Calculate your costs yourself, you simply adopt the pricing list of other bakers around you. You think you have found the easy way out, but the truth is that you don’t know their why. That is, you do not know the reason behind their prices. There are 3 possible scenarios;

    • It is also possible that the baker copied someone else and they also do not know exactly what they are doing.

    • Some bakers set a low price because they are riding on a high turnover. So even if the profit is less, the high volume they are making will make it all worth it.

    • Also, some may set their prices high because they offer premium cakes only. That is their own strategy, the same may not be your case.
  • You have ignored some hidden costs that make up a very vital part of your total cost. There is so much more to costing your cakes than just the cost of ingredients. In fact, you will find out that this cost is just a fraction of the real total cost. A lot of us calculate the cost of our ingredients, add a little to it and think we are done. That is why you may not have any money left in the bank at the end of the month. These costs are explicitly discussed in the eBook Cake Costing Workbook for bakers.

  • You are not paying Yourself. Ok, so a lot of bakers are guilty of this. You need to pay yourself as a small business owner. See it as your salary for working in the business. This money has to be separate from your profit. Imagine you have a number of people working for you, you’ll have to pay a salary right? And that is a very important Cost. The same way you will pay yourself a salary even if it is only you. The profit must remain in your business account. This way, you can embark on projects that will make your business grow. So, the question is, how much is ideal to pay yourself? If this is a puzzle to you, then think about it like this;

    • With all the expertise I have gathered over the years, how much would you like to be paid if I worked for a big bakery?

    • Yes, that can give you a good idea.

  • You do not know the right profit margin to add to your products. In our class on cake costing earlier this month, I asked a question at the end of the class. How much profit is ideal for your cakes? I got so many funny answers and this made me realize that a lot of us do not understand the nature of our job. Once you start to understand that cake is an art, you will never feel guilty about charging your worth.

You have not adjusted your pricing to the latest market prices. It’s not news that all the market prices have doubled or even more over the past 3 years. Inflation is sky high and this has seriously affected every aspect of business in Nigeria. From increase of the price of ingredients, electricity tariff, and price of diesel. If you do not factor in all these new costs, you cannot get your pricing right!
  • Just because you bake from home, you have underestimated your cost of production. We need to understand that for any real business to grow, we need to constantly plan for expansion. If you have just one staff member today, you should be thinking of doubling that number. If you use a local oven presently, you should be thinking of how to get an industrial oven. If you have just 20 customers, you should be thinking of ways to advertise and expose your business to more customers. All these require money, so if you keep playing it small, you will not grow.

  • You are wasting your materials. You do not measure your batter; therefore, a portion of your cake goes to waste. In my e-book Cake Costing Workbook for bakers, we have discussed how important it is to weigh your batter. This will help you to set a standard in your production and therefore hardly anything goes to waste.
  • You do not calculate correctly. Mathematics is a big headache for a lot of us, I know! There are simple formulas you can use to calculate the cost of your products, whether in cups or in grams.

  • You do not factor in miscellaneous. This simply means that there is some little money that we ignore. Most of the time we do not record this cost because we think it is negligible. But the truth is, small costs add up to becoming big costs. For example, the cost of nylons and tissue you use in your bakery.

  • You are making delivering for free? You need to understand that delivery is a different business in its own and the customer needs to pay separately for it. If you let your customers get used to free delivery from you, it is adding to your total cost and that will definitely affect your business in the long run.

So, how many of these do you find yourself guilty of? Let me know in the comment section. I hope you found this useful. Our eBook Cake Costing Workbook for bakers is the solution to your costing problems. Click HERE to learn all about it.

Write a comment