You’ve figured out how much your ingredients, time, and overhead costs. You’ve perfected your recipes. You’ve started marketing your cake-making business. Something is still missing, though. Are you making a profit on your cakes or are you just barely covering expenses?
Marking up your cakes protects you from unexpected costs, finances new equipment for your business, and even allows you to earn more per hour. Keep reading to learn more about this essential pricing strategy and how to implement it with the Bakecalc pricing calculator!
What is Markup?
Put simply, markup is the amount you charge for a cake over your expenses. So if you sell a cake for $100 but it only cost you $75, you have marked it up by $25.
Markups provide a safety net for your business by making sure you have a little extra cash just in case.
Markups vary by industry, company, and geographic location, so there isn’t really a right or wrong way to mark up—you just have to trust your instincts and number sense.
Protect Yourself from Extra Expenses
What would happen if your delivery truck needed new tires or your baking oven stopped working? It is impossible to plan for these unexpected events, but they have a knack for happening just when money is tightest.
Furthermore, markup allows you to have sales and discounts and to be ready for surprise costs for a particular project.
Adding a few dollars to your cake prices can help build a safety cushion for when the seemingly-impossible (or at least the unpleasant) happens.
Save Up for Something Bigger
If you have saved up a little cushion for extra expenses (as recommended above), chances are you might even have some extra money to invest back into your business.
Do you need a bigger mixer? Would you like to hire a delivery person or bakery assistant? These expenditures require a bit of forward thinking and some cash reserves—both of which marking up your cake prices can help with.
Even if you do not know what you would like to buy, having extra profit to invest back into your home baking business can take your company from hobby to bustling enterprise.
Give Yourself a Raise
Are you making enough money to pay your own personal rent and expenses? If you haven’t reached your target hourly wage (or monthly salary) from running your own bakery business, marking up your cakes a little bit will help you achieve that goal in the future.
How to Add Markup with BakeCalc
Adding a little cushion to your homemade cakes’ prices is easy with BakeCalc. You can simply add another hour or increase the rate you bill your time at under the “Time” section, and watch the price increase or decrease as you go. If you’d rather, you can also just round up your final price and keep the change.
The method is up to you, but consider factoring it in—better to have a little extra money in savings now than to scramble for cash down the road.