How to Calculate Overheads when Pricing a Cake for Your Home Bakery Business
Pricing a cake can be daunting, but it is something that must be done for every successful home bakery business. And you don’t have to fret anymore over the pressing question of how much should I charge for this cake, because I am sharing with you my exact process for pricing a cake for profit in my Cake Pricing Series.
Today I’m talking all about how to calculate overheads for your cake business, so let’s jump into it!
How to Calculate Overheads when Pricing a Cake:
What are Overheads when Pricing Baked Goods?
What are Overheads when Pricing Baked Goods?
Overhead costs are the costs it takes to run your business each month. These are the costs that are not directly correlated with making your product like ingredients.
Instead these are the costs that happen behind the scenes like paying for your website hosting, Canva subscriptions, Meta verified subscription 🥴, business licenses, insurance, rent, utilities, accounting, and any other services you pay for to run your business.
These are hidden costs that many home bakers may not consider when factoring the price of their cakes, but they are so important.
I mean, if you’re not factoring in those costs, how are you paying for it? 👀
How to Calculate Overheads for a Home Bakery Business?
Calculating your overheads isn’t that hard to do especially if you use my Cake Pricing Calculator where it does all the calculations for you 🙌🏾. But let me break it down for you step by step so you can start factoring it in when you price your baked goods.
Step 1: Figure out what you are paying for.
If you haven’t been keeping a running record of the services you are paying for in your home bakery business, you can figure out what you’re paying for by checking your bank statements.
Look for all the payments you make that are not directly correlated with producing your product and write them down or add them into the Cake Pricing Calculator.
Step 2: Make a note on how often you pay for these services.
How often do you pay for each service? Is it every 7 days, 30 days, or yearly, 365 days? How much do you pay per cycle? Write this down or fill it into the Cake Pricing Calculator.
Step 3: Figure out how many cakes you sell or want to sell each month.
Either calculate or have an idea about how many cakes your business will sell each month. If you’re new and don’t have a reference point for how many cakes you make a month, create a goal amount. It will then be your responsibility as the business owner to get those orders in the door.
You’re going to use this number to evenly distribute the overhead costs across each order.
Step 4: Calculate the overhead cost per cake.
Do this by dividing the monthly costs by the number of expected monthly cakes.
For example, if your overhead costs to run your bakery is $100 a month and your cake business sells an average of 10 cakes per month, divide the $100 overheads by 10 cakes a month.
This gives you an overhead cost of $10 that will be added to each cake.
If you have weekly or yearly costs, you will need to convert those numbers into monthly costs. You can also calculate these numbers by the year. Just make sure you convert all numbers to match. If you use my Cake Pricing Calculator it makes this process easier by doing all th math for you! Grab it here.
Do You Have to Factor Overheads for a Home Bakery?
How you choose to run your business is completely up to you, so if you decide you’re not ready to add in overheads to your pricing then that’s your business and you can work your way up to it.
However, understand that whether you add them to the price of your cake or not, those costs are still going to need to be paid. You’ll have to decided where the money will come from and keep track of it so it’s clear when it’s time to file for taxes.
Pricing your baked goods so you can run a profitable home bakery business is necessary, but it doesn’t have to be difficult. Subscribe to The Station Bakery to follow my step by step tutorials or use my Cake Pricing Calculator to make pricing even easier.
If you found this article helpful or have any other questions, please feel free to leave a comment below.
