How to Calculate the Cost of Ingredients for a home bakery
Knowing how to properly price baked goods for a profit is an important step for running a successful home bakery business.
It can be a little daunting to know exactly how much you should charge for your cakes, which is why I am sharing my Cake Pricing Series. In this series, I’m breaking down each step of pricing a cake to make your journey of running a profitable cake business that much easier.
How to Calculate the Cost of Ingredients for a Home Bakery
Make a List of Ingredients and Supplies
Make a List of Suppliers
The first step in costing out your ingredients and supplies is to make a list of where you shop. This is to help you keep track of where you purchase your ingredients and find how much you pay for each ingredient easier.
Tracking your suppliers also helps you to make decisions to find the best deals on your ingredients and supplies if you shop in multiple places.
I personally stick to a handful of suppliers such as Walmart, Amazon, and a few local stores.
Make a List of Ingredients and Supplies
Next, you can start making a list of all the ingredients you use in your home bakery. This can take some time, so feel free to break this up into multiple days.
It is important to keep track of everything you purchase for your home bakery from the flour, sugar, cake boards, boxes to your sprinkles, paper towels, and parchment.
Another short cut is to grab my Cake Pricing Calculator where you can drop your information in and it will do the rest of the work for you.
Keep track of your ingredients and supplies and you can also categorize them by where you purchase them from.
Write the Cost and Quantity of Each Ingredient and Supply
Once you have your list, you can begin to go back to your suppliers to figure out the cost of each ingredient and how much of the product you got for that price.
Write both of these numbers out next to each ingredient and supply or you can just add the numbers into my Cake Pricing Calculator. This is going to be very important for you to be able to keep track of and to make the next step easier.
If you purchase your ingredients and you need to convert the unit of measurement to another one, you can use Google or ask AI like ChatGPT to help you with those conversions.
For example, your flour may come in ounces, but, you measure your recipes in grams. You’ll need to convert the amount from ounces into grams.
It is very important to convert your ingredients so you can have accurate numbers.
Calculate the Cost Per Unit
Now it is time to do some math.
If you are using my Cake Pricing Calculator this step is already done for you to save your mind from having to do some math. But it is still good to know how to do this manually and understand how it works.
It’s time to put all the pieces together to figure out the cost per unit of each ingredient and supply you use.
Knowing the cost per unit helps you to calculate the cost of your recipes.
To do this, simply divide the cost of the ingredient by the number of units in the ingredient.
For example, you purchase a bag of flour for $3. This bag has 19 cups of flour.
We divide the $3 by the 19 cups to get about $0.16 per cup of flour.
Repeat for all ingredients and supplies adn write down for safe keeping. If you are using my Cake Pricing Calculator, it does this step for you!
Make Conversions as Necessary
Flour usually gives the measurements in pounds or kilograms, but most bakers, may not measure in those measurements so a conversion needs to be made.
To get conversions, you can do a Google search or use AI to convert units of measurements and then do the math from there. This is why we mentioned converting to the proper unit of measurement in the earlier steps.
The flour is measured in pounds and kilograms but I need it to be measured in grams. This is an easier conversion because we know there’s 1000 grams in a kilogram. So we simply multiply 2.26 kilograms by 1000 and get 2,260 grams of flour.
So now we can do the same math and divide $3 by 2,260 grams to get $0.001 per gram.
This looks like $0.00 in my cake pricing calculator because it rounds up to the nearest cent. Many people get confused and think it’s not calculating, but the reality is that it is calculating in the background and will show once the cost comes to $0.01.
Knowing how much your ingredients and supplies cost is crucial to being able to run a profitable home bakery. You have to know your numbers to grow your numbers. And while this is such a tedious step in the process of pricing your cakes, once it’s done all you have to do is run maintenance on it to keep the numbers updated. That’s why I love my cake pricing calculator. It makes maintaining accurate numbers a breeze. All I have to do is update the cost and then it automatically adjusts everything from there!
Calculating the cost of all the ingredients you use in your cake business can take quite some time if I’m honest. But you don’t have to tackle this process all in one go. Work on it bit by bit and before you know it, your library will be full and fully functioning. Start with the ingredients of just one or two of your most popular recipes a day if you have to.
Once you have the cost of your ingredients ready, you will then be able to start costing out your recipes. Don’t worry, I’m going to show you how step by step in the next blog post so subscribe to my newsletter to get updates as I release new articles to help you run a sustainable and profitable home bakery business.
