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Pricing Pastries to Sell

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chenoa's picture
chenoa

Pricing Pastries to Sell

Hi, I am in need of advice about how to price pastries to sell.I live in a state where it is allowed to do this out of my house. A lady wants to buy a half dozen scones from me,Raspberry White Chocolate.


How do I price these out?


The scone recipe i use is a "basic scone" recipe.I modify the add-ins depending on what kind i want to make,but that is the only thing that varies.


Is it logical to price out the basic dough per batch and then add in the price of the add-ins per oz?


Any advice would be helpful.Thanks,Chenoa

shiloh.sharps's picture
shiloh.sharps

Don't sell your self short. Most people equate good with expensive. I would base things on how long it takes to make them rather than just the material cost.


A quick look around has scones going for 1.95 each. I'd start around there and see what happens. It's always easier to lower your price.

Brot Backer's picture
Brot Backer

NO! DO THE MATH! I know you are just selling some from your house but these ventures can take off and if you start with the wrong prices you will all too often feel pressured to keep those prices. Buy your ingredients and see how much it costs you per batch (include tax!) then double it, that should be your MINIMUM price. Shiloh is right about your time being more valuable than materials but start with what it costs you then remember that you also pay for the water, heat and mortgage your goods are made with.


The reason most food businesses fail is not poor product or lack of spirit, it's because people get caught up in the romance and forget the bills. I'm not trying to take the fun out of it (you can beat local prices!) just know that a financially stable baker is a damn happy baker!


Good luck!

csimmo64's picture
csimmo64

I thought most businesses failed based off of location? And usually a 33% food cost [or triple what the ingredients cost] is what normal restaurants aim for. I'm not sure what bakeries do, but I suppose its the same

Brot Backer's picture
Brot Backer

Location is only so much of the equation, I see great restaurants fail in great locations and terrible restaurants thrive in horrible locations. For a home bakery, location really isn't a factor since goods a basically being sold wholesale. I said double instead of triple due to the lower costs of working from home and on the assumption that she has no employees but tripling the material cost is never a bad idea.

chenoa's picture
chenoa

I agree and that's what i did.I sat down with my husband and we figured out how much just the mix would be,then there are the add-ins,and those are sometimes seasonal and the prices fluctuate.


I detest the aspect of adding it up and i have avoided it for 2yrs.Its not because i want to live in the romance and the dream,but because i struggle with math.However,my husband does not and thou it was stressful,i got through it.I have to do it if i am going to run a business and I want to.


I did forget to take in to account the bills involved.So i will need to add that in as well.


I did some research online,(bakeries all over the country) ect...made some calls to some places in my state.Most places sell their scones for example at around 2.50 each.I am not sure why so cheap.I called and asked how many ounces they were and they are about 3.5.


Mine are nearly 4oz.I use all fresh ingredients and butter only.


I found someone on Etsy.com who sells scones very similar to mine and she charges $36 for half dozen.Does that sound right?I guess that would be the cost plus the mark up.


It doesn't take me an extraordinary amount of time considering that i have made scones a gagillion times and know the routine like the back of my hand.But i do consider that aspect too.


I used to bake at a cafe and had to scale and price out items for the manager before should would ok what i wanted to bake.And have had other restaurant experience.So,i am no stranger to the technical side of this.I want to be smart and anticipate unexpected situations.


I want to price out my product according to what I am worth,but i dont want to be a snob about the fact that these are quasi artisan pastries.That to me is a fine line and I have never stood on it until this week.


I have not been to school,nor have i apprenticed under anyone.I am self taught.However,i dont think that disqualifies me from knowing a thing or two.


THANKYOU both so much for the feedback! I will check back for more advice! -Chenoa

mimifix's picture
mimifix

Standard bakery pricing: find the cost of ingredients, then triple for wholesale and quadruple for retail. So if the scone ingredients costs you 50 cents, your wholesale price is $1.50 and your retail price is $2.00 Included in this mark-up is the cost of incidentals (i.e. packaging) and all your overhead.


Baking from home naturally gives you a higher profit since you have no additional overhead other than utilities.


I began as a home-based baker and then owned a retail bakery/cafe for many years. I wrote "Start and Run a Home-Based Food Business" and also teach baking, and home-based business. Really, the above pricing structure works. If you have more questions, post them on my facebook business page http://www.facebook.com/pages/Kingston-NY/BakingFix/150393868317261


Mimi     http://www.bakingfix.com/


 


 

Mike Avery's picture
Mike Avery

It seems everywhere you go, sooner or later people ask, "how much should I charge"?


In a consulting forum, it was suggested that the consultant consider his overhead, divide by the number of billable hours he anticipated and charge that.  However, that wasn't a billing rate needed to succeed, that was just a billing rate to keep your doors open.


Twin related concerns are, "Is this a one time deal?" and  "what do you want to be doing next year?"  If you don't plan on doing this again, or regularly, don't sweat it.  Charge her what the bakery down the street is charging and smile.  If you are planning on doing this commercially and moving into a rented kitchen, or even continuing to use your home kitchen, you don't want to under charge now because later your costs could rise and you don't want to raise your prices if you can avoid it.  So, if you do want to continue, there are a number or ways of gauging prices -


There is the "total up your materials and triple it for wholesale and quadruple it for retail" song and dance.  If you do that, count EVERYTHING!  You wiped the counter with a paper towel?  Count it!  You used some baking spray - PAM, Baker's Joy or whatever - COUNT IT!  You dusted the pans with flour?  COUNT IT!  You used bakers parchment to line your pans?  COUNT IT!  Many bakers make the mistake of overlooking little incidentals.  And they do add up.  Once you have the real cost of materials, do tha math, write down the number and keep on reading.


Materials are a part of your cost, but not the whole enchilada.  Right now, you're baking at home.  Most home bakers ignore the cost of their kitchen and utilities, not to mention their own time.  You are paying for your home, whether you rent or own, and you are paying utilities. You have wages - you SHOULD pay yourself!  And you'll have witholding if you become sucessful.  Budget that also.  If you hire people to help you, you will have to pay them and handle witholding. You should also talk to your accountant.  In some areas, using your home as a workplace has tax implicaitons.  Some now, and some when you sell your home.  You should know what the costs and benefits here are.


You have some fixed overhead and some variable overhead.  Your fixed overhead is things like your rent (or mortgage), advertizing/marketing costs, equipment costs and insurance (make sure you get product liability insurance if you're going professional).  They don't change as you make more or less product.  However, your products have to pay for these costs.  So, project at different production levels how much each scone will contribute to your fixed overhead.


Variable costs include ingredients and labor.


Another aspect to pricing is what will the market bear?  If people are used to paying $2.50 per scone, will they go to $3.25 for a better scone?  You don't want to gougge people, but you don't want to leave money on the table either.  You might visit bakeries, coffee shops and so on to see what the going rate is.  Look at some up scale places too.  And the relationship isn't always clear.  A consultant friend was at the end of his rope, he was billing over 50 hours a week!  That is bad because he had no down time and no time to stay on top if his area.  He needed to cut down to about 30 hours a week.  So, he raised his rates to chase away some of his clients.  However, his business went UP not down!  People figured if he was charging that much, he must be good, and they wanted someone good!


If you think you're overcharging the market, consider temporary price adjustments.  However, make it plain the special is short lived.  A get aquainted offer for 2 weeks is cool.  But if people get used to seeing you pushing specials and coupons, you'll have to keep doing that - people get used to specials and will only buy when stuff is on sale.


There is an intersection between what people are willing to pay and your costs.  If people are willing to pay more than your costs, you have a good situation.  If it costs you more to make the product than you are taking in, it's time to do something.  Find a way to reduce costs, find a way to increase revenues or go into a different line of work.


A few final words - STAY ON TOP OF YOUR COSTS!  When they change, reevaluate what you are charging!


STAY ON TOP OF YOUR COMPETITION - if they raise their prices, it may be time for you to do the same.


Good luck,


Mike


 

mimifix's picture
mimifix

As Mike suggested, there are numerous ways to price products. Of course there are fixed and variable overhead costs that we can't control, and there are competitors' prices to consider, but we must find a consistent way to price our products or we will drive ourselves crazy.


The bakery industry came up with one way to price products. This is not an exact science, but rather a simplified formula for anyone who chose to use that method. Tripling or quadrupling ingredient cost has been used by many businesses and it works for them. "Included in this mark-up is the cost of incidentals (i.e. packaging) and all your overhead." 


I'm sorry Mike (or anyoner else) misunderstood how this standard bakery pricing works. I must not have made myself clear. My apologies.


Mimi

chenoa's picture
chenoa

You guys have given me such direction and good advice! thanks so much.


I did the math on what you suggested and it seems a bit steep to me...my retail price per scone would be $8.36.Is it me or does that sound wrong to expect someone to pay that?


that figure comes from the cost of dough ingrendients plus the add-ins.


-C

gary.turner's picture
gary.turner

I think you overstated some costs. The rule of  thumb my dad used for his restaurants, cafes and bbq joints was to keep food costs at or below 20% of sales.


Using that, I calculated a simple scone batch would run $3.60, give or take (I used Walmart's current prices). Times 5 means $18.00 for the tray of 8 scones. Or, $2.25 each.


All expenses, including your pay, and except for ingredient cost comes out of the markup.


cheers,


gary

mimifix's picture
mimifix

Hi Chenoa,


Pricing ingredient costs can be tricky. It's so easy to make a math mistake when figuring out price per cup or pound. The good news is that you can keep a master list for other products you may want to price later on. I suggest you redo ingredient calculations. Many of my students get math help from their kids, a spouse, or a friend. The retail price for a scone should be no more than three dollars, and that would be high.


Mimi

chenoa's picture
chenoa

we broke it all down in price per ounce.Is that the right way? some of my packaging used grams,others ounces.

mimifix's picture
mimifix

Chenoa, you need to break it down according to how you measure ingredients. In the U.S. commercial bakers weigh all ingredients so their price calculations would be in pounds and (weight) ounces. For U.S. home bakers who typically bake using liquid (volume) measures, the price calculations need to be in cups, tablespoons, liquid ounces, etc.


The best way to start is to take the contents of your ingredient package, measure out how much that package contains, and divide your cost by the yield. It can be annoying to do each ingredient, but then you create a master list so you can always accurately price all your products.


Mimi   

rhomp2002's picture
rhomp2002

He would do what you do above in figuring out the cost of materials to make an item and then he would multiply that by 3 to get approx the price he would need to charge to handle overhead and profit.   It worked for him for over 25 years.   I would think that in the major cities today maybe 3.5 times would probably be a better number.  That would get you a ballpark figure.

Eidetix's picture
Eidetix

I would advise you to worry first and most about the flip side of your business equation.


Do what capitalists must do all day every day: Slash costs.


The details are basic and cheerless: Spend cash, so the impact of each purchase is immediate and acute. Shop hard. Vary offerings to include less pricey seasonal ingredients. Call in favors if you know someone who knows someone who can get you a deal. Try house brands. Buy in bulk. Look everywhere for discounts, then grab carloads when the price is right. Substitute ingredients and run taste tests to see if quality suffered. Then substitute some more and run taste tests again.


Attack the core costs of your product, be they butter, eggs, shortening, flour, fruit or what have you. A suggestion for comparing the value of this approach: Don't change the way you buy for a while, but keep a ledger of your purchases. At least for starters, limit the ledger to the aforementioned core items, so you don't drive yourself bonkers making a note every time you grab a paper towel.


Use that ledger and a count of your finished product to arrive at a cost per unit, or single scone.


Then go on a mission to reduce costs, maintaining your ledger as before. Challenge yourself to get basic costs as low as possible without seriously compromising the quality of your product. Whittle costs with a vengeance -- then see if you can put money in your pocket after pricing your product so it is nearly in line with local competition.


If so, you may do OK. If not, you may have a new set of questions to ask about the line of work you're hoping to pursue.