In the bakery business, setting prices for your baked goods is a tricky task. Ultimately, pricing is a delicate balance between the amount of money you need to make a profit and the amount of money your customers are willing to pay for your goods. With so many different costs coming into play, it can be overwhelming to know where to start!
Making a Profit
The most important part of ensuring you make a profit is understanding your income and expenses. Spreadsheets can be an effective and efficient way to track what you are spending on your orders in terms of money and time. You can make a spreadsheet for every step in the process and pull all the numbers together to give you the total cost to make an order:
Considering Customers' Budgets
Determining what your customers are willing to pay will likely take experience. However, one of the best ways to get a sense of what customers are paying is by shopping the competition.
When doing this, choose competitors who are both well-established and of similar quality. Why? The well-established bakeries will likely have solidified their pricing via trial and error over time, and bakeries of similar quality will give you a sense of what the market is willing to pay for your products’ level of quality.
When visiting these bakeries, determine their unique selling propositions (USPs) and consider how they compare with your own. This will help you determine how you can differentiate yourself from the competition. Then, knowing what the competition is charging and their USPs, you can start experimenting with profit margins.
In the end, setting the right prices is a game of trial and error, so it may take some time. Throughout it all, remain confident in your work, don’t sell yourself short, and never lose sight of the value you are bringing to your customers!