Entry level wholesale baker with questions.

Joined Jul 16, 2010
Hello!  I'm building a small baking business from the ground up, based on baking with natural, organic and local ingredients.  I started about a month ago by baking two cakes for local restaurants, and I'm looking to appeal to all types of buyers.  I'm currently charging $30 for a $15 tiramisu cake that takes roughly 45 minutes of physical labor to make, and does not require baking.  I'm wondering what percentage of the price of ingredients should I be charging for a profit for wholesale, and then resale?  Is a 50% profit margin worth it to professional bakers, or am I underselling myself?
Joined Sep 18, 2008
3x food cost did you go to school for baking??
At the minimum, you need to recover your:
  • Food costs
  • Overhead costs, i.e. rent, utilities, non-food supplies, insurance, etc.
  • Labor, and YES, you DO have to pay yourself! (at LEAST what you could be earning working for someone else)
and then add on what you want your profit to be.

Now, of course, you must "temper" your prices with what the competition is offering, otherwise you will not sell much /img/vbsmilies/smilies/crazy.gif

As a "general rule" and guideline, if your food cost is greater than, oh, 35% you are either under-priced or you are paying too much for food. If you food cost is under, oh, 25-30%, you are charging more than most of your competition (which might be because you have a unique product or service) or you are very astute in purchasing.

IMHO, setting your price at some multiple of food costs, generally thought to be 3x, can be a recipe for disaster! You HAVE to know and understand ALL your actual costs, food, labor, overhead (for some this includes student loan payments in addition to what is listed above) and anything else that you have to spend money on to remain in business.

Successful food operations generally have food costs in the range of 25-40%, centering on 32-33%, depending on what they are serving and to whom. That results in a "multiplier" ranging from 2.5 to 4, but YOU have to figure out which "multiplier works for YOUR business.

Remember, just because "successful food operations keep their food costs around 33% (price = 3x food cost), the converse is NOT necessarily true!

Bottom line? KNOW YOUR COSTS! KNOW YOUR COMPETITION! KNOW WHAT YOU WANT OUT OF THE DEAL! Then, set your prices to meet those criteria. Anyone who says otherwise is GAMBLING, IMHO!
Joined Jul 16, 2010
Thanks for the advice.  I did not go to pastry school, though cooking and baking are serious hobbies of mine.  I got the idea for starting a business when the restaurant I work for asked me to come up with ideas for desserts, bake them out of house, and then offered to buy them.  They refused to give me more than 2/3 of what it cost me to make, so I sold it cheaply in hopes that recognition and word of mouth would make up for it, and it has.  I'm now selling to two other restaurants, have an in house job opportunity, and a promising possibility for a cheap commissary.  Currently I'm baking at home, so I haven't taken into consideration the cost of renting a kitchen.  I will most definitely take your advice into consideration in the future!
Joined Jun 17, 2008
You should also check the laws in your city. It is illegal to sell food made at home in many places but this varies from city to city.
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