The bakery business is one of the most vibrant and delicious ways to make money. Plenty of people go into selling their own sweet treats because they enjoy eating them so much themselves!
However, the key thing to remember is that it is still a business. Things like revenue, costs and stock management need to be considered if you want to set up a baked goods business.
For example, if you’re reading this article, you might be thinking about setting up your own cookie store or selling cookies in general. It can be very difficult to determine a fair and cost efficient price for cookies because they’re often very diverse.
That’s why we’re here to help! This is our ultimate guide to cookie pricing to help you get on track to starting up your business.
As a ballpark figure for prices, individual cookies should sell for around $2-$6 and boxes of a dozen could be anywhere from $10-$20.
Of course there are so many factors that will go into determining an accurate price for each cookie you want to sell.
Just like with any business, you don’t want to leave any figures to guesswork and estimations, so we’re going to discuss all the key factors to consider when determining the price of your cookies.
Costs of Making Cookies
Before we look at what sort of prices you should be selling your cookie products at, it’s important to consider how much it costs to produce them in the first place. There are plenty of different factors that you must consider to work out your average cost per cookie.
Cost of Ingredients
This is a pretty straightforward consideration that any food vendor will have to make. However, it’s much easier to calculate and remain consistent with baked goods because customers won’t ask for you to add extra toppings or other last minute ingredients to customize their order.
Instead, you should use a fixed recipe for each type of cookie you make and keep it written down somewhere for your records.
Quite simply, all you have to do is add up the cost of all the ingredients required to make one batch of cookies. This should include everything needed to make the cookie itself, as well as any decorative ingredients like icing or sprinkles.
Then, simply divide the total cost by the number of cookies made in the batch and you’ll have a cost per cookie figure.
The reason you should keep recipes written down is so that you can experiment with different ingredients and quantities in the future to try and bring costs down.
Cost of Equipment
This is another important cost that will affect the price of your finished product but it’s much more difficult to work out a cost per cookie.
To get a figure for this, you will have to estimate some things a little bit. The simple way to work it out is to add up the cost of all the equipment you use to make your cookies and estimate how long you think each piece of equipment will last before needing to be replaced.
Naturally, it’s impossible to accurately estimate this when you buy new equipment but over time, you should get a better idea for this estimation.
Then, based on how many cookies you expect to make in that period of time, you can work out the cost of equipment per cookie.
Let’s say you expect all of your equipment to last 4 years (obviously some equipment will last longer than others so you shouldn’t expect the same lifespan from all your equipment) and you bake an average of 250 cookies per week.
That results in 13,000 cookies per year and 52,000 over a 4 year period. Now that’s a heck of a lot of cookies!
Then, you simply have to divide your total equipment cost by that number. If your equipment all costs you $1000, simply divide 1000 by 52,000 and you’ll have an average equipment cost per cookie of roughly 2 cents.
This final figure might seem insignificant now but it’s definitely something you should consider when pricing your cookies.
Overheads are basically the extra business costs that don’t refer to the actual production of your cookies. For example, if you rent a kitchen to make your cookies in, that rent will go into your overheads figures.
Similarly, everything else related to the general maintenance of your business should be factored into this figure too. Things like, bills, the cost of running a website and insurance costs are all important things to consider.
What’s good about these kinds of expenses is that they’ll often be the same on a month-to-month basis, meaning it’s easy to work out a cost per cookie.
In business terms, these are known as fixed, indirect costs. They are fixed because they don’t change based on how many cookies you produce and they are indirect because they don’t relate to the actual production of cookies.
Alternatively, the cost of ingredients is a variable, direct cost because it changes based on the quantity of production and does relate specifically to the production process.
For an overhead cost per cookie, simply total up the cost of all your overheads in the space of a month (for example, $1500) and the number of cookies you’ll produce in that month (13,000). Divide the overhead cost by the number of cookies to arrive at the average cost per cookie ($1500 / 13,000 = $0.12).
Again, this might seem like a pretty insignificant figure at first but it all adds up over time and you’ll need to factor it into your cookie pricing.
Boxes, Bags and Other Packaging
The packaging you use to serve your cookies to your customers is the last cost in the production line that you’ll need to factor in.
This is a pretty straightforward cost to work out as it won’t really change too much from month to month. Of course, that’s only the case if you’re using the same amount of packaging each month but the cost per cookie will always remain the same.
Simply work out how much money you spend on packaging like boxes and carrier bags in a month, then divide the number of cookies you expect to make in that month by your packaging costs. This one really is nice and simple!
Taxes are the bane of most business owners’ lives. It’s a necessary cost though, and definitely one that should be factored into your cookie pricing.
This isn’t a figure that’s necessarily easy to work out, simply because of the variety across the globe. Every state across the US might have different methods of taxation for businesses and every other country will certainly have their own system.
To avoid getting it wrong, it’s crucial that you research how much tax you’ll need to pay in your area.
Once you’ve worked out how much you’ll need to pay each month or year, you can use the same calculations as before to work out how much that will cost you per cookie.
Unfortunately, cookies don’t last forever and if you have some left over at the end of the day that don’t get sold, you’ll have to throw them away.
This is something that a lot of people going into a new business will forget about but it is a very important thing to consider and record. By recording the amount of wastage each week or month, you can make plans to change your production process to avoid it as much as possible.
To work out the waste costs per cookie, work out the average number of cookies thrown out every day and multiply it by your average cost per cookie. Then, simply divide that number by the average quantity of cookies that get sold each day and you’ll have an average waste cost to add to your other costs.
This is a figure that should change on a weekly, even daily, basis. If your waste costs become too high, it’s a good indicator that something in your business needs to change.
It might be a case of simply not making as many cookies every day or it could be time to lower your prices to get more people buying your stock.
Factors that Affect Pricing
Now that we’ve established how to work out the costs of making cookies, it’s time to examine what sort of factors you should consider when deciding how to price them.
Obviously, the goal of any business is to make as much profit as possible but you should have a target profit margin you want to achieve for each individual cookie you sell when you set the prices.
Of course, your average cost per cookie will be the main consideration here. As long as you factor in every cost that goes into the production of each cookie you make, you can set your target profit at whatever you like.
For example, if the total cost (including taxes) of producing your most basic cookie is $1 and you want to make $1.50 profit on each one, your price should be $2.50.
Of course, the amount you can realistically charge on top of the cost per cookie will depend on an entirely different set of factors. After all, you can aim to make a $10 profit on each product but you’ll never achieve that if people aren’t willing to spend $10 on a cookie!
Whether you want to market yourself for catering large events or simply open up a small retail store, your target customer will have a huge impact on how you can price your cookies.
If you’re planning on catering for events like weddings and birthday parties, you might have to charge slightly less per cookie, because you’ll be making and selling them in bulk.
However, for a simple walk-in cookie store, you can charge a slightly higher price per cookie because people might only come into the store to buy one or two.
As well as these factors, you should also consider the types of customers who might hire you for events or walk into your store.
For those with a physical store, a good indicator is to look at the other businesses around you. If you see a lot of up-market stores and expensive businesses around you, your average customer might be willing to spend more on cookies, meaning you can charge a slightly higher price.
Ultimately, this decision is all about using your own judgement and might take some trial and error before you get it right.
Size, Quantity and Complexity
These three factors all concern the types of cookie products that you’re selling. Of course, they all relate to the cost per cookie but you can actually charge prices indirectly to the actual cost, based on these factors.
For example, a large cookie might only cost you 25 cents more to make than a small cookie in terms of raw ingredients. However, you could easily charge at least a dollar extra for a larger product. There are plenty of sizing charts available online that can give you an idea of this but it’s always best to work out your own.
The same is true of complexity. Cookies that take longer to decorate because of their complexity might only cost you an extra 50 cents in terms of extra ingredients and labor costs. However, it’s reasonable to charge at least another dollar for a more elaborate cookie, meaning you’ll end up making more profit off of them.
The only exception to this rule is quantity, which has a much different relationship with price. Of course, you want your customers to buy as many cookies as possible, leaving you with minimal wastage.
For that reason, it’s a good idea to sell cookies in bulk (often, boxes of a dozen). To incentivize your customers to buy larger quantities of your product like this, you’ll need to lower the average cost per cookie. For example, if you sell your most basic cookies at $2 each, you might want to sell a box of a dozen at $20.
This leaves the average price of each cookie at around $1.66. As long as your cost per cookie is still lower than this, you’ll make a profit.
Trial and Error
The most important part of setting your cookie prices is to experiment and adapt to changes in the market and your production line.
Ultimately, it’s your customers who should be setting the price of your cookies. After all, you can only charge as much as people are willing to pay.
That’s why it’s always a good idea to experiment with different prices to determine the best price to set for your products.
If you find yourself running out of cookies every day for a week, it means there is a high demand at that price and you can afford to charge a little more. Alternatively, if you find yourself throwing loads of stock away at the end of each day, that means demand is too low at this price and you’ll need to lower it.
Of course, changing your prices every day is a sure-fire way to confuse your customers and put them off your business entirely. It’s also a bad idea because you won’t have an accurate indication of whether a particular price point works after only a day. Instead, you should wait at least a month before changing your prices.
That way you’ll have enough data to justify your decision and your customers won’t be left scratching their heads.
Frequently Asked Questions
The whole point of a bake sale is to be cheap, cheerful and to allow people to enjoy spending time with each other. For that reason, you should charge a slightly lower price at a bake sale than you would in a regular cookie store.
In this article, we’ve gone over how you should work out prices for selling cookies. However, for a bake sale, you might want to consider charging a slightly lower price than we’re outlined here.
In order to sell homemade cookies commercially, you’ll need all kinds of licences and food standards checks. However, the process for this will differ from state to state and in different countries around the world.
Many people set up online cookie stores, which is a great way to sell homemade cookies. Similarly, you could visit a local retailer, invite them to try some of your cookies and see if they’re interested in buying stock from you.
As with pretty much any business, the amount of money you’ll make from selling cookies is ultimately defined by the amount of custom you’re able to generate.
Again, as with most businesses, this will often be a slow process at first and you might not even be able to make a profit at first. However, successful cookie selling businesses are able to make pretty good money.
If you’re thinking about stepping into the baked goods business but have no idea where to start, hopefully this has given you a clearer understanding.
Starting any new business can be a daunting and scary process but at least in this case you’ll have plenty of delicious, colorful treats all around to motivate you!
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