Top Mistakes by Cake Business Owners

It’s one thing to be a talented cake decorator, but something quite different to be the owner of a successful cake business. In fact, we’ve seen many technically talented bakers suffer through difficult times, while observing others with less experience and skill achieve great success in business.

I would chalk up the difference in these two different results to the person’s understanding of business knowledge.

You’re A Cake Business Owner… Not A Cake Decorator.

Most people who start bakeries aren’t business people; they’re what E-Myth author Michael E. Gerber calls “technicians.” As a result, it’s not the most talented cake decorator who thrives, but the best marketer and business-minded baker. Here are a few of the most common mistakes in staring a cake business that you should strive to avoid.

cake recipe

#1: Undercharging For Your Time And Talent
This is a typical mistake that almost all new cake decorators make, usually because they start out as an amateur who realizes they can earn money doing what they already love to do. They spend years making cakes for free or at cost, so switching over to charging a profitable price is difficult.

The thing you have to realize is that the moment you charge for a cake, you’ve moved from amateur to professional. That shift requires a change in thinking, especially when it comes to how you view the value of your time. In most cases, selling your cakes means you’ve already made an investment in becoming legal and licensed. Your pricing structure must reflect that overhead. All that is needed is a simple change in perspective: from amateur to serious business owner.

If you are really in business and not just “making some extra money on the side”, you must take seriously the cost of keeping the business open and appreciate the great responsibility just to turn on the oven. With this change in perspective and a realistic valuation of your time, you can calculate healthy prices that correctly value your work and time.

#2: Setting Prices Without Knowing The Total Cost of Goods Sold (COGS)

Continue reading Top Mistakes by Cake Business Owners

Questions for starting a cake business

There are a number of things that can contribute to success of a new cake business. One of them is to learn as much about the business as you can before you invest a single penny. As a starting point,  I always suggest the new entrepreneur do a self-evaluation. Some of the most basic skills in business cannot be transferred. They need to be innate or part of who you are.

While your commitment to starting a cake business may be strong, it is critical to take the time to answer honestly  some tough questions about running a business in general. Don’t just avoid these questions or provide quick incomplete answers. Your thoughtfulness in  addressing these questions can be very useful in realistically assessing your readiness to start a business. Continue reading Questions for starting a cake business

Liability Insurance

liability_cakeA while back a colleague told me about a cake decorator in a precarious position in which any cake decorator could find herself — what to do if there was a foreign object lost in your cake.

The specifics of the situation were that with only a few days to go before a multi-tiered, expensive cake was to be delivered, the home-based decorator found a shard of plastic inside one of the tiers. To make matters worse, there were a few additional pieces of plastic from a piece of her equipment, missing. While the likelihood of the missing plastic shards being inside the cake was small, the risk was still significant.

Continue reading Liability Insurance

Making Money in the Cake Business

wedding-cake-cutting

Why do cake decorators get paid upfront before the event — party, wedding, bridal shower, etc?

For weddings, it is important that a deposit of 30 – 50% be provided to hold the date. Moreover, because of the stress of the day, you don’t want to attempt to collect on the wedding day itself. The balance should be paid at least 7 days before the event. In all my years, I can recall only a few protests for this arrangement and even then we worked it out, with the final third of the balance paid on delivery.
Continue reading Making Money in the Cake Business

When Sister Is Your Cake Business Partner

Would you go into business with a family member?  Here’s an informative article about two sisters who started a cake business near Wrigley Field in Chicago.

There are several keys to note in this article about starting your own bakery.

First, they started off cautiously.

…holding down day jobs while they figured out their fledgling business concept. In 1998, Brenda moved to Chicago by herself and worked as an administrative assistant for a staffing company with the goal of gaining business skills and locating a viable market. “I don’t like to be one-dimensional. It allowed me to get my feet wet in Chicago and learn a variety of skills,” she says. By the time Mary came to Chicago (with a full set of professional baking and kitchen equipment) two years later—she had been working at an upscale Detroit-area bakery&—a sense of the business and the roles they would play had emerged. Brenda took the lead role in business and Mary focused on the creative side of cake baking and decorating.

Lesson 2: Word of mouth marketing was critical to their success:

“The Cakegirls got the word out themselves, telling friends and co-workers about their “night job” in the kitchen.”

Lesson 3: they used technology to market themselves:

“They gave prospective customers the impression they had a much bigger operation by using voice mail and posting their catalog online.”

Lesson 4: They were patient.

“They opened a business bank account with $500 and deposited any money they earned from baking into it. Within three years, the Mahers had saved $15,000 from sales, having continued to survived on the income from their day jobs.”

Lesson 5: They used the media for free advertising.

“When Chicago magazine ran a feature on them in 2003, orders flooded in, prompting Brenda to buy a minivan for deliveries.

Read the full article at Business Week.

via When Sister Is Your Business Partner – BusinessWeek.

How much does it cost to start a cupcake business?

From Paula Spencer

Cupcake businesses are posting steady sales despite a sour economy. Interested in starting your own cupcake company? Here’s what it took to launch The Sweet Tooth Fairy Bake Shop, a brand new cupcake shop in Provo, Utah.

 

The Small Business:
The Sweet Tooth Fairy Bake Shop
1227 S. University Ave.
Provo, Utah
Est. Jan. 31, 2009

The Start-Up Costs:
Security deposit = $3,600
Construction = $25,000
Start-up inventory =$5,000
Oven = $8,000
Pots, pans, tables and racks = $8,000
Permits = $1,000
Total start-up costs = $50,600

The Monthly Expenses:
Staffing = $3,500
Rent and utilities = $3,000
Inventory = $1,500
Insurance = $100
Rough monthly expenses = $8,100

Number of $2.25 cupcakes she must sell a day to break even: 120

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how to start a cupcake business
Interested in more information about the expenses related to starting your own cupcake business? Checkout our blog or order a copy of our Book (Start a Cupcake Business Today by Paula Spencer) If you are in the process of writing your cupcake business plan, we have an entire section on our site with articles and resources to help.

[Original inspiration for this article: Starting a Cupcakery By the Numbers | Launching | Small Business | Mainstreet]

 

One way to get a loan for your cake business….

Ask your customers…or would-be customers.

Read and listen to this piece from NPR.org about how a small dairy in upstate NY is attempting to procure an unsecured loan (at a 6 percent interest rate) from their own customers.
milk_standard
So many of you who want to borrow money to start your cake business are running into difficulty obtaining a loan. Is it possible to learn from Dante Hesse and work with the people who know and trust you — your loyal customers?

Hesse is offering 6 percent interest for an unsecured loan of $1,000. His business plan taps into a pair of burgeoning movements — the first characterized by an interest in organic, locally grown food; the second by an environmental approach to economics.

Check it out. More later about this idea, I’m sure.