Three Basics of Pricing for Profit

Happy Sunday!

I can't begin to tell you how good it feels to be back after my long absence.  For those of you who don't know, due to health issues I was away for almost two years, but I am back and so happy to be here.

I wanted reach out to you today with a video, that I made just for you where I discuss the basics of pricing for profit.

Synopsis of the Video:

Three Basics of Pricing for Profit:

DON’T GUESS

There are a number of well-meaning folks out there sharing their own price charts of their baked goods. While these give you a general idea about pricing, they may be nowhere near where you need to be in order to make a profit or conversely, you may be losing money by using another person’s model.While it serves as a general indicator, it simply may not work for you and is no better than guessing.

1. That person may not be in your area. A cake in Miami, is much pricier than a cake in Dothan, Alabama.

2. Other people do not use the same ingredients as you are. How can you know for sure that you are paying the same price, or using the same raw materials? This is fundamental, and we discuss it a little more in detail later. You have to figure out your costs before you even think about what to charge.

3. Not selling to the same demographic- If you make $500 dollar cakes but the median income in your town is 40K per year, chances are people will not be able to afford your product but the person who provided you with their pricing schedule may have a completely different socio-economic demographic.

4. May not have the same skill-set as you- If you are a beginner, (We all have to start somewhere) it is more difficult to command a high price for cookies or cake that do not look polished and professional. Conversely, if you are making these beautiful elaborate cookies that are taking you a long time to finish because of the detail that goes into them, you cannot sell them for the same amount as another decorator.

INVEST IN A SOLID COSTING SPREADSHEET OR PROGRAM (OR CREATE ONE) 

The difference between a hobby baker and a pro is profit.  If you want to create a profitable business there is no way around this. You must know the cost of each and every one of your products in order to price them for profit, otherwise it’s sheer guesswork.

Figuring out how much your raw materials such as flour, sugar, eggs etc.  per recipe, on your own may be a pain if you purchase in bulk, and that’s why I recommend that you either create a spreadsheet that is going to help you to keep track of how much each product is going to cost you to make . That includes Direct and Indirect costs, which we will get into in another post but here is a great spreadsheet that I invested in myself that helps me keep track of all my costs.

http://www.smallfoodbiz.com/shop/food-product-cost-pricing-spreadsheet-us/

Please note that I receive no financial compensation if you elect to purchase this program whose link I have included above. This is simply a recommendation based upon my experience. There are other spreadsheets out on the market and the Cake Boss Program. You have a bunch to choose from. Just make sure you are using something to keep track of all of your costs. It’s not a luxury, it is a necessity and I cannot emphasize that strongly enough.   

Here is a link to an article I wrote for Chef Julia Usher's Cookie Connection in my former Dough to Dollars blog feature on Pricing. 

KNOW YOUR CUSTOMER/DEMOGRAPHIC

In order to price your products accordingly, you need to know who your customer is, what they spend their money on, how much they earn, and how they think.

If you are creating beautiful cakes that are worth $500.00 and the people who live in your area can only afford to pay $100.00 your business will not go very far. Clearly, talent or quality is not the problem, people only have a certain amount of disposable income available and are willing to spend on a custom cake or cookies.  These are luxury items, we should not forget that.

The opposite is true as well. You may be starting out and have a limited skill set. Perhaps your cakes are somewhere beyond amateur but not quite at pro level yet. There is also a group of people who are willing to take a chance on you and pay a bit less for your cakes/ cookies even if you have not yet perfected your skill set.

This is a mutually beneficial situation as they may not know how to even bake a cake out of a box and you can make them look good by helping them out, and selling them a cake at cost. Which honestly makes you money in the long run, because someone is paying you to practice.

Sure, you are not earning a profit, you are breaking even however, the practice on that cake is an asset because it adds to your education and skill set. That is as good as money in the bank.

 Just be sure to be upfront with them, if this is the case so there are no disappointments if your baked goods did not turn out as well as you expected. This happens to all of us at the beginning.

The key to creating a profitable baking business is striking a balance between your costs, what the market is willing to pay, and your skill set.  We live in a free market economy and there is competition everywhere.

The best way to get ahead of the game is by offering a consistently great product, knowing how much it is costing you to make it ( to the last penny), knowing who is willing to buy it and how much they are willing to pay.

Wishing you all the best this week and always remember this.. No matter how hard it seems

Persistence is the key to success, never give up, ever!
Aymee aka Cookiepreneur™

p.s. Don't hesitate to drop us a line with any questions. And be sue to check out our What inspired you to become a Cookiepreneur? Contest.

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The Journey Begins

Finally, I have been chomping at the bit for over a year now to get this blog started.  Those of you who already know me , are well aware that I have been excited about this project for quite a while.

At long last , I am able to dedicate the necessary time and energy to, hopefully make this a place that you can come to that is filled with information about a. How you can get your cookie business off the ground or b. how you can take what you already have to the next level.

Okay so listen up ladies, before we begin, I have to be honest with you, and I want you to know exactly what you can expect from this blog.  I value your time , and I want you to get the most out of this. I also want you to know a bit about me as a person .  I don’t know about you, but I like to know who I am listening to and why I should listen. I don’t take anything for granted. 

My intention as I stated before is to share a wealth of information with you about how to grow your business. Now that  means different things to different people.  In other words, some of you may think the information I will provide is all about the mechanics of how to start a small business from home, but that's not what this blog is all about.  Sure, there will be some of that  but let me tell you exactlly  how I intend to help you grow  or start your business.

Before we begin this journey together, I want you to know a little about my story.  I will not bore you with the long protracted version of woe is me, because it’s not, but I can tell you this.

My  Dark Night

Before I started baking and decorating cookies for a living, which quite frankly, I would have never imagined,doing a few years ago, I went through what many call MY personal Dark Night of the Soul.

I am going to throw around some figures here, not to brag about what I had,  but so that you can fully comprehend the magnitude of what I went through, and how far I fell. 

Within the a period of a single year I found myself in a position where I was forced to sell my interests in a very lucrative Mortgage Business that I co-founded . My five figure monthly  income vanished, overnight.   My husband of 8 years left me for another woman.  I was left with a three year old child, a $4500 dollar per month mortgage payment, a $1100 per month car payment, three properties and two elderly parents. One an ailing mother ( Alzheimer’s) that died soon thereafter and the string of unfortunate events continued for two years, until they finally culminated in me losing everything except my son and my sanity. It was a period of three years that I do not wish on even the most evil person on earth.

The Decision 

As I  look back on as the greatest period of Creative Destruction I have sustained, there was an immense amount of growth for me both spiritual and as an Entrepreneur.  I am the kind of person who has never accepted defeat and therefore I decided that if this was happening to me, I was going to give it a purpose, and use it to serve me, and others In the future.

It's not what life throws at you, it's how you handle it that counts and determines your destiny.

The Comeback

From an early age, 16 or so, I have  been fascinated by the subjects of Psychology and Personal Development. I always loved people like Tony Robbins, Dr. Wayne Dyer and Louise L. Hay. I read their books, and studied them. I  wondered how these people had turned their lives around so dramatically after such devastating failures, setbacks and horrible circumstances

Over the years I had taken many Psychology courses both in college and invested thousands upon thousands of dollars in books, seminars and have an extensive education in Personal Development, Entrepreneurship, Influence  NLP and like subjects in addition to attending Business School for a year where I completed coursework in  Leadership Theory, Economics, International Business, Marketing and other subjects relevant to Entrepreneurship .   

It had been a few years since I had not done any heavy  work on the Personal Development related subjects, and somehow when I took an inventory of everything that happened to me, I decided that it was time for me to dive back in and search within , to uncover what was going on inside of me, rather than continue to look outside for those answers.   

I have read about countless successful entrepreneurs that have been financially devastated only to rise from the ashes once again.  I wanted to learn for myself, how I could apply all of these theories so that I could handle all of this without losing my mind,  and not just survive it, but learn from it , grow stronger and share what I have learned with others.

As you all now know, I did make it through that period of time in my life, and reinvented myself as a Baker/Cookie decorator.  I am not yet a mogul by societal standards, but I can now support my household on my own if need be.

I can tell you that my first year I invested about $800. That’s all I had to start with , no more.

My second year I think I made about $250, the third I made about $12,000, the fourth $74,000 and projections are for over 100K for year number 5 in spite of a recent setback.

That kind of money is certainly not a fortune to some, but for someone who is looking to build a business  produces extra income without having to leave their home too much ( Except when you have to rent out a commercial kitchen for large orders) that’s not too bad, in fact it’s about 30-40K more money than most middle class Americans bring home if not more.

It's enough , if using it as a second household income to send your kid to private school, or pay for your child's college tuition ( At least part of it depending on where they go) .

 I am here to teach you how to become independent and build real businesses.  I am an open book and if you are going to listen to what I have to say, then you should know that you are hearing someone who knows what they are talking about, and someone who is going to be able to teach you to do the same thing
and hopefully exceed those numbers.

There are far too many phonies out there lying about how they made 50K their first year working from home, honestly, I have never seen that happen in this business and it takes hard , constant and steady work to build a cookie business, Any business for that matter, anything else is a lie or a blatant exaggeration, plain and simple . 

I have been to what I consider the depths of hell and back and learned that  there is no growth without resistance.  As many of you already know , being a Cookiepreneur is filled with resistance on many fronts that we will get into at a later time. 

Focus of this Blog

In short what My blog will focus on is sharing much of what I have learned both through my studies and my personal experiences, my triumphs and failures and what  I consider to be the two main components of successful entrepreneurship.

Component I (MECHANICS)- The Outer game

This is the component of success that  most people are familiar with are the technical in’s and out’s of running a business such as having : A good business plan, a solid costing model in place, great products that stand out among your peers, great marketing strategies, great networking, understanding basic business principles such as  ROI ( Return on investment) and the like, I'm sure you get the point.

Component II ( MINDSET) -The Inner game 

This is the remaining  80% of , which is actually the most important part in both your life as an entrepreneur and your life in general . The inner game is your psychology or mindset and that is what is going to determine the following: How you handle failure and how quickly you can bounce back,  how you deal with difficult clients, how you determine the value of your work, and not feel guilty about charging what it's truly worth,  how you feel about yourself as a business person , how you react to people who do not appreciate your work , how you treat your peers and others, whether you are confident in your work or always trying to hide, whether or not you feel deserving of your success. All these things, if not fine tuned are ultimately are going to bleed into the mechanics of your business and affect your overall ability to earn money through doing what you love.

Think of  mindset  as the soil in which you grow a plant, if it is not fertilized properly, a plant will not grow or reach its full potential. Mechanics is the actual plant.

We will absolutely be discussing some of the MECHANICAL  aspects of the Cookie Business, we will mostly discuss the MINDSET aspects that will prepare you to build a cookie empire if that is what you wish to do, which brings me to the last point of disclosure that I wish to make.

I admit it !

I like baking cookies, I love decorating them.  For me, it’s like therapy and I love the fact that I can play with flour and sugar and have something so beautiful that families share on special occasions. Creating a cookie business has allowed me to discover a talent I never knew I had, to cultivate it and to grow from it.  It helped me get back on my feet financially after a complete holocaust and I continue to run my cookie business and am happy to do it however, life is about growth and I feel myself evolving into a new role.

I must make this confession to you.  My true passion, what keeps me up at night ( in a good way) , what makes me light up like a Christmas tree, is sharing what I have learned with you. So you see, this is a dream for me, and I greatly look forward to serving you in any way that I can.  I look forward to hearing from you.  I will post weekly in the beginning stages and  and as Cookiepreneur evolves and grows, we will have more discussions and I plan to hold conference calls, post videos, and even have live, in person conferences where we can all meet up.

Thank you ladies (And any gentlemen as well) for all of the inspiration you have given me to start these conversations . I will close with my personal philosophy of life.

Persistence is the greatest Key to Success! If you can see it, you can be it! Never, give up ! Never!

Aymee  

p.s If  you have any  general questions or think of a subject you would like me to touch on, please feel free to email me at Cookiepreneur@gmail.com