The Magic Pricing Formula

I found this article while tried to help a friend to finalize her new tart’s price. Hope it will be helpful for you guys 🙂

The Bakery Business Perspective

One of the most common business-related questions I see regarding starting a new bakery is how to price your products and services. If you can legally charge for food in your area with your current setup (for example, some states restrict home bakeries), the answer is a simple formula:

Price = Ingredient Cost + Labor Cost + Allocated Overhead Cost + Profit

To price ingredients, you need to to know how much you are spending per unit on each ingredient and how many units of each ingredient are in your recipe.

Your labor cost is based on how many hours it will take to complete the order (including prep, baking, decorating, packaging, and cleanup) multiplied by your hourly wage. If you rent a commercial kitchen by the hour, I find it’s convenient to capture that cost under labor since it is directly related to the time spent on order processing.

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