How much will it cost?
Your start-up costs will depend very much on how big an operation you wish to run. As with all businesses, the fewer overheads you have, the lower your expenditure.
The first cost you will be faced with if you decide to run your business from anywhere other than home is the cost of premises. The price of premises can vary enormously – for a 379 square foot bakery premises in Plymouth, for example, the rent is £10,750 a year – compared to a 1,300 square foot bakery in Upper Holloway, London, which is around £18,000 a year.
Your other option is to start at home, selling your products on the internet. Lynn Oxley started her business, Cake Perfect, as a website back in 2003, and says it was a huge part of the success of the business. “The website is essential for us. If you’re working from home, you don’t have a shop window,” she says.
Websites can vary in cost, but you can do a basic one with a simple package like Mr Site, which costs around £100 and gives you a domain name, PayPal shop, and 50 email addresses for your domain name.
A note of caution, though: the more professional-looking the website appears, the more likely consumers are to buy from you. You need to differentiate yourself from the competition, or you risk undermining the quality of your products. Holly Tucker from notonthehighstreet.com, which showcases and sells products – including cakes – from independent retailers, says your customers will be less inclined to spend if your website’s appearance lets you down.
“If you have something that looks like it’s been photographed on your bed, it’s going to let down the site. If it looks like it could be featured in a magazine, that’s when people will trust the site. People are used to looking at magazine-quality pictures when they consume magazines. The moment someone has to decipher what you’re photographing, that’s when people will lose trust,” she says.
For Cake Perfect, Oxley hired professional models, photographers and designers to create the website – but warns that it cost money. “It’s expensive, but it’s essential,” she says. “It was 100% worth spending the money, every time – even if it did cost me an arm, leg, internal organ and my first born child.”
Your next decision will be whether to employ staff to help out or not. Although casual administrative staff can be hired for relatively little – a part-time receptionist, for example, would start at around £8,000 per year – specialist cake decorators come at a significantly higher cost. In fact, Tim Slatter from The Cake Store says staff account for 45% of the business’ turnover. “It’s a big chunk but it’s what you have to factor in for employees who are highly skilled at what they do,” he says.
When you start up you will also invariably need to invest in equipment. What you buy depends on how big an operation you want to start. CakeCraftShop.co.uk sells starter kits which include a polystyrene cake dummy, a ruler, a side scraper, a palette knife, and a turntable from £19.85. “It’s unlimited as you get more involved,” says Slatter. “You’ll need more colours and more decorating tools. It’s something you’d have to build up over time.”
Pricing your offerings
Pricing cakes is particularly difficult – especially if you are starting from scratch. Jane Asher says she undercharged for her cakes for a long time. “Because they’re things you’re going to take home and destroy and eat, it’s hard to realise how expensive they should be,” she says.
But cakes are often intricate, and take hours to make. “It’s so labour-intensive,” explains Asher. “I might have to have the shop spending four or five days on some beautiful weding cake, and that’s inevitably going to be incredibly expensive, but you have to be realistic and if that’s what it costs, that’s what it costs.”
Asher says she worked out her pricing eventually. “I took a long hard look at it, and I worked out that I was going to be spending this much per hour to be in the shop with this many staff, and I’m going to have to take x much to survive. Now, when someone comes in with a new cake design, I can look at how long it will take and work out a cost from there.”
As a guideline, The Cake Store charges £34.95 for a fairly simple, 10-inch diameter iced sponge cake with a message on it, and up to nearly £900 for an intricate, five-tiered wedding cake.
Most cake businesses deliver their cakes. Lynn Oxley varies her price depending on how far she is delivering. “We have a concentric ring model which we work on – if it’s a 70-mile round trip, we would charge £35 on delivery and setup.”
She adds that sometimes, they are unable to set up the cake. “We don’t guarantee setup because sometimes the venues aren’t ready for us because they’re running behind,” she says.