Stay Running

Setting up your business is exciting, but keeping it running is

the challenging bit.

This is where many businesses struggle and end up closing down, but that doesn’t have to be your story. Be creative about how you take your business forward especially in this credit crunch climate. It is no longer about baking good looking, tasty cakes.... you need to do more to encourage people to part with their money

Let’s start with some of the basic things to get right.

Getting the Price Right

Pricing your cakes depends on a number of factors. I’m going to tackle the main ones: the cost-price of making your cakes, your competition, the area your business is based in and/or the area where your clients are based.
The cost price: Remember you are in business to make a PROFIT (even if your business is a Community Interest Company all the profit made goes back into the business), this profit should be able to cover the costs of running your business – your breakeven point - and leave you extra to do what you want with it!

Examples of running costs of a cake business are below, some of which will pertain to

a small business, some to a home based business:

Cake making sundries, (caster sugar, butter, eggs, flour, icing sugar, sugarpaste,

cake drums, cake boxes etc).
Utility bills, such as Gas and Electricity
Telephone
Advertising
Business and car Insurance
Wages for yourself and any employees
Rent of premises
Cost of Website and cost of running it
Cost of accountant or accountancy package used
Travel costs
Bank charges

I’ll touch on a few of these. Some of these running costs such as Sundries (your variable costs) would have to be factored in such a way to give you an idea of how much used for one cake – as your cakes will vary! I started out by calculating the cost of 1 oz or 1 gm of sundries such as flour, caster sugar, butter etc. I’d also put a cost on a teaspoon of vanilla essence or 1 vanilla pod etc. This was so that when I looked at all the ingredients used, I was able to calculate the cost of each cake individually. These costs obviously vary over time so make sure you review them regularly. I would then break down my utility bills (my overhead costs) from a monthly rate to an estimated hourly rate. So if I spent 6 hours in total on a cake, I knew roughly how much gas and electricity I was using. This also made it easy for me to charge myself an hourly rate. I add them all up and get my prices. It might seem like a tedious task to do initially but getting it right from the start makes sure you don’t under cost yourself and giving a false profit margin.

Bank charges, I will touch on because it is a good idea to shop around for your business account. Look at what each bank offers and figure out if certain services offered, and included in their costs are right for you now, as these could always be reviewed when your business grows and needs more support.
An accountant might sound all so posh and unnecessary right now, but do look into the possibility of getting one if you can. A good accountant can also give you advice on how to make your cake business cost-efficient. Or at least ask around; see what an accountant can offer you and what they charge. Some accountants do a free one-hour consultation to give you an idea of what figures you need to be recording.

Apart from running a cake business, I am part of the management team of a child care setting that is run as a charity. We have a number of staff both permanent and bank. We deal with government funding on a regular basis, expenses needs to be sorted out and lots more. We have now decided to use an accountancy firm but only for sorting out our payroll. Apart from sorting out wages efficiently for our staff, they will be up to date with any legal and government changes relevant to us. This makes life so much easier for us, especially our treasurer!

If you can’t afford an accountant yet, get yourself a good software package or a really

good book.

The Competition

On doing your market research well, you will have an idea of who your competitors are and what they are charging, giving an indication of what clients are willing to pay. This does not mean that you have to undercut them. Clients like to know they are paying for quality and psychologically this is linked to the prices you charge. Clients always go on about how lovely and moist my cakes taste, and that is because I would never compromise on the quality of my cakes, I strive for that wonderful homemade taste... and this will reflect in my prices. But people always come back and my greatest form of advertising has been word of mouth from my clients.

As I mentioned before, who are your competitors? I remember having a consultation with a business advisor and she stressed that I should not think of the local supermarket as my competition as my cakes are in a different category. So if a client says to you something along the lines of “I can get a cake cheaper in the local supermarket” then by all means politely tell them to rush off and buy their cake from there! Unless your cake business is one that sells lots of low costs cakes to a large volume of clients.

The Area

When I first started my business, we lived in Hertfordshire – known to the government as an affluent area (this I found out when I was looking into grants towards my business!) and the area in Hertfordshire we lived in was a stone throw from North London – need I say more! So I worked out the cost of my cakes and figured out an hourly rate for myself to get a decent enough profit, took into consideration what the competition were charging and launched my prices! Now we have since moved from Hertfordshire over a year ago, to a more rural area in Essex, the kind that as you take your children to school you are passing through farm areas – admiring the Shetland cows, singing “baa-baa black sheep” to your three year old because you’ve just gone past a flock of sheep, also making sure you drive carefully to avoid the rabbits darting across the road – you get the picture! This obviously will affect my prices, and I soon found that out when I took my portfolio of photos into a party decorations shop that was starting a section catering for weddings – they already had a lady who they used to make birthday cakes but she wasn’t very confident doing wedding cakes. They loved the photos of my cakes but nearly choked when they saw my price list!

In my case I have had to readjust my prices ‘only slightly’, this is because even thorough we live in an area more rural than where we were before, looking around us the cost of living for myself and the clients around me is only slightly lower. I have had to review where and how I get my supplies, without compromising on the quality of my cakes. If my prices have to be lowered then my cost prices have to be lower!

Promoting Your Cake Business....

Marketing according to the English dictionary is described as ‘part of a business that controls the way that goods or services are sold’. This means that advertising is part of marketing. A lot of people take marketing as just advertising but it is not. You the owner of the cake business, the way you dress, the manner by which you behave with clients, the logo for your cake business, your business stationary are all part of the marketing package. If clients don’t like you or the way your employees behave, they won’t buy from you. Imagine you call up for a mobile mechanic and he arrives at your place in a rickety rackety car... this will not fill you with confidence about what he’s about to do to your car? So always remember the image your business portrays and then work on the advertising bit as well.

Using the Media

Ever picked up a Wedding cake magazine, of other food related magazines and wondered if one day soon, just maybe one of your cakes can be featured with such splendour in such a glossy magazine. Well it is possible – take for example the magazine ‘Wedding Cakes, a Design Source’ at the very beginning there is a section that says “see your work in print” (I never used to look at that section before) All you have to do is send them a good quality photograph or a high resolution digital image to their address and follow the instructions given, if you’re lucky and your images are great, voila!

It just shows you need to keep an eye out to see the opportunities that come your way. That is how just over a year of starting my cake business, I was able to get myself pictured alongside one of my cakes in the local newspaper, and used this opportunity to get myself on a programme on SKY TV. I had received an e-mail from a friend saying there was a new programme to shown on SKY, the producers had sent out information to as many people as possible stating what the programme was about – one of the things mentioned was the aim to showcase up and coming businesses. I took down their contact details and sent an e-mail to one of the producers, it was my own story, about me, my business, my journey and a few amazing photographs of my cakes. You’ve got to learn to blow your own trumpet to promote your cake business. It worked, it got their attention and I was on air ‘live’ a few weeks later. As the theme on the day was Mother’s day, I made a very unique Mother’s day cake for all to see. These are all press appearances I can boast about on any of my advertising material. As that famous quote goes ‘Seize the Day’.

Business Partnerships