When was the last time you evaluated the prices of the products you sell? If your answer is never, or if it’s been more than a few months, it’s time to revisit your pricing.
After working with thousands of artisans, especially those who sell baked goods from home, we have a sense that most people are under-charging for their products. We want artisans to be able to turn their passions for food into sustainable, profitable businesses — and you can’t do that if you’re not charging enough.
How can you avoid working long hours just to barely make ends meet? You need to price your products — whether they’re cakes and cookies, or hot cocoa bombs, or prepared meals — in a smart and strategic way.
Meet Laura Luk of Butterfly Bakes ATL
Laura joined our community to discuss all things pricing: how to raise prices, how to calculate pricing, and much more. Laura started Butterfly Bakes in 2020, right before Christmas. “I like to make the analogy that I was almost like a rookie football player that played in the Super Bowl as his first game, because, as we all know, Christmas is a big baking season. Especially for custom cookies. I did way more cookies that season than I really could handle at a price point that was not really sustainable for me,” Laura said.
Get more tips on pricing from Laura:
Pricing Lesson 1: You’re Not Desperate for Customers
Before you raise your prices — and before you turn on your oven or start mixing ingredients — you need to work on your mindset.
“I don't want you to ever accept the thought that ‘I am desperate for customers,’” Laura said.
When she started her business, Laura said that she would feel guilty when she sent quotes to customers. When she made her first sales to friends and family, Laura found herself giving quotes with a question mark at the end. Instead of being firm in her estimates, she would say “These are $40 per dozen, is that ok?”
“I just want you to know that you kind of have to take yourself out of the equation altogether,” Laura said. “Take your insecurity and the discomfort out of the pricing equation with your customer. This is not about you, it is not about them. It's about your product.”
“There's an age old saying that I'm sure most of you have heard that a business makes you money, a hobby costs you money. That is very, very true. And if you want to make money — if you want to be a business — it has to be about your product, it cannot be about you,” Laura said.
Pricing Lesson 2: Know Your Ideal Customer
Once you’ve come to the realization that there are customers out there who are willing to pay what you charge for your products, and who appreciate the time and effort you put into handcrafting your products, it’s time to settle on who those customers are.
This is a time when you can really let your imagination run wild. If you had to come up with the perfect customer for your business, who would they be? You can get as detailed as you want. What kind of car do they drive? What do they do for work? Do they have children? How old are they?
“Not too far into my business journey, I created an imaginary customer in my mind,” Laura said. “I actually have two [ideal] customers. My first customer for my custom cookie business is — I'm going to be blunt with you guys — a person of means. A person that has a lot of disposable income that loves to host events, loves to impress, is sentimental. Most of the occasions that I do cookies for are big milestones, like bridal showers, baby showers, and kids’ birthdays for ages one through five. You know, parents who want that beautiful Pinterest moment with their cookies and everything.”
Laura continued: “I even went so far as to define my customer in terms of the area in which I live. I live in metro Atlanta, which is one of the biggest cities in the southeast. There are plenty of people that live here, but there's a certain segment of the population here that would be my customer. if you have a product that you just have this endless capacity to make, and you can be making it all day and all night like a machine, and you want to sell to every single person, maybe you can cast a wider net than I can.”
How does this relate to pricing? You have to put yourself in the shoes of your ideal customer and ask yourself how much they would be willing to pay for your products. Take yourself out of the equation. Think about your competitors, or other products that your ideal customer would buy instead of yours. How much would they be willing to pay for those? (Don’t forget, even Panera Bread charges $4 for their mass-produced sugar cookies!)
Laura made the decision to position herself as a maker of luxury products selling to high-end customers, and she charges accordingly.
Pricing Lesson 3: Know Your Fixed Costs
The prices of your fixed ingredients — like flour, butter, and sugar — might change, but the ingredients on your shopping list generally don’t. Before you can make money, you need to make sure you’re covering the costs that don’t change. That can be easier said than done, though, if you don’t track your expenses.
What should you include in your cost calculations? Think about things like:
- Your time
- Packaging (and shipping, if applicable)
“Your pricing should be a consideration of two things, it should be a consideration of your raw materials, things that are what I would consider ‘cost of business’ materials,” Laura said. “The next thing you're going to want to consider is your time. How much time does it take you to make a dozen cookies or two dozen cookies? For me, it's a big range, and that's why I decided to come up with the three tiers of prices. I more or less know about how much time it's going to take me for a Basic, Bougie, or Beyond set.”
“What I ended up doing was publishing on my website, very clearly, I have three packages of custom cookies. I have a Basic package, and I’ve listed out, line-by-line, what that includes, and what it does not include. My second package is what I call Bougie. It's for somebody who wants that fancy cookie look, but they don't get all the bells and whistles. Third, the Beyond tier, which is just totally Instagram-worthy: all the gold, all the glitter, all the glam. I just went for it with the prices. Set expectations up front and let your pricing points weed people out for you.”
Laura doesn’t ship her cookies, so she doesn’t have to factor shipping into her costs. If you do ship, make sure to cover shipping costs completely. The fast shipping often required to make sure that your products get to customers on time isn’t cheap, and neither is the protective packaging needed to ensure your products make it in one piece.
Pricing Lesson 4: You’re Not a Not-for-Profit
“I'm not looking to sell cookies to the world, and I'm not looking to make it affordable for the world,” Laura said. “I'm a for-profit business, not a not-for-profit business. Some of pricing is about weeding out the people who aren’t really your customers, and some of it is educating your customers about your pricing, your time, and what goes into the prices.”
Remember: you started this business to make money. Otherwise, you’d just be baking for friends and family, right? To keep your business going, you need to make sure you’re covering your costs and compensating yourself fairly.
Pricing Lesson 5: Supply and Demand Are Your Friends
Supply and demand are the best friends of any food entrepreneur who want to run their business on their own terms. There are only so many hours in a day, and there is only one of you! You’re working within time and capacity constraints. With the right pricing in place, you can make the money you need to make without burning yourself out.
“There’s only so much supply of my time. When I was getting more requests for orders than I could take, my demand was larger than my supply. So in that case, I was able to raise my prices,” Laura said.
“At any point in your business — it doesn’t have to be the first of the month, it doesn't have to be the 15th, it doesn't have to be a special day — just raise your prices,” Laura said. “You don't have to make a big deal about it. Don't make an announcement about it. That's not going to be helpful to your customer.”
“Have you ever gone into a store, any store, and heard them announce a price increase? The only thing they ever advertise is a discount, right? You do not want to advertise raising your prices. It’s not a bad thing to raise your prices, but announcing it is not going to benefit you in any way.”
Not quite at the stage where you’ve got too many order requests to handle? Laura still recommends raising your prices. As ingredient costs go up and your skills improve, you should pass those costs on to your customers. Even if it’s an increase as small as one dollar, Laura encourages artisans to increase prices at least every six months.
How to Raise Your Prices
Now that you’ve thought about the topics mentioned above, it’s time to do it: raise your prices!
It may seem daunting, but by raising your prices, you’re saving yourself time and earning more money. You’re creating special products, and you deserve to be paid for them. Think of yourself as an artist, because you are one. Your customers could go to the grocery store and pick up a box of cookies or a sheet cake, but they’re coming to you because you’re able to provide high-quality, delicious products — so charge accordingly.
Raising your prices is as easy as making an adjustment to your website’s price list or charging extra on your next order quote. Set expectations ahead of time and start charging more for your products. You’re worth it!