Pricing is something many bakers struggle with every day. We love what we do and want our products to be affordable so everyone can enjoy them. But then we also need to cover costs and make a living.
So here's where the money goes. For every dollar that comes into the bakery...
9% is actually state, county and city sales tax. I collect it from the customer, pay any and all fees associated with collecting that money (such as credit card processing) then remit the entire amount to the proper agency.
25% covers food and packaging. Things you'd expect like flour and sugar and butter and eggs. Plus bakery boxes and cellophane bags. And bakery string and labels. All of the items needed to transform raw ingredients into baked products and get them to your home safely. This includes some things you might overlook like gloves and plastic wrap, tape, cups and lids, parchment paper and garbage bags. Plus all of the cool decorating items that make our products special such as sprinkles and gel colors and edible glitter and chocolate and gum paste and fondant.
36% -- and my biggest single expense -- is labor (not mine). Payroll plus the employer contributions to social security. Plus worker's compensation insurance. These are the people who help bake and decorate your cakes and cookies, help me open and close the shop, without whom I could not attempt to run my business -- clearly money well spent.
9% goes to rent, utilities and phone.
2% goes to advertising. Very thankful here that Facebook is free and the cost of maintaining the website is minimal.
7% goes to miscellaneous overhead. Things like banking fees, permits and business licenses, equipment repair, our monthly pest control service, supplies and smallwares.
Which leaves 12% for me as the business owner. I made more money when I had a "real" job in industry, and benefits too, but running the bakery is much more satisfying in ways that money can't buy.
We make almost everything in the bakery from scratch, so my food costs are higher than a grocery store bakery's might be, and so are my labor costs. Also included are the food and labor costs associated with making food we give away, to children who come into the shop, and as donations through gift cards for charitable events. Plus the cost of making items we don't sell and have to throw away, breakage, waste, you-name-it.
I never expected to make a fortune running a small bakery, but you could not pay me enough money do do anything else.
And if you'd rather buy your baked goods from a grocery store or home-based baker because they are cheaper, I understand.