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From Dough to Dollars: Creating a Successful Costing Model - Part I

What makes the difference between a cookie aficionado and a cookiepreneur? Profit! Remember we are talking business here, and the bottom line is the bottom line.

 

I am going to dive right into this two-part series. Part I, Creating a Successful Costing Model, is going to teach you how to figure out the actual direct cost of your products. We will discuss all the direct cost components, including raw ingredients, labor, and packaging. In Part II, Pricing Your Cookies for Profit, we will delve into indirect costs* and profit margin. At the end of these two posts, you should know exactly how much your cookies are costing you and what your markup should be so that you are operating in the black. (*Note: Indirect or allocated costs are those costs that relate to the general running of your business, not directly to the making of the cookies, such as rent, insurance, and utilities. They too must be taken into account in order to accurately price your cookies for profit.)  

 

After frequenting several cookie forums over the past couple of years, I have seen numerous questions regarding cookie pricing. A few members of our cookie community have offered assistance by providing samples of their own cookie pricing charts for reference. Although these guides are all well intended, trying to use someone else’s cookie pricing chart is like using some else’s prescription lenses.

 

Each one of you creates a unique product. There are a number of factors that contribute to your overall cost per cookie. Even if we were to assume that you are using the exact ingredients as a fellow decorator, your rate of speed, cost of ingredients, indirect costs, and overall processes differ; therefore, the only way to guarantee profitability is to figure out your own costs accurately and price your cookies accordingly.

 

1.0 What is a Costing Model and Why Do I Need One?

Simply stated, a costing model is a tool that helps business owners figure out the cost of certain activities or processes - in this case, those costs related to baking, decorating, and packaging cookies. (Again, in this post, we will only discuss the direct costs associated with producing your cookies. Our next post will undertake profit margins and indirect or allocated costs.) An accurate costing model is an essential tool, as it will help you determine a more exact direct cost per cookie than back-of-the-envelope estimates ever can. 

 

However, your model is only as good as the information you input. Be sure to be meticulous and methodical in your measurements of both materials and time. At first all the number-crunching may seem tedious, but in the end it will pay off.

 

Not too long ago, I admit I was costing as if I were living in the dark ages. I used an old spreadsheet to calculate the cost of my ingredients and was manually figuring in my labor and packaging costs in addition to my overhead, which added up to one big mess in a notebook.

 

Upon discovery of the magnificent tool you see pictured below, I have abandoned my antiquated way of doing things and embraced this new approach.

 

Jennifer'sModel

Source: The Food Product Cost and Pricing Calculator, Jennifer Lewis

 

This tool, The Food Product Cost and Pricing Calculator, was created by Jennifer Lewis who is also the brainchild behind smallfoodbiz.com. Jennifer is a seasoned culinary professional who founded her own small food company in 2006 and holds an MBA with a concentration in entrepreneurship, marketing, and finance from Northwestern University's Kellogg School of Management. Her website is chock full of detailed information helpful to all who wish to start a small food business.

 

You can purchase this useful tool for a mere $49 here on Jennifer's site. This post is not a paid endorsement of this product; I have simply fallen in love with it and now find it a "must have." This Excel-based spreadsheet saves me countless hours of work and guarantees the accuracy of my margins, so long as the information I input is correct.

 

In the remaining sections, I'll show you how this model works by taking you through its various costing spreadsheets, each of which corresponds to a particular direct cost component, such as raw ingredients, labor, and packaging. You could, of course, opt to create a spreadsheet of your own or to do the calculations on paper, but in any scenario, the essential costing steps are the same.

 

2.0 Calculating Raw Ingredients Costs

Begin by making a list of all the raw materials needed to create your recipe.

Before you start to figure your cost per unit, you will need to break down the cost of each raw material called for in your recipe, as shown in the spreadsheet below.

 

For purposes of example, I've computed the ingredient costs for 36 of my Wacky Cookies' (3-inch-diameter, 1/4-inch-thick) sugar cookie rounds, very simply iced in a single color with a single detail such as a heart. All orange cells are input cells (ones you, the user, must calculate and enter); all blue cells are automatically computed by the model. 

 

Ingredients [1)

 

2.1 Ingredient Costs, In More Detail

Let’s begin with the flour. I buy all-purpose flour in 25-pound bags, which is equivalent to about 100 cups of sifted flour (assuming 4 ounces of sifted flour per cup*). A 25-pound bag of flour costs me $8, so I divided the total price of the flour by 100 cups, which leaves me with a cost per unit of $.08 (8 cents) per cup. 

 

*Note: Flour (and other dry ingredient) weight-to-volume equivalencies can vary widely with type of flour (i.e., all-purpose versus cake), whether you sift, and how you measure the flour into the cup, so best practice is to weigh your ingredients if you have a scale. That said, here is an excellent weight-to-volume equivalency chart that you can use to convert units if you'd rather measure by volume.

 

In order to accurately figure out your total ingredient cost per unit, you must repeat this process with each and every ingredient called for in your recipe, as I have done in the spreadsheet above.

 

2.2 Per Unit Ingredient Costs, In More Detail

Again, using the flour as an example, my recipe calls for 6 cups of flour. Each cup of flour is $.08 and so the model multiplies 6 by $.08 to arrive at the total cost for flour per recipe of $.48.

 

Once you have completed the above process for each of your ingredients, the spreadsheet adds them together to get the total cost of your raw materials, which in this case is $7.80. The spreadsheet then divides the total ingredient cost by the entered recipe yield (in this case, 36 cookies) to give me an ingredient cost per unit (cookie) of $.22.

 

Ingredients 2

 

3.0 Calculating Direct Labor Costs

When it comes to decorated sugar cookies, labor costs usually far exceed raw ingredients costs. The countless hours of work and attention to detail are what make these edible pieces of art so special. You could use your better judgment to estimate how long it takes you to complete a batch of cookies from start to finish. But better yet, I recommend establishing standards for cookie types by setting a timer while you work. For example, here's the breakdown of how long it takes me to make 36 simply decorated 3-inch cookies:

  • Dough prep time (10 minutes)
  • Cut and bake time (25 minutes)
  • Royal icing prep time (10 minutes)
  • Icing/decorating time (20 minutes)

Total estimated time for production is 65 minutes. In order to figure out my direct labor costs per batch, I divide my hourly rate of $12.00 by 60 minutes to get a labor rate of $.20 per minute. I then multiply $.20 per minute by 65 minutes to arrive at a total direct labor cost per batch of $13.00. To compute cost on a per cookie basis, I simply divide $13.00 by the recipe yield (36 cookies) which gives me $.36 per unit (cookie) for labor. (Of course, if you have Jennifer's spreadsheet, all you have to do is enter the total recipe prep time, your hourly rate, and the yield, and the spreadsheet does the math for you!)

 

My direct costs, excluding packaging, are now:

 

raw ingredients ($.22) + direct labor ($.36) = $.58 per unit (cookie)

 

Direct Labor

 

4.0 Calculating Packaging Costs

And let's not forget packaging - it can rapidly add up! You must account for everything from the cellophane bags in which you place your cookies to the ribbons and/or stickers used to seal those bags shut. (And boxes and peanuts for packaging if the cookies are being shipped, though I typically handle shipping costs as indirect costs. More on this topic in Part II.) 

 

The first spreadsheet below shows my typical packaging materials costs per cookie without taking packaging labor into consideration. To arrive at these figures, I basically repeated the same process that I used to calculate my raw ingredient costs - that is, I divided the total price of each packaging element (i.e., a box of cellophane bags) by the units it contained (i.e, number of bags in the box). Since I use 1 bag, 1 sticker, and 1 foot (1/3 yard) of ribbon to package each cookie, I end up with total packaging materials costs per cookie of $.27 when all three packaging elements are added together.

 

Table 4.0 packaging

Table 4.0b packaging

 

Always remember to roll tax and the costs of shipping (to you) into the price of your bags, ribbons, and labels. Normally, I order many of my paper/packaging products together, so I divide the total shipping cost of my order by the number of items that have been shipped to me. I then roll that figure into the total price of the packaging item. For instance, I entered $65.00 for 2,000 cello bags when the price was actually $60.00, because I needed to add another $5.00 to cover the shipping costs and tax.

 

Let's briefly revisit our direct cost tally. We are now up to $.85 per unit (cookie), excluding packaging labor:

 

raw ingredients ($.22) + direct labor ($.36) + packaging materials ($.27) = $.85 per unit (cookie)

 

4.1 Packaging Labor, In More Detail

When I first started getting very busy with cookie orders, packaging time was one factor for which I hadn't sufficiently prepared. After all, you cannot just shove your beautiful cookies, which may have taken you hours to create, into an unattractive bag or box and hope that your customers will be impressed.

 

Packaging cookies takes a good amount of time and care. You must accurately calculate how long it typically takes to bag cookies, cut the ribbon and tie the bags, or otherwise package a batch of your product. (Again, I handle labor associated with packaging for shipping as an indirect cost, for reasons I'll discuss in Part II.)

 

I invite you to compare the price of packaging before and after labor costs are taken into consideration; it is quite an eye opener! And this is just the time for bagging, tying up, and placing a sticker on each bag.

 

Table 4.1 packaging with labor

 

As with production labor, this calculation will require some standard setting - so take out that timer if you don't already have a clear idea of how long these tasks take you. Note: I have used an hourly packaging labor rate that is significantly lower than the baking and decorating hourly rate. This is due to the nature of the job, so when choosing an hourly labor rate, ask yourself how much you are willing to pay someone (or yourself) to do this job. 

 

5.0 Total Direct Cost Per Unit

We have now arrived at our total direct cost per unit which is $1.08, for a very simply decorated cookie. More complicated cookies could very well drive labor costs much higher (think multiples of the ingredient cost), so you can see why it's crucial to cost cookies to your particular design and circumstance. Again, this figure does not yet include overhead costs which we will discuss in Part II, Pricing Your Cookies For Profit.

 

Table 5.0 Total Direct Cost Per Unit

 

I hope you find this information both helpful and revealing. As always, I welcome your comments and questions.

 

And remember that the key to success is persistence. Never give up, never!

 

 

Aymeecookiepreneur

Aymee VanDyke, also known as Cookiepreneur, is a successful entrepreneur and business consultant whose main focus is to help women in the cottage food industry build profitable and rewarding businesses. She is the founder and owner of Cookiepreneur and The Wacky Cookie Company, a four-year-old cottage/commercial cookie business that has operated in the black for most of its existence. Aymee has an extensive background in personal development and attended the Norwegian School of Business in Oslo. Her articles have been published in BISSI, the magazine of the Norwegian School of Business, and Somos Magazine.

 

Photo credit: Aymee VanDyke

 

Note: From Dough to Dollars is a regular Cookie Connection blog feature written by Aymee VanDyke that provides business planning, marketing, and other tips for starting a cottage cookie business and taking it to the next level. Its content expresses the views of the author and interviewees, and not necessarily those of this site, its owners, its administrators, or its employees. To catch up on all of Aymee's past posts, click here.

Attachments

Images (8)
  • Sample Costing Model: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis
  • Table 1 - Sugar Cookie Ingredient Costs: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis
  • Table 2 - Sugar Cookie Ingredient Costs Summary: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis
  • Table 3 - Sugar Cookie Direct Labor Costs Summary: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis
  • Table 4 - Sugar Cookie Packaging Materials Costs: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis
  • Table 5 - Sugar Cookie Packaging Materials Costs Summary: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis
  • Table 6 - Sugar Cookie Total Packaging Costs with Labor: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis
  • Table 7 - Sugar Cookie Total Direct Costs: Excerpted from The Food Product Cost and Pricing Calculator by Jennifer Lewis

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Comments (35)

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Funny I should come across this just as I am figuring costs for a current order! This is going to take some time to figure out. I so appreciate you taking the time to put it all together for us! For this order I will have to use my current pricing method, but will study this model because although my cookies seem expensive, after I figure my time and ingredients, I'm not making much. More or less getting financial help to support my hobby. Problem is, I am trying to build a business! So thank you so much for this help!

Thank you for sharing - costing/pricing is something I'm working on at the moment and this is really helpful!

 

I have to ask - does it really just take you 10 minutes to make royal icing (my stand mixer wouldn't whip it up that fast, never mind working on consistencies & colour) and 20 minutes to decorate 36 cookies?!  That seems unusually speedy! :-)

LizzieMay,

I think that's just for one color and a basic iced cookie?  Either that or I'm incredibly slow :/

It takes several minutes for me to do one cookie... Getting corners precise, a layer of wet on wet, some painting, a wet on dry layer, a fondant peice, etc....

Hi TammyHolmes,

 

I assumed it's just one colour and plain iced but I still can't see any possible way I could prep royal icing in 10 mins (mine takes longer than that for my mixer to make, never mind sorting consistencies and filling bags..), and outline & flood 36 cookies to a high standard in less than a minute per cookie... I was just curious, perhaps Aymee is just incredibly fast with a spatula and a piping bag 

Thanks for the great info.  I agree with Lizzie about the timing.  I hope that with more experience I will get faster but right now, I am the tortoise of decorating.  Good thing it is only a hobby!

I am very interested to see how this model compares to my analysis in QuickBooks from the data that I import and export for my biz. I WILL be purchasing this model as it is SUPER simplified vs. what I am currently using.  Thank you for taking the time to do this!

Originally Posted by Montreal Confections:

What about the time spent running around at stores purchasing supplies and the price of gas. Then cleaning after the fact, is that calculated in the preparation time? 

Good Morning Montreal Confections

 

That is a good question and one I will address in Part II- Pricing Your Cookies for Profit. For now, I will say that  I treat  gas, cleanup and shopping time as variable indirect costs because they are not directly related to production of my cookies.  Remember, we have only discussed the direct costs in this part of our post and we still need to take the other into account in order to accurately price. 

Originally Posted by TheTailoredCookie:

I am very interested to see how this model compares to my analysis in QuickBooks from the data that I import and export for my biz. I WILL be purchasing this model as it is SUPER simplified vs. what I am currently using.  Thank you for taking the time to do this!

You are most welcome, So glad you found Smallfoodbiz's Product Cost & Pricing Tool practical. I think it's amazing! And so affordable too .   

Originally Posted by LizzieMay's:

Thank you for sharing - costing/pricing is something I'm working on at the moment and this is really helpful!

 

I have to ask - does it really just take you 10 minutes to make royal icing (my stand mixer wouldn't whip it up that fast, never mind working on consistencies & colour) and 20 minutes to decorate 36 cookies?!  That seems unusually speedy! :-)

Hi LizzieMae,

 

The answer is YES! The way I prep my Royal Icing is my own process that I have worked out over the years. I know some people beat the icing for 15 minutes or so, but I find it difficult to work with icing that is so fluffy.

 

Also, keep in mind that I have been doing this for years, and have made thousands of cookies, so the more experience you have, the faster you will find you do things. Years ago it used to take me an entire 15 minutes to work out the consistency of my icing, now i just know .

 

Another important thing to keep in mind is, when I prep my royal icing, I don't just make a batch that covers 36 cookies, I normally make my batch so it covers many more. Let's say It takes me 30 minutes to whip up a batch of royal icing that covers roughly  108 cookies, I then divide that 30/108 cookies which gives me roughly 2.8 seconds per cookie. If I multiply that 2.8 seconds times 36 cookies it gives me roughly 10 minutes per 36 cookies.. That's how I do it!       

 

Same thing applies to outlining and flooding my cookies. Over the years I have gotten more efficient at flooding my cookies. My advice, watch tons of videos, learn new techniques and tricks from the best of the best and make them your own All the best to you !

 

Last edited by Cookiepreneur

Just a comment on the mixing of icing question: I think this discussion points to the benefit of doing relatively large runs (i.e., scaling up) to drive down unit costs. Because mixing icing (excluding the coloring of it) and dough are relatively fixed costs (time doesn't vary that much no matter how much you make), then it makes sense to do those tasks in bulk. But, if you are typically baking and icing in small batches (a few dozen at a time, as in this example), you should load the full costs of mixing that dough or icing into your pricing because you're bearing the setup costs each time. 

This discussion also points to the importance of developing YOUR OWN time standards, because the speed at which you work obviously greatly affects costs and price. For instance, I know I couldn't outline and flood (and put a simple decoration on) 36 (3-inch) cookies in 20 minutes. I could easily spend 3x that time. I may be slow, but that's just the reality of it.

This is such a great discussion to have ! I completely Julia, scaling up is very smart because of the time you save, I do that very often in order to keep my costs down. 

 

As far as decorating speed goes, absolutely. Everybody works at their own pace and has a certain standard their cookies must meet. That's something else we have not even gotten into yet. I know people who are charging 3 dollars per cookie and will obsess over a single cookie for half an hour because every corner must be absolutely perfect.  

 

I want to be clear that I am not advocating putting out a sloppy looking cookie, however, there is no way to make money on cookies, if you are way too slow or get bogged down when you are trying to market your cookies to the average middle class person  who is not willing to pay more than say 42-45 dollars per dozen for your cookies .

 

In my humble opinion, there is absolutely no way to create an absolutely flawless gorgeous cookie and make a profit unless you have the right kind of client who is willing to shell out the kind of money that it takes to make that kind of a piece. That's a good discussion for another day.  

 

As I mentioned in my first piece The Rise of the Cookiepreneur, I am not the most meticulous cookie decorator in the world, In fact I don't obsess over getting a corners perfect or obsess over certain things that other cookie decorators do because I have come to understand how much that costs and it is a very conscious choice that I have made.

 

My standards are the cookie must taste great and look good. If those are met, I am satisfied that I am delivering a quality product and making money.

Last edited by Julia M. Usher
Originally Posted by Kookie:

Thank you for explaining this in detail. When will you be doing the same with the indirect cost ?

Hi, Kookie, Aymee posts about once a month and her next post will be Part II of this post. So you can expect to see it in a few weeks. We won't leave you hanging too long, I promise! 

I'm so stoked to know that I have been doing most of this all along! (doing a happy dance!) It's great to get the inside scoop from professionals - especially about detail affecting the cost and whether or not you have the clientelle who can afford it!  Thank you so much for sharing this!

Originally Posted by Cookiepreneur:
Originally Posted by LizzieMay's:

Thank you for sharing - costing/pricing is something I'm working on at the moment and this is really helpful!

 

I have to ask - does it really just take you 10 minutes to make royal icing (my stand mixer wouldn't whip it up that fast, never mind working on consistencies & colour) and 20 minutes to decorate 36 cookies?!  That seems unusually speedy! :-)

Hi LizzieMae,

 

The answer is YES! The way I prep my Royal Icing is my own process that I have worked out over the years. I know some people beat the icing for 15 minutes or so, but I find it difficult to work with icing that is so fluffy.

 

Also, keep in mind that I have been doing this for years, and have made thousands of cookies, so the more experience you have, the faster you will find you do things. Years ago it used to take me an entire 15 minutes to work out the consistency of my icing, now i just know .

 

Another important thing to keep in mind is, when I prep my royal icing, I don't just make a batch that covers 36 cookies, I normally make my batch so it covers many more. Let's say It takes me 30 minutes to whip up a batch of royal icing that covers roughly  108 cookies, I then divide that 30/108 cookies which gives me roughly 2.8 seconds per cookie. If I multiply that 2.8 seconds times 36 cookies it gives me roughly 10 minutes per 36 cookies.. That's how I do it!       

 

Same thing applies to outlining and flooding my cookies. Over the years I have gotten more efficient at flooding my cookies. My advice, watch tons of videos, learn new techniques and tricks from the best of the best and make them your own All the best to you !

 

Thank you for taking the time to respond so thoroughly! So helpful and very much appreciated.

 

Gail x

I have learned so very much reading this blog!!! Thanks for such good and detailed information. I want to eventually make a business out of it and I was thinking of considering into the price instead of time invested in the decorating portion the type of design involved that is simple design, detailed and intricate. Time invested changes with practice so since now it takes me so much time how about going by type of design? Sugarbelle , on her website has a suggestion for price based on the intricacy of design . What do u think about this approach?

on this note I would like to know how to decide what simple, detailed and intricate might look like. If possible I would like to see various pictures of cookies as you see them fit these categories. Thanks

Originally Posted by Nancy Margarita:

I have learned so very much reading this blog!!! Thanks for such good and detailed information. I want to eventually make a business out of it and I was thinking of considering into the price instead of time invested in the decorating portion the type of design involved that is simple design, detailed and intricate. Time invested changes with practice so since now it takes me so much time how about going by type of design? Sugarbelle , on her website has a suggestion for price based on the intricacy of design . What do u think about this approach?

on this note I would like to know how to decide what simple, detailed and intricate might look like. If possible I would like to see various pictures of cookies as you see them fit these categories. Thanks

Hi, Nancy, Thanks - so glad you're learning a lot. Aymee is tied up until at least next week, so I thought I would answer your question from my point of view. Pricing for profitability comes down to understanding your ingredient, overhead and labor costs, but especially the latter (if you're working out of a low overhead environment) since decorated cookies can be so time consuming. And labor costs are driven by time, which is a function both of your speed on any task and the complexity of the design. Even with practice, some designs will take you a lot of time no matter what.

 

While shorthand visual cues can help in a lot in guesstimating or bracketing pricing, there is no better way to price for profitability in my opinion than by figuring out how long designs will take YOU by going through the exercise of timing yourself to create standards for certain tasks - i.e., mixing dough, cutting, baking, mixing icing, and creating the specific design in icing. I think most people would be surprised to learn that even their "simple" designs are taking longer than expected when all the baking and mixing of icing is fully accounted for.

 

Once you have cost standards, you can begin to build up costs per cookie much more quickly by adding components together. Also, if you feel you cannot charge more than a certain amount in your market, these standards will also help you figure how much time you can allot to a custom design before you start eating into your desired profit margin.

 

I really don't know how Sugarbelle developed her chart - whether she started with the foundations of basic costing as we are, or whether she applied a more market-driven approach to set pricing for cookie types, so I can't comment on it fully. I also don't know if she has factored in any margin to cover overhead costs, which are particular to personal circumstance. Though I do know that when I had my shop, I could rarely sell any cookie for as low as $3 and make money on it, partly because my designs tended to be pretty complicated, but also because I had the larger overhead of mortgage on my shop, and all the other licensing costs that came along with it, to cover.

 

So, to make a long story short, I advocate for building your OWN pricing through a firm cost basis like Aymee presents, but then cataloging your basic cookie designs in some way (visually can help) to help quickly bracket pricing in your mind. 

 

In Aymee's costing example above, her "simple" cookie was defined as a (3-inch-diameter, 1/4-inch-thick) sugar cookie round, very simply iced in a single color with a single detail such as a heart. But I agree that a visual might help to see just how simple this is. Perhaps as a follow-on post, Aymee could work up a few more examples showing cookies of different degrees of complexity just to demonstrate how HER pricing changes with the time she invests in a cookie design. We'll see what she says when she gets back! 

Last edited by Julia M. Usher
Originally Posted by Julia M. Usher:
Originally Posted by Nancy Margarita:

I have learned so very much reading this blog!!! Thanks for such good and detailed information. I want to eventually make a business out of it and I was thinking of considering into the price instead of time invested in the decorating portion the type of design involved that is simple design, detailed and intricate. Time invested changes with practice so since now it takes me so much time how about going by type of design? Sugarbelle , on her website has a suggestion for price based on the intricacy of design . What do u think about this approach?

on this note I would like to know how to decide what simple, detailed and intricate might look like. If possible I would like to see various pictures of cookies as you see them fit these categories. Thanks

Hi, Nancy, Thanks - so glad you're learning a lot. Aymee is tied up until at least next week, so I thought I would answer your question from my point of view. Pricing for profitability comes down to understanding your ingredient, overhead and labor costs, but especially the latter (if you're working out of a low overhead environment) since decorated cookies can be so time consuming. And labor costs are driven by time, which is a function both of your speed on any task and the complexity of the design. Even with practice, some designs will take you a lot of time no matter what.

 

While shorthand visual cues can help in a lot in guesstimating or bracketing pricing, there is no better way to price for profitability in my opinion than by figuring out how long designs will take YOU by going through the exercise of timing yourself to create standards for certain tasks - i.e., mixing dough, cutting, baking, mixing icing, and creating the specific design in icing. I think most people would be surprised to learn that even their "simple" designs are taking longer than expected when all the baking and mixing of icing is fully accounted for.

 

Once you have cost standards, you can begin to build up costs per cookie much more quickly by adding components together. Also, if you feel you cannot charge more than a certain amount in your market, these standards will help you figure how much time you can allot to a custom design before you start eating into your desired profit margin.

 

I really don't know how Sugarbelle developed her chart - whether she started with the foundations of basic costing as we are, or whether she applied a more market-driven approach to set pricing for cookie types, so I can't comment on it fully. I also don't know if she has factored in any margin to cover overhead costs, which are particular to personal circumstance. But we are saying the same thing in at least one respect: that complexity of design (i.e., time spent on a cookie) can have a large impact on cost to make the cookie and, thus, the price that should be charged.

 

I also know that when I had my shop, I could rarely sell any cookie for as low as $3 and make money on it, partly because my designs tended to be pretty complicated, but also because I had the larger overhead of mortgage on my shop, and all the other licensing costs that came along with it, to cover. So it can be risky to assume someone else's pricing model will work for you not knowing the underlying assumptions regarding how they do business.

 

So, to make a long story short, I advocate for building your OWN pricing through a firm cost basis like Aymee presents, but then cataloging YOUR basic cookie designs in some way (visually can help) to help quickly bracket pricing in your mind. 

 

In Aymee's costing example above, her "simple" cookie was defined as a (3-inch-diameter, 1/4-inch-thick) sugar cookie round, very simply iced in a single color with a single detail such as a heart. But I agree that a visual might help to see just how simple this is. Perhaps as a follow-on post, Aymee could work up a few more examples showing cookies of different degrees of complexity just to demonstrate how HER pricing changes with the time she invests in a cookie design. We'll see what she says when she gets back! 

 

Last edited by Julia M. Usher

Thanks so much for your response. It really helps me start organizing my ideas for pricing. I can see how time is a better measure to decide price since the complexity will increase the time anyway. I would also like to see how you visualize the different levels of complexity . I think that from a customer perspective it is easier for them to understand the cookie pricE.

thanks again you were very thorough and I appreciate it very much

Hi, Nancy. I believe that Aymee is planning to post more images of her simple to complicated cookies, and the associated pricing. But she's had to take a small break from posting to this site until the end of this month. I copied her on this conversation, so she can jump back in as soon as she gets back to work here. Stay tuned!

Oh my goodness - I was about to give up the business until I read this - I realize that I won't get rich off of decorating cookies but I too would like to make a profit which until now has been minimal - I am going to work hard to figure out my costs - thank you SO very much for this website and this blog post!!!

Originally Posted by SharonMuse:

Oh my goodness - I was about to give up the business until I read this - I realize that I won't get rich off of decorating cookies but I too would like to make a profit which until now has been minimal - I am going to work hard to figure out my costs - thank you SO very much for this website and this blog post!!!

You're so welcome. Thanks also go to Aymee VanDyke who wrote this post!

I, beyond words, needed this info. I am operating under Cottage Food Law regulations and do not want my business to fold due to lack of understanding how to properly price out my products. Thank you, Thank you
Originally Posted by SweetlyDetermined:
I, beyond words, needed this info. I am operating under Cottage Food Law regulations and do not want my business to fold due to lack of understanding how to properly price out my products. Thank you, Thank you

Great - glad you found it useful. I really believe that this is the best way to cost/price. Taking shortcuts based on cookie size (as some do) is likely to get you into trouble if you do very labor intensive cookies.

Kim S. posted:

Looks like this tool is no longer available. Does anyone know where to find something similar?

Kim

I just googled "recipe costing", and a ton of Excel/spreadsheet-based options come up. Here's one that offers a free trial (https://cafesmarts.com). I haven't tried it and can't vouch for it, but, truth be told, recipe costing is pretty standard/straightforward. You might just want to create your own spreadsheets to do this sort of thing.

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