How to price bakery products profitably

To price a bakery product, work out the dough cost per kilo, divide the batch cost by the pieces you actually get after trim and bench loss, add the oven, your time, packaging and overheads, and spread whatever does not sell across what does. With that loaded cost per piece, the price comes from dividing by (1 − the margin you want). Counter and wholesale prices are worked out separately, because each carries different costs.

In this guide

• How to calculate the cost of a loaf of bread, step by step with a sourdough loaf.
• Baker's percentages for costing dough.
• Oven time and energy: costing bakes per tray.
• Unsold bread and pastries: limiting the loss.
• How to price a cake by size, portions and decoration.
• Pricing custom cake orders.
• Cost per dozen: cookies and small pastries.
• Holiday bakery products: pricing and planning.
• Supplying cafés and shops with bread and pastries.

1. Cost the dough by weight

In a bakery everything is weighed, and so is the cost. Write down the ingredients in one batch with their weights and their cost from your invoice. Add them up and divide by the total dough weight.

Dough cost per kilo = ingredient cost ÷ kilos of dough

Include what goes outside the dough but inside the product: egg wash, filling, icing, the dusting sugar at the end. If you work in baker's percentages, you can recost any batch size in a minute. And if you need to take a recipe to a different number of pieces, use the recipe scaler.

The general guide to recipe costing, yield and waste covers the basics for any recipe; here they are applied to baking.

2. From dough to pieces: trim and bench loss

Not all the dough turns into product. There are three losses you measure yourself, with your own scale:

• Bench loss: what stays stuck to the mixer bowl, the tub and the bench.
• Trim: with laminated dough, rolls cut from a log or anything cut to shape, the ends and edges left over. If you use them in another product, they are not a loss there; if you bin them, they are.
• Rejects: pieces that tear when shaping or come out of the oven misshapen and cannot be sold.

That is why the cost per piece is the cost of the whole batch divided by the good pieces you get, not each piece's weight times the cost per kilo.

Bake loss is different. Bread loses water and weighs less, but it is the same piece. It does not change the cost per unit. It does change the cost per kilo if you sell by weight, and it changes what you can print on the label.

3. You pay for the oven by the bake

The oven uses the same energy with two trays as with four. Work out your hourly energy cost (from your gas or electricity bill and how much the oven draws) and multiply by preheat plus bake time. Divide by the pieces that went in.

A full oven spreads the cost over many pieces. So plan your bakes: bread first, then whatever needs a lower temperature, without switching off in between.

4. Your time and batch size

Labour is the cost people forget most in craft baking, and it often weighs as much as the ingredients or more. Count the hands-on hours in the batch (mixing, laminating, shaping, baking, packing, cleaning), not the proving hours when you are doing nothing. Price them at what you would pay someone.

Time does not grow in step with the batch. Making 40 rolls does not take twice as long as 20. That is why batch size changes your cost per piece more than almost any ingredient; see how batch size changes your cost per unit. One catch: a bigger batch only lowers cost if you sell it. If it is left over, cost goes up.

5. Packaging

Paper bags, boxes, labels, ribbon, baking paper, cake boards. All of it goes per piece or per order. Over the counter it may be just a bag; in a gift box it can cost more than what is inside.

6. What does not sell

A bakery always has leftovers. If you bake 20 and sell 17, you paid for the 3 left over too. Spread them across the ones you sold:

Cost per piece sold = cost per piece × pieces baked ÷ pieces sold

Whatever you recover by selling them the next day at a lower price, or turning them into another product, cuts that loss. The guide on unsold bread and pastries shows how to do it without undercutting today's price.

7. Counter and wholesale

Counter and wholesale are not the same product at two prices. They carry different costs:

Work out each cost separately and give each channel the margin it needs. The guide on wholesale and retail prices for the same product shows how to set them so the shop buying from you also makes money.

Worked example: cinnamon rolls at the counter and for a café

You bake cinnamon rolls. Here is your batch, at the prices on your last invoices:

Dough: about 2,155 g with the filling, before icing. You trim the two ends of the log: 55 g. That leaves 2,100 g, which you cut into 20 rolls of 105 g.

Ingredients per roll: 7.85 ÷ 20 = $0.39.

Oven: both trays go in together. 20 minutes to preheat and 25 to bake: 45 minutes. Your oven costs $1.20 an hour to run, so 1.20 × 45 ÷ 60 = $0.90. Across 20 rolls: $0.05 each.

Your time: 2 hours of hands-on work (dough, filling, rolling, cutting, baking, icing), at $18 an hour: $36. Across 20: $1.80 per roll.

Bake loss: the roll goes in at 105 g and comes out lighter. You sell by the piece, so the cost does not change.

At the counter

You bake 20 and sell 17 on average. Cost per roll sold: 2.89 × 20 ÷ 17 = $3.40.

You want to keep 55% of the price before tax: 3.40 ÷ 0.45 = $7.56. You round it to $7.75 in the case. Check: (7.75 − 3.40) ÷ 7.75 = 56.1%. That leaves $4.35 per roll sold.

For a café, wholesale

A café orders 24 rolls a day and takes them all. No bags; they go on a reusable tray ($0.03 a piece), and delivery costs you $5 a day: 5 ÷ 24 = $0.21 a piece.

• Cost per piece: 0.39 + 0.05 + 1.80 + 0.03 + 0.40 + 0.21 = $2.88
• No leftovers to spread
• Price to the café: $4.50 before tax
• Margin: (4.50 − 2.88) ÷ 4.50 = 36.0%
• That leaves $1.62 per piece, or 24 × 1.62 = $38.88 a day

Per piece, the café leaves you a bit over a third of what the counter does. But it is 24 sure pieces every day, with no leftover risk, and it fills your bakes, which lowers the cost of everything else in the oven. If the café pushes for $4.00, your margin falls to (4.00 − 2.88) ÷ 4.00 = 28.0%. Decide your minimum before the conversation. The guide on supplying cafés and shops covers payment terms and minimum orders.

To go from cost to price at any margin, the markup and margin tool does it in one step.

Cakes, cookies and special orders

The method is the same; what changes is where the costs hide.

• Cakes: filling, frosting and decoration can cost more than the sponge, and decorating time weighs heavily. They are priced by size and by portions; see how to price a cake.
• Custom orders: design time, client messages, test bakes and the box. Charge for the time, not just the ingredients: pricing custom cake orders.
• Cookies and small pastries: the cost per piece is small, so think per dozen or per box, and packaging weighs a lot: cost per dozen.
• Holiday products: stollen, mince pies and festive cookies are bought for in advance, sold in a few weeks, and leftovers are expensive: holiday bakery products.

What to check every month

• Butter and cream cheese prices on your invoices. Together they are almost half the ingredient cost in the example. If both rise by $2 a kilo, each roll goes up (0.25 + 0.20) × 2 ÷ 20 = $0.045, about 5 cents.
• How many pieces are left over of each product. If 6 are left instead of 3, the cost per roll sold rises to 2.89 × 20 ÷ 14 = $4.13.
• How many bakes go in half full. Every half-empty bake raises the cost of everything inside it.

Do it with the calculator

In the food cost calculator you enter your batch, how many pieces you get and how many you sell on average, and it gives you the loaded cost per piece and the counter or wholesale price for the margin you want.