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How much do I add to cost to make a sensible profit?

(12 Posts)
Cadbury Wed 24-Sep-08 19:46:32

My friend has asked me to make various chocolate and baked treats for Chistmas and is paying me to to do it. I have worked out how much each item or batch will cost but I don't know what the usual amount is to add for profit, my time, electricity etc.

Anyone know a general rule of thumb for this?

Cadbury Wed 24-Sep-08 19:52:30

that should be Christmas

ditzzy Wed 24-Sep-08 20:00:56

Are you do this as a favour or a business? If its as a business, then really you should cost it by what it's worth to her rather than on a 'cost plus profit' basis.

If she would usually spend £5 per treat, then charge her £4.75 for example. It's called 'top down' pricing, rather than bottom-up which would be to work out costs and add a bit.

Of course if you're doing it as a favour then list out the total costs for the whole lot in total, then allow 10 quid or so for electricity and maybe 10 quid per hour for your time.

Cadbury Wed 24-Sep-08 20:09:46

It is for a friend, but I need to give her some idea of how much everything would be before I do it IYSWIM, so can't really add up time and electricity.

SqueakyPop Wed 24-Sep-08 20:14:32

Make sure you cost in failed batches.

My friend started a cake making business, and she basically worked out her ingredient costs, energy costs, and something for labour. What she didn't include was the potential for cakes to sink every so often and not be fit for sale. Also the cost of her investment in cake pans, etc.

It is a very tricky business, because basic costs of ingredients can be quite high, it is then tempting to charge very little for labour, and nothing for failures. A fancy cake can easily cost, in reality, £20, but not many people are willing to pay this.

Cadbury Wed 24-Sep-08 20:18:30

good point - all a bit baffled by the money side of this. Not my bag really [bush]

Cadbury Wed 24-Sep-08 20:24:26

neither is typing accurately it seems! blush

Cadbury Thu 25-Sep-08 16:25:53

Any other ideas folks?

LIZS Thu 25-Sep-08 16:27:49

retail mark up is often cost x 2.3-2.5

Cadbury Thu 25-Sep-08 16:30:50

really? thanks.

becstarlitsea Thu 25-Sep-08 16:36:21

I second ditzzy on the importance of top down pricing rather than cost plus. The important thing is how much the market will pay for your product - research on competitors websites, look in shops and find out how much people are prepared to pay. Then cost in everything (including SqueakyPops very good point about failed batches and proper labour costs). If you find there isn't a margin, then you don't have a workable business model. If there's a great margin then keep it very very quiet smile

Cadbury Thu 25-Sep-08 18:39:29

thanks bec - good advice.

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