The Reality of Pricing for Small Food Businesses

The Reality of Pricing for Small Food Businesses

As a small business owner, I live and breath our pricing and our costs. It is something that needs to be reviewed and analysed on an ongoing basis. Every time a supplier increases costs, we have to asses ours. I thought I would take some time to go through how we work out our prices and why they are the way they are. 

The most obvious cost for us is our ingredients and packaging. This includes everything from butter to boxes to stickers. While there are many suppliers, there are some deal breakers for us that mean our choices are limited. Availability of stock, we would rather have the stock than compromise our products. At present, our supplier is out of stock icing sugar for the foreseeable future. While this may not seem like a huge deal, icing sugar is readily available, the extra leg work and cost can really hit our bottom line. It costs us money to send someone to a retail shop to purchase what we can't order and it will always cost more than our suppliers. Reliability. We can not run our business if our suppliers are not reliable. I will pay more for reliability, whether that is the quality of the products and/or their service.

Just recently, the supplier I order our baking cases from closed. Our next best option is double the price. That impacts every single cupcake that leaves our kitchen.

Our staff costs are relatively small due to our small team but everyone deserves to be paid fairly and on time. The cost of staff can makeup to 30% of a product price due to the hands on nature of what we do. Superannuation is also a big cost for businesses.


Delivery is core to our business. We know how valuable it is to have your order turn up at your office and not have to go out and buy a cake/cupcakes. We work hard to make it work. But it is a big cost to our business. Our couriers are fabulous and they deserve to be paid accordingly.


The cost of running a kitchen is astronomical. Consider the following: rent, electricity, gas, equipment and supplies, food licence, website, domain, marketing costs, software, accounting fees, insurance, servicing of equipment, cleaning, phones and internet. Now this isn't an extensive list of costs but gives you a good overview of what we face.


My accountant always tells me that paying tax is a good thing and they love it. I, rightly, roll my eyes like a teenager. But really, they aren't wrong. I hear many stories from small businesses about how they hate paying tax. Many businesses find it difficult to front up the money each quarter when the BAS is due. A BAS is made up of GST collected (sales) minus GST spent (expenses) plus PAYG (staff tax withholding). Here's my take. I don't like handing over big chunks of money but I do not hate paying taxes. For me, if our tax has increased, it means our revenue has increased. Also, our tax money is to help fund community services etc (you can argue if that happens or not, how the money is spent is not up to me) and I don't think that is a bad thing. What I would question is, can small business owners get something for collecting government tax? I don't think they would go for it LOL. The other argument I hear is, as a food business we pay more tax as we don't pay tax on our ingredients (cooking ingredients do not have GST applied). Well this is true in essence but really, the truth is, we don't pay GST on our ingredients, therefore we don't have to front up as much money. So while you may pay $110 for your order, we only get to keep $100 of that and the remaining $10 must be put aside for the government.


With all that in mind, I am sure you can understand how difficult it is to get pricing right. We do our best to be competitive but make sure that we are providing a quality product and a great service. Despite all of the above, it doesn't stop us from loving what we do.


Here's to another great week of baking and eating cake!

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