Pricing

Ive been offered my first catering job: to create 150 desserts while keeping with the theme of my very new chocolate business. The dessert is to follow a dinner following a summit on local businesses and mine has been chosen to make dessert. I have decided on giving them a choice of one or the other or both and letting the people choose like a menu. First is a dark chocolate mousse served in a white/milk chocolate cup garnished with chocolate covered orange peel the second is a square of white chocolate raspberry cheesecake(no crust) enrobed in dark chocolate. I have never priced something like this out before but have calculated that I could make each dessert for around 2-3$ I would like to make a reasonable profit on this job but also don't want to over charge. I was thinking 500-550$ for one dessert for everyone or 650-700 for the option of one or the other. Is anyone out there familiar with these kinds of things?
updated by @rosie: 04/20/15 05:56:31PM

H,

pricing is a big science, so many things to calculate: food cost, overheads, profit but also market related prices, high potential profit for once-off or lower price to create a long lasting client/business relationship!

So start to have your food cost (ingredients per portion) right: $2-3 is a very wide range!

THEN do this calculation: food cost (FD) X 65% = minimum selling price. (eg: $2X1.65=$3.30-min.selling price)

or: final price is equivalent to: FD +15% (oveheads)+55% (minimum profit) (considering your food cost being 35%)

Also remember to add to your costing any extra tool/trais, foil, petrol etc necessary to get the job done. ( let say 5-10% )

As well: do you need to hire extra people for the job? Add it on. Do you need to work extra hours for the job? if you will do it on your extra time, add it on: you could have been doing something else but you stuck at work till late night!

Then you will see, if this price isbelow your competitors or market related you can add as much as you feel :a) right; b) fair c) worth the effort d) try to cash up heavily to buy a new tool/ great dinner/a day at the SPA....

my suggestion? it should be worth the effort and the extra time without being to heavy on mark up..

Remember that unless you are happy at the end of hard work, you will feel very very bitter about it and you will not appreciate what you did.

My few rand (south african money..) worth of knowledge...

Hope it helps

Pricing is always derived from your COGS or COGS+L(abor) numbers. It's hard to arbitrarily price something as you're requirements and overhead are different from my own. You also want to be above your margin threshold, for some it's 300% for some foodservice they are lucky to get 80% so YMMV.

Just noticed Antonino's post and he's right on.

Like Antonio and Andy have mentioned, it is very important to understand your costs. I actually have a catering company and before I prepare a quote, I always ask myself " How much money do I want to make on this project?." Then I go about analyzing my costs to come up with a price for the client. Good luck. This is a tricky thing to figure out, but you will.

There's another way to do this, which is to research what other (caterers) are charging for similar items. I do this a lot on my projects.

If a survey of caterers and venues reveals that they charge $7/pp for a dessert then you know what the market will bear - you know the maximum you can charge. Taking a much closer look at food costs (Antonino is right - $2-$3 is too wide a range), you can mark your costs up to reflect the other costs (labor, overhead, delivery) to arrive at a final price. I would recommend you consider thinking about gross margin, not markup.

What's the difference? For an item with $3 in total costs, a 50% markup results in a final price of $4.50. On the other hand, a 50% gross margin results in a final price of $6.00. An item with $2.25 in ingredient and labor costs and a gross margin of 45% results in a final price of $4.10 - you'd factor in all your other costs into the final price -- $4.10-$2.25 = $1.85 gross profit/unit before other costs.

The general formula for calculating a final price based on a gross margin percentage is:

Final price = cost price / (1 - margin percentage)

$4.10 = $2.25/(1-.45)

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clay - http://www.thechocolatelife.com/clay/

Just curious....

Have you asked them what THEIR budget is?

THEIR budget, not yoursis your starting point.

Quite often organizations will dangle the carrot of "exposure to new customers" as an incentive to bring your price down and/or almost work for free. I promise you that you will get very little business from an event like this. You need to find out what they can spend on dessert, and then see what you can do to make something for them AT A PROFIT. It's a business summit. They'll understand if you tell them you can't work profitably within their budget.

It's also ok to walk away from business opportunities if they simply don't make sense financially. Remember.... Your business isn't a charity. You have bills to pay just like every other business, and in fact handing opportunities like this to your competitors is a good thing in some ways. Let THEM work for free!

Cheers

Brad