I had a viewer post a question on a youtube video about pricing, and I thought it was worth repeating the answer here since it's a topic that everyone can relate to. (So much so that it takes up a section in my book on running a home-based business.)
Here's my response: You're going to get a lot of resistance if they're used to getting free cakes, but I have no doubt that they don't know how much time and expense goes into making a cake. If you sell cakes to other people and have a price list, I'd let people know that you're changing to this:
1. They get the cake from you and you give them a 25% family discount and that's their birthday present.
2.They get a cake somewhere else and a regular present from you.
3. They pay you full price and get a regular present from you.
4. If it's adults who don't give each other presents, they get a 25% discount if they want a cake from you.
WHEN (not if) they pitch a fit and say that you're greedy and mean, remind them that when you make a cake for free you're losing time and money that you could be using to make a cake for a paying customer, and you can't afford to do that anymore, and that's not being greedy, it's supporting your family.
When they say that you're family so you should be willing to do it for free, remind them that yes, you're family, so they shouldn't ask you to do something that they know will make it more difficult for you to pay your bills. Or something that will take time away from your family, or whatever it is that making cakes does to you.
Remember that family and friends are your worst customers, and that you'll find out who your REAL friends are when they have to start paying you for your work. They might also decide to "punish" you by getting a grocery store cake. This is pretty common, and you shouldn't take it personally. It only means that they either can't afford your cakes, which is fine, or they're trying to be passive-aggressive and "teach you a lesson." But all it teaches is that you can have a day off from working for free. And that's never a bad thing.
My rule of thumb is that the only people who get free cakes when they ask for them is the person who gave birth to me and the people I gave birth to. If I want to make a free cake for someone AND I OFFER, I get to decide on everything other than flavor. If someone ASKS me for a cake they're placing an order, and the rules I outlined in my other reply apply.
Kara Buntin owns A Cake To Remember LLC, online cake supplies at www.acaketoremember.com and www.acaketoremember.etsy.com