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The custom cake business had changed A LOT since I started doing cakes 20 years ago. Last year I did a three-part series that predicted where I thought the industry was going, and unfortunately I think it was pretty accurate. (Click here for part 1, part 2 and part 3.)
I don't have much to add to that gloomy forecast other than to say that things are pretty much continuing in the direction they were headed at the beginning of last year. I know of at least 4 local cake businesses that have closed in the past year, plus many more that I've seen in other areas, and that's of the established ones, not the fly-by-nighters. The market is glutted with cakes that people are selling for rock-bottom pricing because they're not paying attention to the business side of it, and are basically recouping their costs (if that) instead of making a profit.
There are also more people who have transitioned their businesses toward more teaching as opposed to actually making cakes, which I also wrote about last year. If you think about it I'm sure that you can come up with five or six "famous" decorators who don't actually sell cakes at all, they just run cake decorating schools online or teach at conventions. No shame in that game, but it does show that the market for custom cakes isn't what it's cracked up to be.
Personally, I'm doing fewer cakes because after 20 years my back is starting to give out and I'm not interested in surgery. I have my minimum in place so that the cakes I do will be more profitable and avoid the little time-sucker cakes that don't pay as much as larger ones. I'm doing more online sales and writing, and I'll be working with American Cake Decorating magazine this year on a series of business articles, so watch for that.
For the upcoming year, I'm thinking that wedding cakes will continue to be the money-maker as far as custom cakes go, but with a twist, more on that below. Smaller custom cakes just aren't going to be as profitable as they were because of the number of people making them. Because of that, you'll need to have a good strategy or an established business that's kind of seen as a local institution to make a decent profit.
People who make only custom birthday cakes and that kind of thing are going to run into the issue of the "facebook pricing club," where people expect the lowest price for everything and shop based on price alone. It's going to be hard to fight that, so you'd better get a good marketing plan in place. One that DOESN'T include posting on Craigslist.
As far as wedding cakes go, that's where you're going to be able to make money, as long as you price them correctly. Charging $150 for a three-tiered cake isn't going to cut it, so get my pricing guide and make sure you're charging correctly. The twist that I mentioned above, though, is that the traditional wedding cake is going to have to share the stage with different desserts. Cupcakes, dessert buffets, and even pies are options that people are using more often for their wedding receptions, and you'd better be ready for it.
Increasing your menu is going to be important in upcoming years for both wedding cake decorators and people who don't do weddings. Some good books to get on this subject would be the ones by Mimi Fix, especially Home Baking For Profit. (Click here for the book: Home Baking for Profit ) Expanding your line of available products can give you the edge when it comes to booking a wedding, since brides will be more likely to hire someone who can provide an array of goods instead of just a cake as multiple desserts becomes a more common option.
Having said that weddings are where the profits will be, I'll add that you'll still have to do a lot of cakes to make a decent living. The overall profit per wedding cake isn't as high as people think, once you take all of the time spent on marketing and paperwork into account. So keep that in mind when planning your year (And have you downloaded my free 2016 planning guide yet? Go do it now if you haven't.)
The last thing I'll say about the upcoming year is that the downward trending prices are probably not going to stop any time soon. As long as there's a social media platform for people to post a picture of a five-tiered cake and ask who can do it for the cheapest price, there will be people willing to do it for the cheapest price.
If you want to run an actual business, you should take a real look at your local market and be realistic about what you need to do to fit into the new reality of whatever is happening on your area. Because things aren't what they used to be, and your business will need to adapt to survive and thrive in 2016.
Kara Buntin owns A Cake To Remember LLC, online cake supplies at www.acaketoremember.com and www.acaketoremember.etsy.com