· By Kaley Hassell
How to Price Cookies for a Home Bakery
One of the questions I get from other bakers pretty regularly is some version of, “How did you decide what to charge for your cookies?”...and I completely understand why. Pricing can feel SO uncomfortable, especially when you look around and see another baker charging $4 for a cookie you were thinking needed to be $7.
I recently had someone ask me specifically about our half-pound stuffed cookies because of the general pricing rule of $1 per ounce; understandably feeling like $8 for an 8oz cookie would be really high for her area. It got me thinking about how we actually priced our cookies, because although it is a pretty standard practice in the cookie world and a decent starting point, I never strictly followed a per-ounce rule. The size of our cookies absolutely helped customers understand the value of what they were getting, but that was never the thing that determined the price.
I priced them by figuring out what they actually cost us to make, making sure I was paying myself for the work, accounting for overhead, and leaving profit for the business. That sounds painfully obvious, haha, but there is quite a bit hiding inside the phrase “what it costs to make,” and it took me some time to really start treating all of those pieces like a business instead of just looking at the ingredient cost and hoping the rest worked itself out.
We didn’t always price our cookies this way
When we first started, every cookie we sold was $5.50. Chocolate chip? $5.50. More expensive bakery-style flavors? $5.50. Stuffed cookies with an entire additional component inside? Also $5.50. 😂
Eventually, as I started paying much closer attention to our numbers, I realized that didn’t make a ton of sense. Different cookies had very different costs to produce, and there was no reason they all needed to have the exact same price. Our pricing eventually settled into a pretty simple structure: our 6oz chocolate chip cookie was $5, our other 6oz large bakery-style drop cookies were $6, and our stuffed cookies, which were generally around half a pound each, were $7.
Chocolate chip was by far one of our least expensive cookies to produce, and it was also consistently one of our best sellers. We could buy chocolate chips at a good price, there were no additional fillings or components to make, and I could make a LOT of chocolate chip dough at once in our large mixer. I was perfectly happy having that cookie at $5 because the numbers worked beautifully. The extra dollar on our other bakery-style cookies gave me more room for the more expensive mix-ins those flavors required, and the additional $2 on the stuffed cookies helped cover whatever ridiculous thing I had decided to put inside one that week. 😂 Cake balls, brownies, cookie butter, Nutella, peanut butter fillings...you get the idea.
But, I didn’t arrive at those prices just because $5, $6, and $7 sounded good. I actually ran the recipes through the numbers first.
Want to make the cookies we actually sold?
I’ve taken many of our bakery recipes and turned them into detailed digital recipes you can make at home or add to your own bakery menu. I built these recipes with profitability and production in mind. You can browse all of our stuffed cookie recipes here and our 6oz bakery-style cookie recipes here.
I ran every recipe through CakeCost
One of the tools I used in our bakery was CakeCost. You load the ingredients you actually purchase into the program, including how much you paid and the size of the package, and then you build your recipes using those ingredients.
So, for example, if I bought a certain size bag of flour for a certain price, I entered that information. Then when I built my chocolate chip recipe and told CakeCost that one batch used 440 grams of flour, it calculated exactly what those 440 grams cost me. I did this with everything. Flour, brown sugar, white sugar, cornstarch, eggs, butter, vanilla, chocolate chips, even the individual cellophane bag the finished cookie went into.
Then I told CakeCost how many cookies that recipe actually produced. My chocolate chip recipe made eight cookies per batch, so once the entire batch was costed, I could see what each individual cookie cost us to produce. I would also go back through my ingredient prices every few months and update them because butter changes, eggs change, flour changes, sugar changes...and the beautiful calculation you did a year ago doesn’t help much if everything you’re buying now costs more.
For one of my actual chocolate chip batches, the ingredients and packaging came to $10.02. I had $5 of labor assigned to that batch and $2 of estimated overhead, which brought the total cost to $17.02. I had CakeCost set to add 50% profit on top of that, which brought the target batch revenue to $34.04, or $4.26 per cookie.
We charged $5.
That gave us some additional breathing room for taxes and all of the little things that inevitably exist in a business, while still giving our customers a giant six-ounce chocolate chip cookie for five bucks. More importantly, I knew exactly what was happening behind that price. I wasn’t charging $5 because another bakery did or because somebody online told me a six-ounce cookie should be $5. I knew what it cost us to make and I knew the numbers worked for our business.
Make sure you are actually paying yourself
Labor is one of those things I think can be really easy to underestimate when you are the one doing the work. For the chocolate chip example, I only assigned $5 of labor to one batch because I wasn’t standing there making one batch at a time. By that point I made eight batches at once in our large mixer, and chocolate chip didn’t require an additional filling or stuffing step, so it was incredibly efficient for us to produce.
If you aren’t sure how long something actually takes you, time yourself. Seriously. We are VERY good at convincing ourselves something “only takes a few minutes” while somehow losing an hour to it. 😂 Figure out what you want or need to be paid per hour, pay attention to how much time is actually going into the production, and include that in the cost of the product.
Overhead can be a little trickier, especially when you’re working from home. When I had our commercial bakery with rent, employees, utilities, and all of the expenses that came with operating a physical location, our overhead was obviously very different. At home it was much lower, but it was still there. I estimated things like power and the other costs associated with production (ie: parchment sheets, dish soap, etc), and I actually preferred to estimate a little high rather than pretend those expenses didn’t exist.
This was probably one of the biggest mindset shifts for me as we grew. Covering your ingredients is not the same thing as having a profitable business. Your price needs to cover the product, pay you for making it, account for the expenses involved in running the business, and still leave something behind for the business itself. Otherwise you can be incredibly busy, sell a lot of cookies, and somehow have no idea why it never feels like you are getting ahead.
Don’t forget all the tiny things
There are also a million little expenses that don’t feel expensive until you use thousands of them. The bag your cookie goes into costs money. So does the sticker. We included care cards with our orders, so those had a cost. We baked on parchment sheets, went through paper towels, and used all kinds of other disposable supplies that I considered part of overhead.
If you’re selling at markets, you have booth fees. If you’re accepting cards, you have processing fees. If you wholesale, you need to understand what happens to your numbers when the selling price is lower. None of those things individually feel like they are going to sink your business, but they still need to exist somewhere in the math.
You don’t have to make this insanely complicated, but I do think you have to be honest with yourself about what it actually costs to produce and sell the cookie. If you leave half of the costs out of the calculation, the price can look wonderfully profitable on paper while the actual business is barely making anything.
Better ingredients may not cost as much per cookie as you think
This was something I learned that surprised me a little. We used really good ingredients in our cookies. I bought local flour, used organic sugars, real butter, organic non-GMO cornstarch, and good chocolate. Whenever we could use local or higher-quality ingredients and the numbers made sense, I loved doing that.
It is really easy, though, to stand in a warehouse store looking at two bags of flour and think, “Absolutely not. That organic flour is twice as expensive.” But I would encourage you to actually run the ingredient through your recipe before deciding.
As an example, a 25-pound bag of basic all-purpose flour at Sam’s Club is $10.98. Two 10-pound bags of Kirkland organic flour at Costco are around $18.99. That sounds like a very substantial difference when you are comparing the bags, and it is. But my chocolate chip recipe uses 440 grams of flour. At those prices, the conventional flour would cost roughly 43 cents per batch while the organic flour would be around 92 cents.
That is about a 50-cent difference for the entire batch, and that batch makes eight cookies.
So now we are talking about roughly six cents more per cookie.
I’m not saying everybody needs to go buy organic flour. Use the ingredients that make sense for your bakery, your product, and your customer. My point is that I don’t think you should automatically assume you can’t afford a better ingredient because the package looks dramatically more expensive on the shelf. Put it into your costing program and see what it actually does to the finished cookie.
You may decide that an additional six cents per cookie is absolutely worth it for an ingredient you feel good about using, especially if ingredient quality is part of what differentiates your bakery. You may run the numbers on another ingredient and decide it is absolutely NOT worth it. That’s okay too. At least you are making the decision with actual information instead of assuming.
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Not every cookie had to have the exact same profit
Some of our cookies were simply more profitable than others. Chocolate chip was a fantastic example. The ingredients were relatively inexpensive, I could buy the chocolate well, there weren’t extra components to make, and production was incredibly efficient.
Then there were some of my more...creative decisions. 😂
Sometimes I would come up with a cookie I REALLY wanted to bring to market, run it through CakeCost, and discover that my profit on that cookie wasn’t going to be anywhere near what I made on chocolate chip. I was sometimes completely fine with that. Maybe it was a flavor I knew our customers would love, maybe it would photograph beautifully and get attention on social media, or maybe it was part of a themed menu and I thought it completed the collection.
I didn’t need every single product in the case to have an identical profit percentage. Some of our cookies were around that 50% range in CakeCost, while others might land closer to 20 or 30%. What I did have was a hard line that the cookie itself still needed to make financial sense for us to produce.
If the ingredients, packaging, labor, and overhead meant I needed to charge an amount I genuinely didn’t think people would pay, sometimes the answer was simply that we shouldn’t make that cookie.
There were also plenty of ways I learned to bring production costs down without making the product worse. I bought ingredients in bulk when it made sense. Webstaurant was great for things we used constantly like cookie butter, chocolate, and other bakery ingredients. We made our brownies, cakes, cake balls, and other components from scratch, and I would make larger batches of fillings at once, portion them, and freeze them for future production.
That mattered because efficiency changes your labor cost too. A brownie filling is a lot more expensive from a labor standpoint if you are making a tiny batch every single time you need six portions of it.
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But what if people in your area won’t pay $7 or $8 for a cookie?
This is the question that actually inspired me to finally write this article, and I think this is where pricing gets a little more nuanced because I absolutely believe your market matters.
We sold at markets all over the Phoenix area, and I knew there were certain markets and demographic areas where customers were more comfortable spending money on a premium specialty product. If we were going somewhere where I knew that wasn’t necessarily the case, I changed what we brought.
I might bring more of our $5 and $6 drop cookies and fewer of the elaborate $7 stuffed cookies. What I would not do is take a cookie that needed to be $7 for the numbers to work and arbitrarily charge $5 because I didn’t think that area would pay $7. My ingredients didn’t suddenly cost less because I drove to a different market. Neither did my labor.
If the market you are selling to truly won’t support the price your product needs to be, I think you have to look at the product itself. Maybe an eight-ounce stuffed cookie is not the right product for that market. Maybe a four-ounce cookie makes more sense. Maybe the menu needs fewer expensive components. Maybe you need a different market for that particular product.
But “people here won’t pay that much” does not make the actual cost of running your business disappear.
Make sure people understand what they are paying for
We regularly sold alongside bakers whose cookies were less expensive than ours, but often their cookies were also smaller. Four ounces is a very common cookie size and still looks like a substantial bakery cookie, so a customer might walk by another booth and see a $4 cookie and then come over to ours and see $5, $6, and $7.
We always tried to make sure people understood what they were actually looking at. Our stuffed cookies were around half a pound each, and we talked about that. We told people they could share them, cut them up, or freeze part for later. Our market display showed the cookies cut open so customers could see the fillings inside, and we talked about the premium and local ingredients we used whenever we could.
That didn’t mean every person thought our cookies were worth $7. We got some mild pushback here and there, but honestly, not enough that it ever made me question the pricing. It was quite rare. A lot of people who tried the cookies came back and had absolutely no problem paying for them.
At some point I had to become comfortable with the fact that someone who did not want to spend $7 on a giant stuffed cookie simply was not our customer. I couldn’t build the financial side of the business around convincing every person who walked by that our cookies should cost what they do.
We actually tested $8 stuffed cookies
For awhile we increased our stuffed cookies from $7 to $8. Financially, of course, I loved the additional dollar, haha, but we noticed something interesting in how people bought.
At $8, customers seemed to become much more selective. Instead of grabbing several flavors they wanted to try, there was more of a “Okay...which ONE do I want?” mentality. When we went back to $7, people seemed much more comfortable buying multiples, and our average order value was better because of it.
I can’t tell you that $7 is some magical psychological price for stuffed cookies. Your market may happily pay $9. Another market may struggle at $7. What I can tell you is that we tested it with our actual customers, paid attention to their buying behavior, and chose the price that worked better for our bakery while still making financial sense for us.
That is ultimately why I think the math and the market have to work together. Your costs tell you what you can realistically afford to charge, and your customers tell you how they respond to that price.
If you handed me an eight-ounce stuffed cookie today...
...and said, “Kaley, what should I charge for this?” I wouldn’t look at it and immediately say $8 because it weighs eight ounces.
I would sit down with you and figure out what is actually in the thing. What ingredients are in the dough? What do those ingredients cost you to buy? What is inside the cookie? How much does that filling cost? How many cookies does the recipe actually make? What are you putting the finished cookie in? How long does it take you to produce it? What do you need to pay yourself for that time? What overhead does the business need to cover? And after all of that, how much profit are you leaving for the business?
Then I would look at the resulting price and ask the next question: will the customer I am trying to sell this to pay that?
Sometimes I think bakers are afraid to do the first part because they are worried about what the number is going to tell them, but I actually found it freeing. Sometimes I would create this elaborate cookie that felt like it must cost a fortune to produce, put everything into CakeCost, and realize...oh. This is actually completely reasonable. Other times the numbers told me an idea was not worth bringing to market.
Both answers are useful.
If you want to offer box pricing or discounts for buying several cookies, knowing these numbers becomes even more important because you can decide ahead of time how much room you actually have to discount. We generally sold our cookies individually and did not rely heavily on bundle deals, but if that is part of your business model, I would still cost it intentionally instead of making up a six-cookie price because it sounds like a good deal.
The goal is not to find the highest possible number you can convince someone to pay. It is to find a price that makes sense for the product, makes sense for your customer, and still allows the business you are working so hard to build to actually be profitable.
I started our bakery because I loved baking. I certainly did not start it because I was dying to calculate the cost of five grams of cornstarch. 😂 But learning to look at these numbers changed the way I thought about our products, and it gave me so much more confidence in our pricing because I knew exactly why a cookie cost what it did.
Your cookie can be delicious, beautiful, and wildly popular, but if you are paying for the privilege of making it every week, eventually that is going to catch up with you. Run the numbers, pay yourself, leave profit for your business, pay attention to what your customers actually do, and don’t be afraid to change the product or the price when something isn’t working.
And if the numbers still leave room for the weird cookie you really want to make...I’m obviously going to tell you to make the weird cookie. 😂
**Even though I’m talking specifically about cookies here because that’s what we sold, the same basic process applies to other bakery products too. Cost the ingredients, packaging, labor and overhead, know your real yield, leave room for profit, and then make sure the final price actually makes sense for the market you’re trying to serve.