• Kyla Kennaley

Managing your time (and costing for it, too.)


Focus:

1. How do I calculate labour cost? What is labour cost percentage and how do I use it?

2. When do I charge for my labour?

3. How do I manage sick/stress/personal time off?


1. How do I calculate Labour Cost?


Accountants do it. Lawyers do it. Why don't we do it to? Why do we sit up all night making perfect lifelike confectionary creations and charge for the ingredients but consider our time a "labour of love"?

More often than not; as bakers we fail to incorporate our labour cost accurately into the cost of production. After all; how do you charge for art?


Simple: set an hourly rate and track your actual time spent working directly on a specific task.


Have you ever calculated how long it takes to make a single sugarpaste rose? What about a perfect rendition of a boxer in a bow tie for the top of a grooms' cake?


If you have a full time business and a professional kitchen you may have a team member dedicated to the creation of flowers and figures. If you bake at home (where local cottage laws and regulations permit) you may find it difficult to calculate exactly how much time you spend on a given project. You make the petals, then let them dry overnight, assemble then let set, paint, dust and transport to cake. It is imperative that you calculate your time to accurately cost it out.



I ALWAYS REVERT TO A BASIC FORMULA FOR COSTING. IT IS OVER GENERALIZED BUT WORKS TO KEEP YOU INFORMED AS TO WHETHER OR NOT YOU ARE IN A CERTAIN RANGE OF PROFITABILITY. Often in baking specific costing the labour is much higher than the food cost. Baking food cost can run between 15% and 28%. Labour can run as high has 48%. If you are over 40% Labour Cost you are in a high risk scenario and are likely working at a financial loss.


HERE IS THE RATIO:


30:30:30:10


30% = FOOD COST

30% = LABOUR COST

30% = OVERHEAD COST

10% = PROFIT


If you have a professional kitchen and dedicated staff for production of figures and flowers you simply calculate the number of completed projects in a given shift and divide it by the number of hours in the shift. This will give you the number of units per hour.


There are usually three stages.

1. prep/shape petals or parts for drying

2. wire/glue/assemble and let dry

3. paint/finish.


Here is a 9 minute video on how to make sugarpaste roses.


Count the number of finished units per shift and this will account for your prep and give you an average per shift. Divide this by the number of hours in the shift.


EXAMPLE:

Shift: 4 hours

Completed Roses: 24 roses

Total: You make 6 roses per hour (10 minutes per rose.)


To calculate the labour cost simply divide the number of finished roses by the rate of pay per hour:

Pay rate per hour divided by number of roses per hour = labour cost per flower.

$15.00 per hour /6 roses per hour = $2.50 labour cost per rose.


Clear as the food colouring stains on your fingernails?

It is actually easier to calculate labour cost over a large volume of items than it is for single items.

At our bakery we run 8 hour shifts and at the end of the day we do a physical count of each item completed and divide it by the total labour cost to make sure we are in line with our selling price.

It does get easier as you build your business. Keep track of your labour costs/ flower and you will begin to have a chart to cost from when doing custom cakes.


Need a little break? Here is a 2 minute buttercream peony flower tutorial.


What is labour cost percentage and how do I use it?


Using labour cost percentage will help you calculate your selling price. It will also serve as a gage to make sure your costs are inline with your selling price to make sure you are running a profitable venture.

To calculate you divide the labour cost by the selling price then multiply by 100. This will give you the Labour Cost Percentage.


Let's go back to our Example:

If our labour cost per flower is $2.50 and we are charging $6.00 per rose we simply calculate

$2.50 / $6.00 = .4166667

.4166667 x 100 = 42% ( I rounded up the 41.6667%)


In this scenario the labour cost is running a bit high and I may want to adjust the selling price. How do I know that? Industry average shows that you need to keep your ratio of food cost + labour cost + overhead cost in line. Otherwise your profit suffers.


Here is the cool part. To calculate the best selling price you divide the cost by the percentage you want to hit:

Example if we are at a current labour cost percentage of 42% and we are charging $6.00 we can use percentages to set the correct price. Divide the labour cost ($2.50) by the percentage we want (40%) to get the selling price we need to charge to be profitable:


$2.50 / .40 = $6.25

Therefore we should be charging $6.25 to meet our target 40% labour cost.


Try it using a labour cost percentage of 35%. Did you get a selling price of $7.14?


Apply this method to your cake, cookie, bread and pastry items and you will be able to calculate your labour cost. Note: you will see that as your volume production goes up your individual labour cost goes down. I find that it takes the same amount of time to make one cake as it does a half a dozen.



Once you have mastered the use of percentages you can keep a tighter control on your profit margin. Afterall, we need a profit to keep our business and dream going...


2. When do I charge for my labour?


Answer: ALL THE TIME.

In Canada we include the "u" in labour. Please don't leave it out.

Direct labour cost is the total cost of production. Not just the time it takes to decorate a cake. You need to factor in:

  • the time to purchase ingredients

  • the time to prep the recipe

  • the time to set up and clean up (usually done while cooking/cooling goods)

  • the time to decorate/finish the goods

  • the time to package and deliver

Additionally, you may want to consider indirect labour costs such as:

  • the time to consult with your customer

  • the time to research and develop your recipes

  • the time to research material resources

  • the time to market your products (i.e. social media)

  • the time you spend calculating your costs and setting your prices

These costs are not calculated as your direct labour cost percentage but become part of your overhead operating costs and do contribute to your profit or loss. It is important to be aware of the overall labour you put in and make sure you are being remunerated for it ALL.


We all have a phone with a timer, a fitbit, a good old fashioned stopwatch or some other device (clock on the kitchen wall.) There is no excuse not to calculate your actual labour cost and once you make a habit of monitoring your time, you will find yourself PROFITABLY operating your dream business. After all; we love what we do and the only way we can keep at it is to make enough money to achieve our goals.


3. How do I manage sick/stress/personal time off?

I am the wrong person to ask that question to. After working in the industry for over 30 years the short answer is: DON'T GET SICK.

I am aware that this is not a bonafide answer. However, this is a very unique industry. You cannot deliver a wedding cake the day after a wedding because you had a head cold and couldn't get out of bed. You also cannot ask someone else to fill in for you because the customer has paid for your time and talent.

So what is the realistic solution?

  1. Stay healthy. Eat right. Stretch. Exercise. Get enough sleep. (really.)

  2. Schedule yourself. Days on. Days off. Do not make exceptions. In the long run; you will survive in the industry and long term profit is better than a quick buck making a last minute request for someone. Trust me. You don't lose customers by saying you are booked up. You do burn out if you do not take days off.

  3. Be prepared. When you are baking a vanilla cake; bake two. One goes in the freezer for someone's last minute "emergency." Your labour cost improves and so does your profit.

....BE PREPARED. THAT IS REALLY ALL I CAN SAY. My staff will mimic me and quote "one and a backup" this level of preparedness is key to profit and success.


HOW DO YOU STAY HEALTHY AND MANAGE WORK LIFE BALANCE?

PLEASE POST YOUR TIPS FOR STAYING HEALTHY IN THE INDUSTRY IN THE COMMENTS BELOW.


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© 2020 Kyla Kennaley