but not quite sure which business I want to focus on when answering. Perhaps I’ll do both. I’m squarely in the service industry with both my funeral home and my cake business. One can be thought of as a necessity in some circles.
With my funeral home business I consider that while I am the only black funeral home in my area (and yes the funeral business is split on racial lines) I have to think of the economic condition of the community in which I serve. Its in a rural area first and foremost and my customer’s cant afford the price if I moved to the city where I would have about 75 different companies to compete with so my market rate differs. Not that my wholesale products take into consideration the fact that I’m in a rural community. I pay the same price wholesale as I would if I was located in Atlanta which makes pricing my goods and services very different. I admit to at times running at a deficit, but I can do that as my land and all of my buildings and cars and such are completely paid for. I run a debt free business in every aspect. I’m also in an industry where I can’t withhold my services for lack of payment so I offer and keep extensive books on payment plans. Markup for me consists of maintenance of property, taxes, employee salary and benefits, monthly upkeep- gas, electricity, chemicals, fuel, etc. I try to do everything as in house as possible, so I have a auto mechanic on staff. I’m old school -4th generation – so I’m not above bartering for my services in this area. Most of my profit though is made simply because I have a complete market share and therefore don’t have to raise my rates every time my suppliers raise their rates. I can afford to buy in bulk in many instances so I’m still operating on 2012 costs with some things. Automotive Fuel has been the biggest variable with me – it costs a lot to bring my cars back home (dead heading miles). I charge .85 cents per mile (which is above the federal reimbursement rate for instance) every time one of my cars cranks up, in addition to a flat fee for use of the vehicle. I see that many people are opting to drive themselves now versus getting in a limo. They are at least thinking about their costs which in the past-folks have just assumed that they should use a limo. My other profit comes from extending credit to my customers.
In the cake world, I’m of a different mindset. The products I sell are discretionary. Nobody needs cake…its a want and often a want people can accomplish themselves. However, I cater to a niche market – those people who cannot create a cake like I can and I charge accordingly. If I out price someone from getting a cake from me, that’s intentional, they aren’t my target market client. (This was a conscious choice I made, because this is a hobby I’ve turned professional and something I love to do without a headache or hassle.) I pick my client as they pick me and I’ve turned some people away that I just prefer not to work with on creating their cake. I’m of the impression (mistaken or not) that in the competitive cake industry in the city, people believe that the higher the price, the more exclusive the product. EVERY cake I make has a ridiculous profit margin because the people who are willing to buy my cake, are willing to pay it. Again, I take into consideration general overhead but I buy cake flour, powdered sugar and other dry ingredients in bulk – I bought 300 pounds of powdered sugar just the other day. Dairy products are a little more difficult to source and store in bulk form but I’m working on that this year. These fresh ingredients are my only fluctuating cost which I can’t control and I charge for my creativity at a ridiculous hourly rate. If I get my bakery moved to a store front and out of my basement (where its licensed), then I will buy a massive walk-in which will allow me to buy fresh ingredients in bigger quantity. I’ll need your eggs Kathryn
No the two businesses share nothing in common – I don’t even take a cake to a repast. I take that back – I’ll barter a cake as I did for my business cards and as I am doing for a revamped website.