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How to Price Sourdough Bread to Make a Profit | Episode 3

  • Nov 12, 2024
  • 7 min read

Updated: 4 days ago

Listen on Apple Podcasts or watch on YouTube


Most of us set our first prices by looking around. You check what the baker two towns over charges for a batard, you think about what you would be willing to pay, and you land on a number that feels reasonable. Then you bake hard for a year and wonder where all the money went.


I did that too, and it is an expensive way to run a bakery. Here is the question your prices have to answer: is the bread you are selling actually paying you? Not does it sell, but does it pay you, cover your real costs, and leave something over for your household. Here is how I calculate a price now, so you can do the same thing this week.


Step one: know what your ingredients actually cost you

You cannot price a loaf until you know what one loaf takes out of your bank account. For every ingredient you use, write down four things:

  • The name of the ingredient

  • The total price you paid for the package

  • The size of that package in grams

  • Where you bought it

Grams keep everything consistent, so when a bag is labeled in pounds, search for the conversion and enter grams. My flour comes from Costco in two ten pound bags, so I enter that as twenty pounds, which is 9,080 grams. Divide the price you paid by the grams in the package and you have your cost per gram. That number does all the work from here.


A few things I have learned doing this over and over:

  • Write down your source, and update what you paid every month or so, because ingredient prices move.

  • For sourdough starter, divide the cost of your flour by two, since starter is half flour and half water. If you buy filtered water and it is a real expense, add it in and divide the total by two.

  • Start with the ingredients in your five to ten core products. You do not need your whole menu entered before this becomes useful.

If your baking ingredients and your household ingredients still live in the same pantry, separate them now. It makes all of this far easier to pin down.


Step two: build the recipe and find your cost per unit

Now build each product on top of those ingredient costs. For each recipe you need the grams of every ingredient it uses, plus three things bakers skip constantly:

  • Packaging cost. Bags, boxes, ties, stickers, labels. Even at pennies apiece, this adds up fast across a hundred loaves.

  • Unit size. The number of items a customer gets in one purchase. For a loaf of bread that is one. For cookies it might be one, and it might also be a dozen.

  • Batch size. The number of units one recipe actually yields.

My original sourdough recipe yields two loaves and I sell them one at a time for $10. My cookie recipe yields twenty cookies, I sell a single cookie for $3, and I sell a dozen for $30. That dozen goes in as its own separate product, because I want to see the real margin on both.


Step three: read your profit margin

Your profit per unit is the dollars left after your ingredients and packaging are paid for. Your profit margin is that number as a percentage of your retail price. On a $10 loaf, $8.53 left over is an 85% margin.


That percentage is what pays you, covers your taxes, builds your savings, and buys the bigger mixer that lets you bake more in the same amount of time.


At retail, a margin in the 80 to 85% range is healthy, and a product down in the 60 to 70% range is worth your attention. That does not mean you are a bad baker. It means you had an incomplete picture, and now you have a better one.


When a product comes back with a low margin, you have real options:

  • Raise the price on that product

  • Adjust the portion size

  • Simplify the ingredients

  • Source something in bulk instead of buying small packages

  • Take it off your menu

Blueberry is my own example of that last one. I love baking with fresh blueberries in the summer, and when they are out of season and expensive, that flavor comes off my menu entirely.


Low margin products look absolutely fine on a busy week, because money is coming in and you are selling out, and they collapse the moment things get tight. If you feel stretched and tired and constantly behind, your margins are usually part of that story.


Where market research actually fits

Once you have a number your own costs support, then you go look around. In my area, bakers charge anywhere from $9 to $13 for a plain white sourdough batard, and my price sits inside that range. I am not the cheapest and I am not the most expensive.


Use what other bakers charge as a sanity check, never as the source of your number, and please do not try to be the lowest priced seller at your market. If three bakers have bread at $8, $10, and $12, most buyers assume the $8 loaf is the inferior product, whether or not it is any different.


Do not price your bread at what you would pay for it either. You are a baker by trade, so of course you would not pay a premium for something you can make at home. Plenty of people cannot, and they are glad to pay well for it.


Round the number and set it

Your cost math will hand you something like $12.34, which is awkward on a sign and awkward to make change for. Round it to $12, or to $12.50.


Once your price is set, bundles lift your average sale. If a loaf is $7, two loaves for $12 gives your buyer a reason to take the second one. A punch card works the same way, where the eleventh loaf is free after ten purchases.


Stop discounting for friends and family

If you are building a business meant to last, do not hand out discounts to your first customers or to people just because you know them. Feeling guilty about your prices will make you resent the work, and it teaches the people around you to see your bakery as something less than a real business.


The same goes for the way you say your price out loud. When someone asks how much your bread is, you tell them. "It's $12." You do not need to add that it is made with organic flour, and you do not need to apologize. Confident and clear, then stop talking. This is a muscle and it gets stronger with practice.


At one of my very first markets a man asked my price, I said $10, and he told me he would be interested in two for $10. I said very graciously that if I still had product at the end of the market he was welcome to come back, knowing perfectly well I would be sold out. That is one of the only times anyone has ever commented on my pricing, and for every one person who complains, about a hundred buy multiple loaves without a second thought. If saying your number out loud is the hard part for you, Episode 11 on embracing the value of your microbakery is the one to listen to next.


When it is time to change your price

You will almost never lower a price. It sends the wrong message to your buyer and it is usually unnecessary.


Raising is the one you will actually face. A couple of months into my bakery I realized I was undercharging on my inclusion loaves, so I bumped the price. No one batted an eye! A dollar or two is normal, and everyone already knows ingredient prices have gone up. Set the new number and keep baking. For the full walk through, here is Is it time to raise your prices in your sourdough microbakery?


Teach your customers what they are paying for

Part of pricing well is making sure your buyer understands what is in their hand, and that happens on your market signage and on social media, week after week. Tell them about the organic or local ingredients you buy. Show the hands, the hours, the fact that there are no preservatives in it. People pay premium prices for products they understand.


If you are a year or two in, run the audit

Put every product you sell through the math above and sort them by margin. You will find products you assumed were carrying the business that are not, and quiet winners you should be baking more of. My granola sits at a 68% margin, and I keep it as a supplemental product because my other margins are healthy. That is a decision made with information instead of a guess.


Then zoom out to the month. Split every dollar that comes in across owner's pay, operating expenses, taxes, savings and profit before you spend any of it. That comes from the book Profit First, and deciding those percentages ahead of time turns a busy month into money you actually keep.


Now work backwards. Pick the number you want to pay yourself this week, say $150, and use your profit per unit to work out what you would need to bake to get there. Twelve loaves plus a few packs of granola, a dozen muffins and a batch of scones might be the answer, and that is a bake plan built around getting paid.


You will hit real limits doing this: fridge space, oven space, hours in your day. A used double oven off Facebook Marketplace has solved that bottleneck for a lot of bakers, if your setup allows it. For the numbers to watch once your pricing is sorted, start with the four KPIs that bring clarity to your business, and Episode 63 on pricing, bookkeeping and tax prep pulls the whole money side together.


Final thoughts

Pricing feels tricky because so much of it is emotional, and almost none of the emotion is about math. You are not pricing to feel fair, and you are not pricing to compete with the baker down the road. You are pricing so your business supports your life. Higher margins do not make you greedy. They give you breathing room, the ability to pay yourself consistently, and a business that survives a slow month without a scramble.


Go calculate the cost of one product this week. Just one. I think you are going to be surprised, and I think you are going to feel a whole lot better on the other side of it.


Cheering you on,


Caroline


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