The minimum selling price is the lowest price at which you're still profitable. Many bakers estimate their prices, which causes them to unknowingly lose money on bread, pastries or cakes. In this article you'll learn step-by-step how to calculate a minimum selling price that protects your profit.
Why set a minimum selling price?
Without a minimum selling price, you're working for nothing. You pay for ingredients, energy, staff and rent. If your selling price is too low, you lose money on every croissant or cake you sell.
⚠️ Watch out:
Many bakers think: "If I'm cheap, I'll sell more." But selling more at a loss means more loss. You can't be cheap and stay profitable.
The formula for minimum selling price
The basic formula for any minimum selling price is:
Minimum selling price excl. VAT = Cost price / (Desired margin % / 100)
Then you multiply by 1.09 for the price including 9% VAT.
💡 Example: Croissant
Cost price per croissant (ingredients + energy + labor):
- Ingredients: €0.45
- Energy (oven): €0.15
- Labor (15 min at €18/hour): €4.50
Total cost price: €0.45 + €0.15 + €4.50 = €5.10
Desired margin: 65%
Minimum price excl. VAT: €5.10 / 0.65 = €7.85
Minimum price incl. 9% VAT: €7.85 × 1.09 = €8.56
Which costs do you include?
For a correct cost price, you add up ALL costs you incur to make the product:
- Ingredients: Flour, butter, eggs, yeast, salt, sugar
- Packaging: Bags, boxes, stickers
- Energy: Oven, cooling, lighting (per product share)
- Labor: Time to make × hourly wage
- Overhead: Rent, insurance, depreciation (per product share)
💡 Example: Birthday cake
Cost price for a cake serving 8 people:
- Ingredients: €12.50
- Packaging (box): €2.00
- Labor (2 hours at €20/hour): €40.00
- Energy (oven 1 hour): €3.50
- Overhead (rent etc.): €8.00
Total cost price: €66.00
At 60% desired margin: €66.00 / 0.60 = €110.00 excl. VAT
Selling price: €110.00 × 1.09 = €119.90 incl. VAT
What margin percentage is realistic?
For bakeries, typical margins are:
- Bread and basic products: 60-70%
- Pastries and cakes: 55-65%
- Specialties: 50-60%
- Coffee and drinks: 70-80%
The lower your margin, the more you need to sell to make the same profit. A margin of 40% means you need to sell almost twice as much as at 70% margin.
⚠️ Watch out:
Always calculate first excl. VAT and then add 9% VAT. Many entrepreneurs calculate incorrectly and end up with a selling price that's too low.
Competition and market price
Your minimum selling price isn't always your final selling price. Sometimes you can charge more, sometimes you need to choose strategically:
- Above minimum price: Specialties, unique products, prime location
- At minimum price: Standard products in competitive market
- Below minimum price: Only as a loss leader (to attract customers)
💡 Example: Strategic choice
Your minimum price for a sandwich is €3.50. Your competitor charges €4.20. You can charge €4.00 and still earn well. That extra €0.50 per sandwich means at 200 sandwiches per day €36,500 extra profit per year.
Digital tools
Calculating cost prices manually takes a lot of time. Especially when ingredient prices change or you introduce new products. An app like KitchenNmbrs automatically calculates your cost price and minimum selling price as soon as you enter the ingredients and quantities.
This saves you hours of work per week and prevents calculation errors that cost you money.
How do you calculate a minimum selling price? (step by step)
Calculate your total cost price
Add up all costs: ingredients, packaging, labor time (hours × hourly wage), energy and a share of your overhead (rent, insurance). Don't forget anything, not even small amounts like salt or vanilla extract.
Determine your desired margin percentage
Choose a realistic margin percentage for your product type. For bakeries this is usually between 55-70%. The more specialized your product, the higher your margin can be.
Calculate minimum price with formula
Divide your cost price by your desired margin (as decimal). For example: €5.00 cost price at 65% margin = €5.00 / 0.65 = €7.69 excl. VAT. Add 9% VAT for the final price: €7.69 × 1.09 = €8.38.
✨ Pro tip
Check your 5 best-selling products every month. If your cost price rises but your selling price doesn't, you're losing profit without noticing. A difference of €0.10 per product can mean thousands of euros per year at high volumes.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Should I include VAT in my cost price calculation?
No, you always calculate VAT separately. First calculate your minimum price excl. VAT, then add 9% VAT for the final price. VAT is not a cost item but a pass-through item to the tax authority.
What if my calculated price is higher than the competition?
Then you have three options: accept a lower margin, find ways to reduce your costs, or position your product as premium. Selling below cost price is not a sustainable strategy.
How often should I recalculate my minimum prices?
Check at least monthly whether your ingredient prices have changed. With major price increases from suppliers, you need to recalculate immediately. Many bakers lose money because they wait too long to adjust prices.
Can I use different margins per product?
Yes, that's actually smart. Basic products like bread can have a lower margin (60%), while specialties can carry a higher margin (70%+). Just make sure each product at least covers its costs.
How do I calculate labor time per product?
Measure how much time you spend making one batch. Divide this by the number of products in that batch. Multiply by your hourly wage (including social contributions). For complex products, it's best to track this for a week.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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