Top-Down Pricing Method
The first step to determining your pricing is to compare the pricing data you compiled in your competitive survey. Make sure that you're comparing similar services. Try to pick caterers that are close to your concept and your type of catering. You'll be able to tell which caterers are similar to you by comparing their menu prices to yours and by comparing their service fees to yours.
It's important to study how caterers in your area price themselves. Make a spreadsheet and track the answers to these questions for each competitor:
How much do they charge for serving staff?
How much is an additional server?
How much is a bartender?
How much do they mark up outsourced products like liquor, specialty cakes, and ice sculptures?
Do they charge a fuel surcharge for jobs more than twenty miles away?
What extra fees do they charge?
Once you know how other caterers charge, you can make an educated decision about how and what you want to charge. Depending on your marketing strategy, you'll want to either be priced competitively with your colleagues or priced above them if you're planning to offer a more premium catering service.
If you are trying to premium price your services, charge at least 20 percent more than the average price of your direct competitors. This alerts customers that you intend to provide superior service, and you will still be in your target audience's price range.
There's no simple mathematical formula to follow for calculating the exact price of your catered meals. The cost of each ingredient you use is quantifiable; you pay an exact amount for thirty-six chicken breasts, for example. The other costs associated with catering are not as tangible. You must also figure preparation labor and transportation into your calculations, but the fixed dollar amount you choose to charge for these components is subjective — and so is the final price you charge your clients. The right price exists between the cost of your materials, labor, and overhead, and what the market will bear. An efficient way to calculate this is to find comparable sales and determine what services in your area can command.
The only labor cost that should be included in your menu costings is the labor that is required to make, or prep, a certain menu item or dish. The labor to serve the menu item or to run a buffet is billed to the client on a separate line item of your bill.
Often, like a consultant, you need to convince your client that you are worth the fee you command. Once you show your client what you can do, he'll gladly pay the fee you request.