The 50-Cent Wake-Up Call: How One Bakery Turned Losses Into Profits
Keegan's chocolate chip cookies always fly off the shelves at The Lakehouse Bakery. Customers love them, and they’re a bestseller. It’s the kind of product every small business dreams about.
But there was just one problem: each cookie made only 50 cents in profit.
Think about what that means. Selling 100 cookies a week sounds impressive until you realize that's just $50 in actual profit from a star product. "I had a ballpark idea on costs," Keegan recalls, "but once I had it pinpointed, the world changed for us."
That pinpointing was a thorough pricing analysis, and it became the turning point that transformed The Lakehouse Bakery from losing $20,000 in one year to becoming solidly profitable just two years later.
When "Busy" Doesn't Mean "Profitable"
Here's the trap many small business owners fall into: you're working hard, customers are coming through the door, products are selling—so things must be going well, right?
Hmm, not necessarily.
Without truly understanding your costs, you can be busy all day and still lose money. The Lakehouse Bakery looked successful from the outside, but the numbers told a different story.
Understanding Your Real Costs
The first step in any pricing analysis is getting brutally honest about what things actually cost. This means more than just the flour and sugar—it's everything:
Fixed Costs: Rent, utilities, salaries, insurance—the expenses that stay constant whether you sell 10 items or 1,000.
Variable Costs: Ingredients, packaging, marketing, supplies—costs that change with production.
The Hidden Costs: Owner’s labor time, advertising, waste, administrative tasks—the things most business owners underestimate or ignore entirely.
Keegan and his dedicated team spent weeks analyzing over 100 products, treating labor and overhead as actual "ingredients" in the cost calculation. The process revealed multiple products with minimal profit margins—items that felt successful but were actually draining resources.
Tip: How do you know if you've captured everything? Check your profit and loss report. Your pricing analysis totals should match your P&L totals. If they don't, you're missing something.
Making the Hard Decision
Once Keegan had the real numbers, the path forward became clear—even if it wasn't easy. With costs rising across the board, there was no choice but to adjust prices accordingly.
The Lakehouse Bakery didn't test the waters with small increases on a few items. They "ripped the bandage off" with comprehensive price adjustments across their product line. The team worked to craft the right message explaining the changes to customers.
The result? Not one customer complained.
In fact, sales increased an average of 20% year-over-year for the next few years.
From Value to Premium (Where They Belonged All Along)
Perhaps the biggest shift wasn't in the prices themselves—it was in mindset.
"Shifting from being a 'value' bakery to a 'premium' bakery was challenging," Keegan explains. "But that's exactly what we are—premium ingredients to make premium products. People are more than happy to support a small local bakery that provides a premium product."
This is the lesson many small business owners need to hear: customers aren't always looking for the cheapest option. They're looking for value. Quality is something worth paying for.
When you're delivering premium work with premium materials, pricing like a discount provider isn't just leaving money on the table—it's sending the wrong message about what you offer.
Staying on Top of It
Pricing analysis isn't a one-time project—it's an ongoing practice. Keegan has built regular reviews into his operations:
Every six months: re-evaluate the top 50 core ingredients
Once annually: comprehensive review of ALL ingredients and packaging
Regular check-ins with his accountant (That’s us!) to ensure labor and overhead calculations remain accurate
This diligence paid off dramatically when commodity prices fluctuated. When chocolate prices surged 600% in 2024, Keegan's detailed cost knowledge enabled quick, informed pricing adjustments.
The Bottom Line
The Lakehouse Bakery's transformation shows that sometimes the biggest risk isn't raising prices—it's continuing to undervalue the quality work you're already doing.
A pricing analysis might sound like a small, technical exercise. But for Keegan, it was the difference between losing $20,000 and building a sustainably profitable business. It gave him clarity on which products truly drove profitability, the confidence to price appropriately for the quality he delivers, and the agility to respond when market conditions shift.
If you're working hard but not seeing the financial results you expect, the problem might not be your product, your marketing, or your work ethic. It might simply be that you don't know your true costs—and you're not charging accordingly.
That's where strategic accounting guidance comes in. Working with a CPA who understands small business operations can help you uncover the real numbers, make informed decisions, and build a pricing strategy that supports profitability.
Sometimes all it takes is knowing what that chocolate chip cookie really costs.