The Myth of ‘3X Pricing’
"Price is what you pay. Value is what you get." — Warren Buffett
Introduction:
Pricing your food products can feel like a guessing game, especially when you hear advice like “just charge three times your costs.” It sounds easy and foolproof, however relying on a simple 3X multiplier can actually leave you underpaid and overwhelmed. I can also promise you that no large caterer is using this rule, so why would you? In this post, I’ll break down why the “3X rule” doesn’t work for most small food businesses, what costs you might be missing, and how to set smarter prices that actually pay you and help your business grow.
The Myth of ‘3X Pricing’: Why Tripling Your Costs Doesn’t Guarantee Profit
If you’ve been in the food business for even a little while, you’ve probably heard someone say, “Just charge three times what it costs you to make it.” It’s catchy, it sounds smart, and honestly, it’s super tempting. But here’s the truth: the “3X rule” often sets you up to work harder for less money — and that’s no fun for anyone.
So, What Is This “3X Pricing” Anyway?
Basically, it means you take the cost of your ingredients and packaging, multiply it by three, and boom — there’s your selling price. Sounds easy, right? But here’s the catch: most people don’t even get the cost part right. Maybe you spent $35 on materials but only used $12 for that one batch without another batch needed on the horizon to use the extra stuff. Or maybe you forgot to include packaging or labels. So, your starting number is likely to already be off.
Why Do So Many People Stick to 3X?
It’s simple. It’s quick. It feels like a rule you can follow without doing a ton of math. And honestly, pricing can be confusing! A lot of food makers just match what their competitors are doing or hope that tripling the cost will magically cover everything — order costs, overhead and pay themselves. Spoiler alert: it usually doesn’t.
The Big Problem With 3X? It Doesn’t Cover Your Time
The idea behind 3X is that one-third of your price covers the order food cost, one-third goes toward business overhead, and one-third goes to labor. But if you have employees or subcontractors, or if your products take a lot of time and effort beyond the material costs, that math just doesn’t add up. You might be working tons of hours and still not paying yourself fairly or even at all. A baker that is making an elaborate dessert table is not accounting for the hours they likely put in decorating if they are only accounting for supplies. Imagine making 300 custom cookies for an event. Each cookie takes 2 minutes to decorate and package. That is 600 minutes - 10 hours - of decorating. The cost of supplies is $1.00 per cookie. If you do 3X, that cookie order price would be $900. Sounds great! Cha-ching!!! But let's look at where it all goes now.
Sales Invoice: $900
Costs: $300 material
$300 towards overhead
$300 towards labor (10 hours for decorating, 3 hours for baking, 2 hours for client management, 2 hours for cleanup. 1 FTE fully utilized for 18 hours on this one order. So if you do the math just over $133 for a full day's work would go to the person doing the work. Chances are it is you and your day is not 8 hours and that because of taxes you don't even get to use all of that to pay yourself.
Real Talk: When Does 3X Work — and When Does It Fail?
If you’re flying solo, making simple items that don’t take a lot of hands-on time, maybe 3X is close enough. But if you want to grow or even just relax more, your 3X price probably won’t cut it. As soon as you hire someone else, that one-third that was going to labor is going to cover the additional staffing. And that is also likely to mean that there is little to nothing left to pay yourself! Yikes! If everyone priced this way, you would see any business that can afford to buy from a wholesaler automatically beat the little guy that still needs to buy their supplies marked up at the grocery store.
Price Isn’t Just About Cost — It’s About What Makes You Different
Maybe you can’t compete with others on price. That’s okay! Your strength is in what makes you unique — maybe it’s your vegan options, your killer customer service, or your special family recipe. Know what that is, shout it from the rooftops, and make sure your prices reflect the unique value you bring.
Portion Sizes Matter More Than You Think
Ever eyeballed your portions? You might think you’re saving money, but you’re probably giving food away — which adds up fast. When you measure and know exactly what goes into each product, scaling up and pricing accurately gets a whole lot easier and provides control.
So How Do You Actually Price Smart?
That’s where Seize Your Menu comes in. It’s built for small food businesses like yours — people who love making amazing food but don’t want to get buried in spreadsheets or complicated math. Our CaterCalc Lite software helps you track every cost, including labor and overhead, so you can set prices that actually pay you what you deserve.
Yes, there is setup involved to get you going, but once you are there, you will simply love the insight you have available into automatically pricing correctly. We will walk you through getting one of my family's favorite salsa recipes into CaterCalc Lite and then we have a 30-Day Success Track to get you fully functional without overwhelming you. We even help you get a monthly planning rhythm going so that you are always ready to update your menu with seasonal specials to take advantage of changing seasons and holidays to boost your sales and leave the slow months behind.
And the best part? This is a one-time purchase — no subscriptions, no monthly fees. You get lifetime access to a tool that grows with your business and helps you make smarter pricing decisions every day.
Ready to ditch the 3X guesswork and start pricing with confidence?
Check out our options today and take control of your profits!
Start with our free Seize Your Goals course to help you actually set goals for your business that make sense.
