I was watching the new Victoria Beckham documentary on Netflix this weekend, and honestly, I was amazed. Her fashion label started from nothing, built respect, won awards, and boasted strong sales and gross profits. Yet it hit serious financial trouble.
Where Costs Ran Wild
One major cause? Excessive spending. According to the documentary, the company was paying £70,000/year for office plants, plus £15,000 for someone just to water them. They flew furniture across countries for shows. They ordered a huge number of fabric samples—all often with very little check on whether the cost was justified.
Because of her celebrity, her employees assumed she needed these things. The waste added up quietly. Despite seeming “profitable” by some metrics, the business was losing cold, hard cash once every cost was factored in.
Why Gross Profit Can Hide the Real Picture
At first glance, gross profit sems impressive – it’s your sales minus your direct costs (costs of making the product and labour). In Victoria’s case, gross profit looked decent. But what she (and others in her company) underestimated was how much overheads and hidden spending were eating into that.
Overheads include things like:
- Electricity
- Rent or workspace cost
- Equipment maintenance or depreciation
- Subscriptions, website fees, marketing
- Décor, sample materials, and other “nice extras”
When those costs spiral, they erode your gross profit until there’s little or no net profit left. That’s when you realise: having sales and gross profit doesn’t always mean “making money.”
Turning the Ship Around
Victoria Beckham’s team eventually took advice and got serious about cost control. They:
- Drastically reduced fabric samples
- Reined in decoration and office décor costs
- Improved sourcing (choosing suppliers and materials more carefully)
The result: leaner operations, healthier margins, and a business closer to sustainable profitability.
What This Means for Your Cake Business Pricing
If you’re running a cake business—or thinking of starting—here’s what you need to get clear on:
- COGS (Cost of Goods Sold): Your ingredients, packaging, direct labour.
- Overheads: Everything else – electricity, rent, website/hosting, marketing, subscriptions, equipment wear.
- Net Profit: The money that’s left after you subtract COGS and overheads from your revenue. This is what really shows if your cake business profit is genuine.
You can have a good gross profit but if your overheads are too high, you’re still not making sustainable profit.
Why Knowing All Your Costs Is Essential
Understanding where your money goes is the difference between a business that just “looks” profitable and one that is profitable. You’ll be able to:
- Spot waste and unnecessary costs
- Set prices that actually cover everything you do
- Avoid burning out with no return for your effort
- Build profit that sustains the business long term
Coming Soon: The Business of Cake: Simplifying the Business of Pricing
If you want help doing this well (tracking costs, pricing correctly, understanding overheads, making real profit), then keep an eye out for my book The Business of Cake: Simplifying the Business of Pricing. It goes deep into what Victoria Beckham was up against—and gives you tools to avoid the same pitfalls.
👉 Join the waitlist to get early access and early bird pricing.
