A cookie can seem expensive to the customer and still pay its maker very little. Once we count ingredients, packaging, and all the time spent baking, cleaning, travelling, and selling, what is left for the person doing the work? In a small community with high living costs, can a baking business generate enough income to live on? Cookie economics starts with the cost of one cookie and asks what it would take to turn good food into a viable livelihood.
Unit economics teaches us that we must account for labour costs. What hourly rate should we use in the model—the minimum wage, the wage we would pay someone to do the work, or the income we could earn elsewhere? In our cookie business, the opportunity cost of our time is the value of the best alternative we give up while baking and selling cookies, which may include wages we could otherwise have earned.
If you could realistically earn $18 per hour working as a line cook, choosing to spend those hours baking cookies means forgoing that $18—the opportunity cost of your time. If your cookie business leaves you $15 per hour after business expenses, you earn $3 less per hour than you would in the alternative job. That may still be a reasonable choice: enjoyment, autonomy, and purpose can make lower-paid work worthwhile.
The comparison only applies if the alternative paid work is actually available during those hours. In other words, if you can only work from 9 am to 12 pm or from 8 pm to 11 pm, you might not be able to find an hourly job paying minimum wage.
You do not need to “believe in your business” or think that “working harder” will make farmers’ market sales cover your monthly bills. You might choose to bake during time you would otherwise spend on leisure. In that case, you are giving up leisure rather than wages—and rest and personal time have value too. Baking may provide welcome additional income, but whether it can support you requires a separate calculation: how much remains after expenses, how many hours you work, and how much you can realistically sell.
Canada’s Market Basket Measure—its official poverty-line methodology—placed the 2023 threshold for a single person in Alberta at roughly $29,000 in annual disposable income, or about $2,400 per month, depending on location.
The question is: can we make $ 2,000 –$2,400 CAD a month by cooking and selling our product at the local farmers’ market?
So, when playing with the models below, decide what hourly rate you need to assign. It is your business, so it does not need to be an official minimum wage, but it helps to use one so you know how much you have to sell and at what price if you ever decide to do your business full time.
These materials draw on my experience teaching financial modelling in the Small Business Finance course that Judith Gingrich and I developed. I reviewed and edited the model and take responsibility for its assumptions and calculations. The figures are illustrative; replace them with costs, prices, and sales estimates relevant to your business.
Methods note: I used a paid Perplexity AI account to help prepare these materials.
Please feel free to download and use these documents.
PDF Version of Cookies Economics
Excel book – Make a copy. You can change your assumptions, recipe and unit cost details – changeable cells are highlighted in yellow.