ImagesMagUK_Digital-Edition_January2018

£££££££ £££££££ ££££££ ££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££ ££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££ ££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££ www.images-magazine.com JANUARY 2018 images 107 BUSINESS DEVELOPMENT finishing. The conventional wisdom is that most shops only manage an average of 500 stitches per minute. Therefore, each hour only allows for 30,000 stitches when including these other tasks. In this case, you can price based on units of 1,000 stitches. With the average assumed, we can only expect to execute roughly 180 ‘thousands’ per head, per day, meaning we have roughly 45,180 ‘thousands’ per head, per year. If we divide our ‘minimum to maintain’ by the number of ‘thousands’ per head in our shop, we can see how much we must charge per 1,000 stitches to arrive at our most basic needs. These calculations give you the absolute minimum you must charge for decoration when running your machines at capacity. Although most businesses won’t run at capacity every day, these numbers offer a ready metric for quick estimates. Knowing your minimum will help you to make better decisions when you’re unsure if a particular job is worth taking on, as well as revealing gross underpricing. Profit models With our minimums established, we can look to profit models built on one of the following: Garment price + mark-up + decoration Start with the decorator’s price paid for a garment, mark that up, and then add the cost of decoration as calculated by your ‘minimum-to-maintain’ figure. The mark-up is often calculated using keystone pricing – that is, where the garment cost is simply doubled. Pros: Simple to calculate, standard in the industry Cons: Makes too little profit on extremely cheap garments, and increases prices beyond customer comfort on extremely expensive garments, particularly when using keystone pricing Garment price + profit-adjusted decoration Start with the price you’ve paid for a garment and add decoration costs that have been adjusted to account for a desired profit: the decorator decides on a yearly profit target, adds it to the minimum-to-maintain, and divides by the available work units for the year to get the adjusted decoration price. Pros: Maintains consistency independent of the garment chosen, makes estimating profits simpler and is based entirely on your labour. Cons: Requires accurate understanding of time investment per task/process, and requires you to predetermine the profit you want to make for a full year of production ahead of setting pricing. Garment price + marked-up decoration This model is almost the same as the ‘Garment price + profit-adjusted decoration model’, but instead of setting a profit goal, the decoration cost is simply marked up by a percentage. Pros: doesn’t require an excess of forethought Cons: hard to forecast Flat Rates ∞ Combined flat rate Include the decoration and garment in one price. It’s usual to tightly specify the allowable decoration and garment parameters in order to ensure profitability ∞ Per location flat rate Start with the garment cost and add a flat fee for every decorated location. The garment may or may not be marked up ∞ Inclusive flat rate Rarely used, this rate includes the garment and any decoration in one stated rate Flat rates assume a mixture of simple and complicated jobs such that one needn’t worry about labour and material outlay for individual jobs. In deciding to eschew the difficulties of calculated quoting, however, you are undefended from a string of complicated, time- consuming jobs that might damage your margins. It also means that customers with simple work will essentially be subsidising customers who have more complicated work unless you price to the more complicated work, so the simple work will be over-charged. Pros: Easy to explain. Quoting is almost entirely done away with as it requires no calculation. Cons: Less equitable pricing for simple work, risk of too many unprofitable jobs sinking your margins, and restrictions can cause confusion in customers. [Below] If you are flat-rate pricing, whether in total or by location, these two designs are both considered ‘cap fronts’ but they couldn’t be more different. The brightly coloured DBD design has multiple colours and a huge amount of solid coverage – this is a high stitch-count design with a very long run time. The simple, single-colour image of this bow hunter in the forest, on the other hand, requires no colour changes and has a significantly lower stitch count. If you charge the same for both of these cap designs, you have to hope that you don’t get too many of the complicated sort or you won’t be making much in the way of profit.