pricing

[cbireley]

I'm new to embroidery for the most part and I'm still trying to figure out the best "formula" or pricing guideline for my work. I've had some suggestions that don't really work for me. I'm a small business in a rural area. I just did my taxes and for the amount of time and work I produced last year, my numbers were very discouraging. Any suggestions would be appreciated. Thanks so much!

[HERB]

What suggestions did not work for you?

[signman]

You might be able to track down some posts from last year about pricing schedules.
'Generally', in a small shop with 1-3 machines...the consensus was you need to 'BILL OUT' enough to make $40-$50 PER HOUR of production. This is above and beyond digitizing charges or cost of materials (shirts, jackets, etc.)
If you add up your electricity, insurance, water & sewer, rent or mortgage, hired help, etc.-then divide by 50 (to allow for 2 weeks vacation) you now have your weekly 'net cost' to operate.
Now figure out that in an 8 hour day-you spend 2-3 hours talking to customers, doing layouts, paperwork, ordering supplies, maintenance-everything BUT actual sewing-and you are left with 5-6 hours per day of ACTUAL time you can produce goods. Take your weekly 'cost' and divide by 25-there is the amount your amaya needs to charge for an hours work JUST TO PAY THE BILLS.
High, isn't it! But that's what it costs to run a business.
Now profit...if you try to operate on 10% or so-we'll see your machine going up for sale within a year. Even restaurants operate on a higher margin than that. You need to mark up the goods (shirts, sweats, etc.) at least 2-2 1/2 times your cost PLUS FREIGHT for small orders-"retail sew jobs". The customer that comes in for less than a dozen pieces. Then figure a sliding scale, mine is less than 12, 12-35, 36-71. 72-143, etc. and the markup drops to about 1 1/2 times cost at the highest volume. And I'm STILL underpricing the competition by a dime or so!
Add to that your 'sewing' charge- 'retail' orders $1.50 per thousand stitches, AND/OR a MINIMUM of $5-$10 PER ITEM. Any job that you charge less than $5 to sew-you have already lost money. Your sewing charges should add up to $40 an hour or so. If you can only produce 5 hats an hour, or 5 shirts, anything-that's 12 minutes per item- that equals $8 PER ITEM you must charge. At less than that-you aren't making a profit.
Now all figures I mention are variable...but years of screenprinting, etc. have taught me how to make a profit. So you get undercut by someone else-so have I! But in the 25+ years I've been doing this-I have seen 1-2 competitors go out of business EVERY YEAR-and each one of them was undercutting me.
Don't sell yourself short-profit is the name of the game! Sometimes you can make your profit in the 'markup' of the item-competitor told customer the shirt would be $25.00 and the embroidery $5...
YOU figure out you would normally see the same shirt for $18 but charge $10 for the embroider...
you already underbid him by $2!! So you tell him YOU can do the same job for $26 complete...you are still making money! And that shirt 'should' be costing you less than $12.50...so always check your suppliers for best cost and free freight!

[Mr. Sew & Sew]

I was going to ask a question on this topic today so I want to jump in here to see what you wize folks have to say.

First - my situation: home based, 2 AMAYA XTs, I work full-time and have two other jobs/hobbies that throw off income so I don't rely on the embroidery for anything other than vacation money, etc. I paid cash for all my equipment so no payments to worry about either. I'm 2 1/2 years into what I expect to be a 5-7 year trial run to learn the business before I decide whether I can make this a real job or not.

Having said that, I get approached by a close friend at a large international company. Wants 65 expensive golf shirts (Tiger Woods, Nike, Ping) sewn with corporate logo. This will be the first of 5-6 orders of this size per year. Anything promotional his company needs on the East Coast (his territory) will come through me if I want it. I am delivering the first order tomorrow and I got a second order for another 40 shirts this morning.

Now these shirts costs between $23-$45 each (my cost). The logo is one color, 4400 stitches and sews in less than 5 1/2 minutes very cleanly.

My question - I don't see how I mark the cost of the garments up by 2x or so and then add an embroidery charge. The shirts would be $55-90 each. This account could be half my business very quickly and my wife did the first order in about 7 hours using only one machine while the other machine ran smaller jobs. I'm charging $50 on the $23 shirts and $70 on the most expensive ones. I'm making a lot of money - in my opinion - for very little work. I know I'm the cheapest in my area by 10% or so, but I do no advertising and just take in business from word of mouth. Working out of my home concerns some folks so I think I get some business with my pricing structure being low.

Am I missing something here?

thanks
Tom

[signman]

Looking at your prices...you are not off...remember, I said the 'retail' price for just a few shirts, a walk in customer-not a business order...would get the highest markup.
So in the quantity you got for the order, a 4400 stitch design would 'wholesale' for $.75 per thousand, so that's only $3.30...good markup for 6 minutes (times 10 per hour, $33.30 for stitching)
your shirts in that quantity, I'd probably markup about 175%- they'd be $40.25 + $3.30= $44.55 plus divide the freight if you didn't include it by that number of shirts-probably another 50¢ per shirt. So you are making a real good profit margin there. 65 shirts in 7 hours, call it 9 shirts an hour...9 x $17.00 that you are already making over the cost = $153.00 per hour gross profit.
Nothing to complain about!
Now if you ran BOTH machines and did 18 per hour-you are making $306 per hour.
Pat yourself on the back...you have a good deal going!
Roland

[levelbest]

Hey Tom:

For premium stuff, you might not want to double the wholesale and add the embroidery - however - chew on this.... what happens if you trash 2-3 of those shirts? Maybe it won't happen but I wouldn't undersell yourself. People expect to pay premium prices for premium brands. What you might want to do is roll up to your local sporting goods store or sports authority and see what they charge for similar brand apparel and go from there...

[Mr. Sew & Sew]

John - I hear ya on the trashed shirts and that has been one of my concerns. I messed up the first two - one was unusable (crooked) and the other I placed the logo a bit too high. So the first went in the trash and the second is now in my wardrobe. I always "test" the first garments in my size where possible so I can keep the shirt if it's only slightly off. That's when my wife took over as she is the expert hooper.

I know my prices are lower than the local sports stores but like I said, this could be a huge account for me over time and the logo sews out very easily. So on this order, I had about $46 in eaten costs but by the time I finish the second order, I've got somewhere around $2500 in my pocket for a few days work. That's after the credit card fees, trashed shirts, etc.

I think in many cases, I am fighting the perception of a home based part time embroiderer. Kind of like how some people only want name brand foods or something and will pay a premium for that. Some folks just want to buy from the bigger shops and are willing to pay more for that comfort level. I have had a few people just hang up on me when I say I am home based for whatever reason.

Since I know this guy for 25 years, he showed me what they paid for the last order from a different firm. It was Ping shirts instead of Nike, so I adjusted my prices for the difference between those two garments in the SanMar catalog and that's what price I gave them. I also have a SanMar warehouse 20 mins from my house and it's on the way home from my day job so I never pay freight and always have the items the same day I order them which is a nice perk.

I am working on getting another large job from a friend that works for a huge New York city agency. This could be 400-500 pieces twice a year so I will also need to be competitive on the pricing. This corporate job has given me some insights into this and why I posted my question on the boards.

Thanks to you guys for replying. I'm more comfortable now that I'm charging a fair price and still making a nice profit. Without doing this full time, it's harder to figure out what my true cost is for the machines, etc. because anything I make goes into my pocket. My only overhead is some electricity, maintenance, NNEP membership, etc.

Tom

[Don]

Tom,

It's true that you have to fight a perceived image. But, chew on this: is the lower price adding to that perception? Are you sending a message that you are lower because your quality or service is lower? Remember the law of unintended consequences. A higher price might result in a higher perceived value.

I think you are selling your expenses short. You do have your machine, equipment, and supplies insured under a business policy don't you? Your homeowners policy won't begin to cover them and running a business out of your home without your homeowners policy being aware could void any coverage by it.

What about maintenance on the equipment? Repairs? Replacement? The equipment may be paid, but there are other costs that need to be planned for and they can be quite significant.

[Steve]

Pricing is always a tricky subject. I don't turn my machine on for under $40/per hour. I would rather have it there and collect dust. I'm doing a 144 piece job this weekend which I'm only making $7 per shirt but it is only 1800 stitches so I can do about 20 shirts per hour after trimming, etc. $140 per hour isn't bad. This is rare for me and I am charging less than I normally do just to get the job since I haven't turned the machine on this week.

[Shuffletown Embroidery]

I'll chime in with this: Don't forget the cost of the NEXT machine you will buy. Which you may be doing with all the new business!
Great job!
Mary

[Di]

Quick question, when you say you want to make $40/hr does that include the profit you made on the garment or is that with "stitching" charges only?

[Steve]

Di,
It is total profit, shirt plus embroidery

[Aaron]

I'm a little late catching up on e-mails but felt I should chime in here. I do alot of orders both contract and for retail customers that are larger orders and high end shirts alot of the time. For my retail customers I do cost x 1.5 + embroidery so on a $23 shirt Id sell it for $38. On a $40 shirt I would be around $63 which sometimes cause of the high $ shirt and depending on Qty I would probably sell that one for $60. Keep in mind I can do a 40 shirt order on 3 machines in a few hours and making $20 a shirt thats $800 profit. If I do the same job as contract work I would make $120-$160 for the same work but I don't have any money out for garments and if I ruin one the contractor pays for it, not me. In contract embroidery I make my contractors pay for most the ruined garments unless its my stupidity and even then alot of the time they pay. Thats part of why they are getting the prices they do.

On elss expensive items such as a $10 polo shirt with a 6k stitch design I would sell these for around $20. I am a little cheaper than most everyone in my area which explains why I don't have to advertise and stay busier than I really need to be year round. I have started to increase logo costs lately and don't go so much off stitch count but more so what I think is fair for the logo. Pricing can be very tough and depends on your area, competiotion, etc but the most important thing is to figure out your cost and make sure you are charging at least what you need to make money and make the money you want not just enough to get by.

I am a pretty big shop (12 heads) and run out of my dads home so our overhead is low. As contractors we have to keep our quantities up yet still have quality products and timely turnarounds. Its tough to balance all that.

We do around 2500 hats a month and as far as hat pricing goes we sell most our hats for $9-12. I like to make $5-6 per cap retail and on contractors caps we make $3-5 per cap which is a little less. $3 is my min logo charge to contractors unless they have a big order with few stitches, then its $2.50. hat back are $1.50-2.50 for the most part.