After spending the past 4 years creating my own pricing software that we use inhouse I am deciding to go through some of the things I learned while creating the algorithms and best practices for the most efficient pricing estimation. There are much more complex systems that I have worked into my own software but this should be enough to give a novice a general Idea on what's needed. Remember these values are here as an example, you'll need to look at your personal costs and expenses to get accurate results for your business. Cost The first thing you want to make sure you get out of the way whenever you begin pricing anything for estimation is your costs. How much are you spending out of pocket including shipping costs, taxes, misc. expenses that were tagged on after the fact. We need to get these and have them written down or entered in whatever software/spreadsheet you use or build yourself. The last thing you want is to be losing money on jobs or working on fumes to where money is coming in, you are working really hard but you can’t seem to get ahead. In our examples we are using a few different types of material to get a sense of how things are calculated. First up we have roll materials which are usually very long; at least 5meters plus, secondly large sheet or panel materials and lastly, we have any sort of consumable usually in the form of liquid, powders, pastes and the like. Things like toner, pigment / eco or solvent ink, liquid laminations would fall into this last category. For most of these we will be using the same or variations on the same algorithms to arrive at a final answer. While we are going through these calculations at the end I will apply them to a fictional customer sign that measures 24” w x 36”h and is a Gloss Laminated Decal, Mounted on 3mm PVC with 1 sides. Bear in mind this is just what the decal is costing you and does not reflect the overall price. We’ll get into that in the profit and waste sections of this guide. Roll Calculations Example 64” w x 150’h Standard Economy Decal 1. Manufacturer Cost: $100 2. Shipping Cost: $25 3. Tax: $10 Total Roll Cost: $135 Now once we get this figure we need to go ahead and see how much each square foot of this is going to cost us. For that we use a simple square footage equation. But first we need to get our 64 inches and convert it to feet link our length (150ft) in our example. Inches to Feet Conversion: i / 12 = f (where i is our inches value) (where f is the result we are looking for) In our real-world example: 64 / 12 = 5.33 Now that we’ve got our foot amount for the width of the material we can use our square footage calculator to get a total square foot amount for this entire roll of material. Square footage calculation: w * h = sf (where w is our width) (where h is our height) (where sf is the result we are looking for) In our real-world example: 5.33 * 150 = 799.5 The final step is getting a price for each square foot, for this we need to get our material cost and divide it against our square footage we just got. Cost per Square Foot Calculation: c / sf = csf (where sf is our square footage) (where c is our cost) (where csf is the result we are looking for) In our real-world example 135 / 799.5 = 0.168 This gives us a cost of about 17 cents per square foot. Using this figure in your own signages applications would require some additional calculations. You would first need to follow the same square footage calculation on your client’s required sign size and then multiply the result against our value to get a base cost for the decal used here. Your lamination film should follow the same structure, I am adding a new value in our example to reflect a new item that was calculated in the same manner (roll cost calculation). Customer Sign Requirements: 24” w x 36”h 2 x 3 = 6 (square feet) 0.17 * 6= 1.02 (Decal Cost) 0.19 * 6= 1.14 (Laminate Cost) Panel Calculations Example 48” w x 96”h 3mm PVC 1. Manufacturer Cost: $50 2. Shipping Cost: $10 3. Tax: $5 Total Panel Cost: $65 The calculations for this run exactly the same for the panel cost. First we get the feet amount for the width and height (4 x 8) then multiply them to get our square footage (32sf). With this we can divide to get our cost per square foot (65/32) which should give us our cost per square foot (2.03125). A quick check of these calculations should let you know if you’re doing it correctly (cost per square foot * square footage) should give you the total panel cost. We’ll add this into our fictional client sign for reference. Customer Sign Requirements: 24” w x 36”h 2 x 3 = 6 (square feet) 0.17 * 6= 1.02 (Decal Cost) 0.19 * 6= 1.14 (Laminate Cost) 2.03 * 6= 12.18 (Panel Cost) Liquid & Powder Calculations Example Working with liquids and powders can be a bit tricky since you have to find some information on the actual substance you’re working with from the manufacturer. Most of them will have this on their websites or any data sheets that come with the product. This can be mileage, coverage, yield amounts, yardage or anything in between. But there should be a coverage amount for a standard unit whether it be ounces, gallons, milligrams or what have you. An easy one to do is the printer cost per square foot, most manufacturers will have this readily available on their websites. In my case we use a Roland and, in this example, I’ll just have it chalked up to 0.50 cents per square foot. Now for something a tad more complex. For this I am using a liquid acrylic lamination. However, this can work for any liquid or powder-based calculation; all you need to do is find a cost and coverage. 1 Gallon Clear Cast Liquid Lamination (coverage: 400 square feet per gallon) 1. Manufacturer Cost: $50 2. Shipping Cost: $10 3. Tax: $5 Total Gallon Cost: $65 The idea behind this calculation is that we need to find out how much it costs us to cover each square foot, same as the other materials. Once we have our input numbers (cost and coverage) we can get this pretty easily. Liquid Cost per Square Foot Calculation: c / C = csf (where C is our coverage) (where c is our cost) (where csf is the result we are looking for) 65 / 400 = 0.16 This value doesn’t apply to our client sign but as you can see it gives us a rough estimate on what it’s costing us to cover each square foot. Using this in conjunction in a similar fashion as the other values we’ve gotten so far will yield the result for your sign. In my calculator I use this method to get fairly accurate estimations of ink consumptions on most machines, if you have the know how to use macros in excel or can program you could theoretically do the same. Now for something that is relevant to our client example, ink Customer Sign Requirements: 24” w x 36”h 2 x 3 = 6 (square feet) 0.17 * 6= 1.02 (Decal Cost) 0.19 * 6= 1.14 (Laminate Cost) 2.03 * 6= 12.18 (Panel Cost) 0.50 * 6= 3.00 (ink Cost) Labor & Shop Rate When we talk about labor charges we need to talk about your hourly rate. A lot of shops I’ve seen can’t seem to pin one down, or just pluck one out of the air at random and just use it because it’s what they came up with in the heat of the moment. So, before we do anything else in regards to labor we need to find out how much we charge to keep the doors open. There are tons of great examples of this online with some slight variations for more complex formulations so I won’t go too much into detail with it but it goes a little something like this: (Expense + Profit) / Billable Hours = Shop Rate Essentially you add up all of your expenses, this includes salaries, utilities, contractor fees, insurance, taxes whatever takes money out of your pockets. For this example, I am going use a fictional amount of $100,000 in expenses. Now it’s time to find your target profit. This is your goal that you need to hit, how much do you want to mark up your services. In this example we’re using 40%. Expenses * Target Percentage = Profit 100,000 * 0.40 = 40,000 This gives us our profit amount or our profit goal. From here we can get our billable hours. These are all the hours that you have to give to your customers. Work days minus holidays, off days and vacation times. In this example I am using 49 weeks and a standard 40-hour work week. Billable Weekly hours * Work Weeks = Billable Hours 40 * 49 = 1960 We have all of our moving parts now time to put them all together into our calculation. (Expense + Profit) / Billable Hours = Shop Rate (100,000 + 40,000) / 1960 = 71.43 From here it’s up to you to determine how many man hours a particular job is going to take. You can just multiply your shop rate by the estimated number of hours. In our client example I am going to estimate 1.5 hours to from start to completion. Shop Rate * Hours Billed = Labor Charge Customer Sign Requirements: 24” w x 36”h 2 x 3 = 6 (square feet) 0.17 * 6= 1.02 (Decal Cost) 0.19 * 6= 1.14 (Laminate Cost) 2.03 * 6= 12.18 (Panel Cost) 0.50 * 6= 3.00 (ink Cost) 71.43 * 1.5 = 107.14 (labor Charge) Profit Percentage vs Markup Multiplier There are a couple ways to go about calculating your profits. We’re going to be going over two of the most common ones. This concept has been covered earlier in the guide so I won’t go into explaining exactly what a profit is but more so how to go about using the different types (markup vs percentage) and how to incorporate them into our client example. Profit percentage works great for values that tend to get very large like panel boards but can give you some really miniscule numbers when you try to calculate something like roll media or liquids. So, for the different types we use different methods, the ones that make the most sense for your overall. Standard Profit Calculation In the example below my product is $100 and we need a profit margin of 40% (Profit Percentage * Cost) + Cost = Profit (0.40 * 100) + 100= 140 Markup Profit Calculation In the example below, we have a pretty small number that represents decal costs. Even if we mark this up 100% it will still give us a pretty tiny number. So, in this case we are going to multiply the entire number multiple times to give us something that comes close to what we normally charge. My cost is 0.10 cents and my profit multiplier are 20 for this example. Profit Multiplier * Cost = Profit 20 * 0.10 = 2 Customer Sign Requirements: 24” w x 36”h 2 x 3 = 6 (square feet) 0.17 * 6= 1.02 (Decal Cost) 0.19 * 6= 1.14 (Laminate Cost) 2.03 * 6= 12.18 (Panel Cost) 0.50 * 6= 3.00 (ink Cost) 3 * 1.02 = 3.06 (Multiplied Decal Profit) 3 * 1.14= 3.42 (Multiplied Laminate Profit) 0.40 * 12.18 = 4.87(Percentage Panel Profit) 5 * 3 = 15 (Multiplied Ink Profit) Now we have to add the cost and the profit together to give us a composite price 1.02 + 3.06 = 4.08 (Decal Total) 1.14 + 3.42 = 4.56 (Laminate Total) 12.18 + 4.87 = 17.02 (Panel Total) 3.00 + 15 = 18.00 (Ink Total) 71.43 * 1.5 = 107.14 (labor Charge) Material Total + Labor Charge = Final Price 43.66 + 107.14 = 150.80 Creating Composite Prices You may not want to go through all of this every time you need to create an estimate. What you can do is create some commonly used composite profiles. For example; Decal mounted on corrugated plastic, Laminated decal, Gloss deal mounted on 3mm pvc, etc You can crunch your numbers once, probably on a slow day or weekend and get a square footage cost for each of these composites and once you have a final number you can use that against whatever size your clients throw your way. That’s my 2 cents, hope it was helpful.