Discussion Calculating net profit margins on specific items

[White Haus]

We want to have a look at our most profitable items and product offerings. As I'm sure you all know, being in such a custom industry creates some challenges in doing this. We don't sell any standard "off the shelf" products, every job is custom.

That being said, we do have some main categories, and they are:

-Fleet Graphics (supply/install)
-Banners
-Dibond signs
-Decals / Labels
-Coroplast signs
-Wall/window graphics

There are a few sub-categories that can be filed within those, but for all intents and purposes those are our main categories.

We have product items in Quickbooks for these items, and can generate reports to see how much (units or $ value) we are selling of each item. What we can't currently do, is calculate how much money we're making per item and identify which one(s) do best.

I remember a previous post about just using your average/total net profit across all sales, and that is always what we have done, but I want to dig deeper and see how each product category stacks up against the rest.
I can't quite wrap my head around this, given how many different components go into a job (ie: media, ink, laminate, premask, packing materials, labor, machine time etc.).
We do calculate all of the raw materials and labor/machine time during the estimating process, and often review/compare as we go to make sure we're on track.

Anyone care to share how they're currently doing this? I'd love to hear some solutions or ideas on how to achieve this. Hopefully this conversation will also benefit other business owners wanting to identify which products do best, and which to drop.

Thanks in advance.

 

[Pauly]

calculate what it costs you per 1sqm or 1 square foot (how ever you go by)
+ stock
+your time/hour rate etc. (this is your net profit)
= product price

 

[Notarealsignguy]

Use a time card on each job, multiply by your cost per labor hour, Add your materials into it and add in a small percentage for consumables.

 

[ColorCrest]

What we can't currently do, is calculate how much money we're making per item and identify which one(s) do best. be able

Because you've started using FileMaker, you'll be able to create a customized cost accounting table of components specifically for your shop. If you, or someone in your shop, is already handy with spreadsheets, you can use those sheets as a starting point to create and populate a "Components" or "Resources" table.

Something to keep in mind as far as materials, realize that while a shop may price and sell “per square foot,” many materials are purchased and costed “per linear foot.” Ink for roll-to-roll can be accurately costed per sq ft but the media cannot unless it’s always fully utilized. Paint can be costed per sq ft but boards?

 

[Texas_Signmaker]

Because you've started using FileMaker, you'll be able to create a customized cost accounting table of components specifically for your shop. If you, or someone in your shop, is already handy with spreadsheets, you can use those sheets as a starting point to create and populate a "Components" or "Resources" table.

Something to keep in mind as far as materials, realize that while a shop may price and sell “per square foot,” many materials are purchased and costed “per linear foot.” Ink for roll-to-roll can be accurately costed per sq ft but the media cannot unless it’s always fully utilized. Paint can be costed per sq ft but boards?

I agree, I always do linear foot.

 

[White Haus]

Because you've started using FileMaker, you'll be able to create a customized cost accounting table of components specifically for your shop. If you, or someone in your shop, is already handy with spreadsheets, you can use those sheets as a starting point to create and populate a "Components" or "Resources" table.

Something to keep in mind as far as materials, realize that while a shop may price and sell “per square foot,” many materials are purchased and costed “per linear foot.” Ink for roll-to-roll can be accurately costed per sq ft but the media cannot unless it’s always fully utilized. Paint can be costed per sq ft but boards?

Thank you, that is a really good point regarding linear vs sqft. I always struggled w/ sqft pricing due to waste, material yield etc. but using linear should help with this. I am trying to wrap my head around how to incorporate an estimating layout in our FM app, that would have all materials and costs built in so you just punch in the size of the job and it generates a sell price. To start, I may just continue doing our manual calculations to come up with a linear or sqft amount then punch that in and select material combos. Baby steps.

Notarealsignguy thanks for the tip, I know we talked about this a while back.

I'm thinking of making a simple estimating spreadsheet (several different versions in operation already) that will then compare estimated vs. actual (labor, machine time, materials) for every job. I'm not sure how feasible it is to run through these steps for every job, but even if we did this for say 6 months it should give us enough historical data to come up with an idea of how long certain jobs take in relation to the product category and size.

Stupid question regarding billing labor and machine time. Let's say for chits and giggles our overhead is $100 an hour, and we want to make $200 per hour ($100 profit).
How do you guys determine what each person/machine bills out at? We currently use roughly $95/hour shop rate for labor, and roughly $50/hour for machine time.
So I guess at the bare minimum, with one person working on billable jobs we would be losing money, but if we have say 2 people and 2 pieces of equipment running (using previous hourly rates for example) we would be billing $290 an hour. Does that make any sense? What else do I need to consider when determining what each person/machine bills out at?

Thanks guys, appreciate the help.

 

[ColorCrest]

I am trying to wrap my head around how to incorporate an estimating layout in our FM app,

Your estimate (or quote) layout could be based on its own table or sometimes quote records and invoice records are combined in a common table. The layout will have a portal for line items.

Most of the data you’re looking to report from will actually come from the line items and it will need a layout so users can enter specifics such as the sign product name, qty, size, grade, etc. The layout should also show the product’s components. That’s the main difference for quoting custom products from run-of-the-mill software.


The LineItem table and will grow over time far more than any other in the solution.

Customer > Order < LineItem <Product <Component

Maybe show what you’ve got so far.