Fair Price or Rip Off?

[Joe Diaz]

Joe.......

He could very easily mean that, but that still doesn't make any sense to me. That is precisely why I originally wrote, I don't understand his reasoning.

I don't see the difference between......." It costs me $650/hr to have shop open" not "his cost is $650 an hour"

If between employees, insurance, lights, heat, loan payments, mortgage payments and whatever else is figured into that $650/hr.... his cost of operations is $650 an hour period in my book every hour. At the end of the day.... that boils down to $5,200 a day to operate or he needs to be billing out over $18,000 a day. Good... no great money, nothing to sneeze about.

Hence, the reason I asked for his explanation. I'm not nit-picking or putting him down or I wouldn't have put the example I mentioned. I honestly don't see the difference you mentioned or how if he needs a certain amount an hour.

Perhaps I'm really missing something here and need someone to boink me in the head.

It all has to do with means of production. So a larger shop may have more employees or better equipment allowing them to produce much more during a given hour, however those additional employees and equipment cost more too. So a larger shop might need to make more an hour to stay profitable, but in theory they could also charge the same amount as a smaller shop that can't produce as much in that same amount of time, yet also has lower overhead. That's why I say, until we know how large his shop is, you can't really say how much he needs to bill out per job.

 

[Gino]

It all has to do with means of production. So a larger shop may have more employees or better equipment allowing them to produce much more during a given hour, however those additional employees and equipment cost more too. So a larger shop might need to make more an hour to stay profitable, but in theory they could also charge the same amount as a smaller shop that can't produce as much in that same amount of time, yet also has lower overhead. That's why I say, until we know how large his shop is, you can't really say how much he needs to bill out per job.

Yes Joe....... I totally agree with waiting for his response. Your explanations are confusing me even more. I don't think we're on the same page at all. I'm not taalking about size of shop or any unknowns, other than the one given, that in his costs... he needs $650/hr to operate. That's the only constant we have.

Just to go a little further.... if someone tells me they need $650 in costs an hour to maintain operations, I take that times 8 hours in a day, times 5 days a week. Now, they might not hit that each and every hour, but that's what he/she needs to stay afloat or it starts eating into your operation costs, unless they average that over a week's time. Some good weeks, some bad weeks, but overall, that's a need of $26,000 a week, just in costs. A rather large chunk of change and I doubt you're gonna do that in a small shop. It sounds like a large shop to me.

Again, we're not talking a shop minimum, but an hourly cost of $650 an hour to run that particular shop.

Therefore, if with his equipment and labor costs, along with everything else involved with running his business.... if he can turn those panels around in about 1/2 hour. he's doing what he said he was. Again, that equipment isn't in your average small shop.

 

[Joe Diaz]

It goes back to this (your) comment: "With this strategy, you're saying you can't produce anything for less than maybe $2,275 US an hour ??" He could produce something for less than that if he can produce things faster or more of those things in an hour. That's dependent on the scope of his business. In other words, you are missing a major part of the equation and so you can't solve for how much he can produce something per hour. That is what I was questioning.

Yes Joe....... I totally agree with waiting for his response. Your explanations are confusing me even more. I don't think we're on the same page at all. I'm not taalking about size of shop or any unknowns, other than the one given, that in his costs... he needs $650/hr to operate. That's the only constant we have.

Just to go a little further.... if someone tells me they need $650 in costs an hour to maintain operations, I take that times 8 hours in a day, times 5 days a week. Now, they might not hit that each and every hour, but that's what he/she needs to stay afloat or it starts eating into your operation costs, unless they average that over a week's time. Some good weeks, some bad weeks, but overall, that's a need of $26,000 a week, just in costs. A rather large chunk of change and I doubt you're gonna do that in a small shop. It sounds like a large shop to me.

Exactly, you would spread that $26,000 a week out over the average amount of work a shop can produce. A larger shop produces more than a smaller one. So that effects the cost of the service or product they create. That's why I say a large shop could charge the same amount as a small shop because they do have a higher overhead but they can produce much more in the same amount of time.

 

[Kevin-shopVOX]

Gino and Joe. This might help identify of what it costs to run a shop at $650 hr and how that doesn't typically get applied to each hour you are open and how it should be included into your sign pricing.

My guess is the person took total overhead and divided by how many hours they are open per day, giving such a high number per hour. In example it costs them $5200 in overhead divided by 8 giving $650 per day. The issue is this is only what it costs you per day to run your business and you obviously can't bill that rate into your signs at that amount per hour. It is out of touch with reality. The number of hours in a day doesn't relate to what you can and should be charging per hour. That number is based off not hours per day but how many billable hours per day you have. This is the time spent designing and making signs. So if I have 3 employees that design and make signs that come in for 8 hours each but each take an hour lunch. They each produce 7 hours of total billable production hours for a total of 21 per day. So now $5200 gets divided by 21 and not 8 giving $247 per hour. My guess is at that $5200 per day overhead costs they have much more than 21 per day say probably closer to 40 or so giving a more realistic per hour charge that you can now bill into the price of your signs without blowing yourself out of the market.

The thing to remember is its total monthly billable production hours divided into your monthly overhead to determine what your cost per hour is ..not just how long you are open.

 

[Gino]

Gino and Joe. This might help identify of what it costs to run a shop at $650 hr and how that doesn't typically get applied to each hour you are open and how it should be included into your sign pricing.

My guess is the person took total overhead and divided by how many hours they are open per day, giving such a high number per hour. In example it costs them $5200 in overhead divided by 8 giving $650 per day. The issue is this is only what it costs you per day to run your business and you obviously can't bill that rate into your signs at that amount per hour. It is out of touch with reality. The number of hours in a day doesn't relate to what you can and should be charging per hour. That number is based off not hours per day but how many billable hours per day you have. This is the time spent designing and making signs. So if I have 3 employees that design and make signs that come in for 8 hours each but each take an hour lunch. They each produce 7 hours of total billable production hours for a total of 21 per day. So now $5200 gets divided by 21 and not 8 giving $247 per hour. My guess is at that $5200 per day overhead costs they have much more than 21 per day say probably closer to 40 or so giving a more realistic per hour charge that you can now bill into the price of your signs without blowing yourself out of the market.

The thing to remember is its total monthly billable production hours divided into your monthly overhead to determine what your cost per hour is ..not just how long you are open.

Now that..... would make sense. $650 per day, but not per hour.

I'm no accountant, but if someone isn't producing a 30 hour a week, then I need to readjust my numbers if I want to keep that person on staff. Our hourly rate has everything to do with each and every cost I can think of, including mistakes, down time and miscalculations. If we have no problems, it's a well oiled machine. If we have a bunch of hiccups, well then the negative factors kick in and we still meet our quota. I just gripe and b!tch a whole lot more.

Yesterday, someone put a number on a truck upside down. No big deal, but mulitply that times 20 little mistakes a week and it could add up. Without those things, your profits for the week or month will look even better.

 

[neil_se]

Sorry to leave you hanging, you're all just running 14-17 hours behind

I didn't mean to make this a semantic debate, I just wanted to point out that comments like "I can buy B-Bond single side for $34.00 a sheet and direct print them in ten minutes time for each one on our flat bed. $1,500 - $204 for the ACP. $1,300 net for one hours work isn't terrible" isn't NET to me since people aren't taking into account their overheads. There's no point quoting a GROSS profit since everyone's overheads are dramatically different.

My store costs me $650 per working hour on average, but you can't simply double or triple this to work out charge out rate. If you were charging $18000 per day on $5200 total costs, that'd be $3.2 million per year net profit, if there's a signage business out there making 66% NET profit I'd like to hear your model. Say we aim to make 20% net profit we'd need to cover the cost price of overheads by making a margin on our labour and materials. If that's $5200 a day all costs accounted for, then I need to be bringing in 20% more, $6240 per day (of course the more work you do, the higher your materials costs are going to be, but most overheads are still fixed). There's too many individual variables to bother getting into specifics, 1 guy running 10 printers producing supply only products is a very different model to 1 printer producing for 10 guys who are also installing.

Didn't mean to get into semantics, everyone's pricing strategies are different but we've all worked out our own way of turning a NET profit.

 

[Circleville Signs]

The reality is that this industry is getting to the point where unless you have a specialized niche, you are effed. If you want to compete in the commodity sign world you almost HAVE to invest in a flatbed


I am working on moving into a split of wholesale vinyl installation and dimensional retail signage. Vinyl is simply a race to the bottom.

In answer to the OP, at a QTY of 6, I would be around $480/ea. For a single sheet I would be close to $650.

 

[asd]

i would be at 448.00ea, at 250 I would not touch it, a 13oz banner will be 240.00

 

[BALLPARK]

Price - $250 (Yes, if it was a price match.)
Not Installed
Production Quality Printing Resolution
Signbond Panel
Single Sided
Artwork Provided
No Delivery

...

Standard price is $320 with the same info as above.
Typical install adds $100-$250 depending on install method and location.

...

$10 per square foot for a 4'x8' sheet with full coverage is a very fair price. If this is a new client then why not discount it for them and research their signage needs. This type of project could lead to a much higher sale in the future. This job could easily be completed in a day and still have time to knock out plenty of other work.

I love to get my foot in the door and then scope out the outfit for future sales. This is the perfect type of job to impress a client with fast turn-around times and service. You can make up the $420 and then some, if the job is done properly.

 

[John Butto]

new business model

So I don't think the large shop v the small shop has much to do with how much you pay for materials and labor costs.

 

[all_things_art]

..... I just recently completed a job like that last week.....6-4x8 fully print signs, I came in @ $237.50+tax per sign not including the alupanel he has to pay for the alupanel separately

 

[Gino]

Sorry to leave you hanging, you're all just running 14-17 hours behind

I didn't mean to make this a semantic debate, I just wanted to point out that comments like "I can buy B-Bond single side for $34.00 a sheet and direct print them in ten minutes time for each one on our flat bed. $1,500 - $204 for the ACP. $1,300 net for one hours work isn't terrible" isn't NET to me since people aren't taking into account their overheads. There's no point quoting a GROSS profit since everyone's overheads are dramatically different.

My store costs me $650 per working hour on average, but you can't simply double or triple this to work out charge out rate. If you were charging $18000 per day on $5200 total costs, that'd be $3.2 million per year net profit, if there's a signage business out there making 66% NET profit I'd like to hear your model. Say we aim to make 20% net profit we'd need to cover the cost price of overheads by making a margin on our labour and materials. If that's $5200 a day all costs accounted for, then I need to be bringing in 20% more, $6240 per day (of course the more work you do, the higher your materials costs are going to be, but most overheads are still fixed). There's too many individual variables to bother getting into specifics, 1 guy running 10 printers producing supply only products is a very different model to 1 printer producing for 10 guys who are also installing.

Didn't mean to get into semantics, everyone's pricing strategies are different but we've all worked out our own way of turning a NET profit.

Okay, so you're on the other side of the world and can't respond until we're all gone to bed, but numbers still go on and are constant.

Oh, and by the way, this is not semantics, it's basic simple math and running in the black.

If your cost of operations is $650 per hour.... in a normal 8 hour day [yes, 8 hours....... business doesn't stop for lunch], you pay out $5,200 before putting out any money for vinyl, inks, substrates or any other items needed in furnishing a project. Your people, equipment and everyday costs are still constant at $650 an hour, regardless if they're picking their nose, the machine breaks down or Suzy got morning sickness and stayed home. So, if you put out these 6 panels which you trusted your salesmen to negotiate to at least $300 per panel would come to $1,800. Now, if I calculate correctly, that takes you about three hours. You still have five billable hours to go. At the rate you want your salesperson to go, you're never gonna make your cost of operations today. In fact, throwing numbers around wildly sounds like you either better look into your business plan.... or re-calculate your cost of operations.

In conclusion you still haven't added in the cost of ANY goods, markup, profit or taxes. How can you sleep over there when you aren't even getting close to what you have to make to keep your doors open ??

Again, I'm not being a smarta$$, but your numbers simply don't add up. Had you taken Kevin's approach and using that number for a day's costs, it makes much more sense.

 

[neil_se]

Thanks for the pointers Gino, did you go to the Enron school of accounting? I wasn't aware that business doesn't close for lunch, do you have a newsletter I could subscribe to for more such valuable information? Perhaps you should be concerned with semantics because you state "cost of operations" then talk about adding in material costs, when operation costs are by definition fixed AND variable costs. Did you mean fixed overheads? I'm also not sure why you're either assuming there's only 8 billable hours a day? Luckily my business can do 2 things at once!

Anyway, it obviously makes sense in your head and if you're achieving a pretax (thanks for correcting me there) profit of 66% by tripling all costs you're doing better than me and most business owners. I guess I'll keep plodding along with my 14 staff aiming for 20% net and 20% annual growth.

 

[fixtureman]

If he needs $650 an hour to keep his open he must be doing a lot of business as that would be $1,352,000 a year. Either a very large shop or his salary is high. This job shouldn't take all that long and then he could throw another job on that printer.

 

[k.a.s.]

I wouldn't touch em at $250 each, I would think about it at $300 but I would've quoted about $325.00 for 6.

Kevin

 

[Gino]

Thanks for the pointers Gino, did you go to the Enron school of accounting? I wasn't aware that business doesn't close for lunch, do you have a newsletter I could subscribe to for more such valuable information? Perhaps you should be concerned with semantics because you state "cost of operations" then talk about adding in material costs, when operation costs are by definition fixed AND variable costs. Did you mean fixed overheads? I'm also not sure why you're either assuming there's only 8 billable hours a day? Luckily my business can do 2 things at once!

Anyway, it obviously makes sense in your head and if you're achieving a pretax (thanks for correcting me there) profit of 66% by tripling all costs you're doing better than me and most business owners. I guess I'll keep plodding along with my 14 staff aiming for 20% net and 20% annual growth.

Nope, no Enron schooling here. Just the school of hard knocks and trial & error.

Since you have your sh!t together, there's no reason to talk with you any longer. You've managed quit well to turn things around to make your points appear workable.

I bow to your superior wisdom.......
​

Oh, and don't look for a newsletter. It's not written in Australian, so you'd be at a loss, since we don't use pictures.

 

[John Butto]

Gino's shop

How did that guy know about your Enron training. Has he been to your shop.