New guy interested in pricing thoughts?

[Modern Ink Signs]

Are you a sign professional? Then your price for a sign should include not only the full cost of materials necessary for doing the job, but also in case you make a mistake and have to do it again to deliver a quality product. In addition, it should include the amount necessary to cover your professional expertise and knowledge for as long as it took to talk to the customer, sell the job, design the job, order materials, manufacture the signs, invoice and bill and deliver (whether that's over the counter or to the customer site). It should also cover the cost of your building for that time, your employees, and the cost of purchasing and maintaining your equipment and inventory.

Or you could just double your cost on the ACM and think you made 100% profit.

So you charge for YOUR potential mistakes!? Wow….

How about this. DON’T make mistakes! If you do, get out of the business it’s not for you.

 

[Geneva Olson]

So you charge for YOUR potential mistakes!? Wow….

How about this. DON’T make mistakes! If you do, get out of the business it’s not for you.

I thought that was a bit odd to charge for potential mistakes.

 

[unclebun]

It's not charging for potential mistakes. It's covering the cost of things that happen in the course of business. You've never had a print ruined because there were random ink drops on it? We deal with questions about that on this forum all the time. How about banding in the print? That is a common question on this forum. Or maybe the plotter skews and ruins the vinyl, or the blade tip breaks? Or in the middle of a plotter cut on a 50 yd roll you run across a splice? Or running the knife across a piece of substrate it jumps the ruler or the ruler slips?

If you have nothing over the cost of materials figured into your pricing, you won't be able to finish the job that a mishap occurs on because you have no money to pay for it.

Every industry has what's called "spoilage" in it. You have to account for that or you WILL be getting out of the business when you go bankrupt.

As for me? I have been in this business for over 30 years and still going strong.

 

[binki]

We consider 2 things in pricing.
1) Cost of materials
2) What we want to net an hour and a margin that we want to make

We take that and come up with a price.

For example, if we want to net $270/hr and have a cost of materials of $1800 and have a production time of 3 hours and a margin of 50% we would want the greater of $1800*2 = $3600 (cost plus margin) or $810 + $1800 = $2610 (hourly rate plus cost). We would charge $3600 for the job. This gives us a net of $600/hr.

Now, there may be times we go below net hourly rate but at the end of the month we want to look at all of our jobs and see if we averaged that not only per job but per working hour. Our best customers get better rates. One offs get the highest rates.

This is a simplistic version. You would want to look at fixed costs as well such as insurance, rent, utilities, payroll and associated costs, property taxes etc. to determine a the hourly rate.

 

[Splash0321]

Since you are so new to the business, I HIGHLY recommend picking up a copy and reading Mike Michalowicz's book "Profit First." Implement his strategies as soon as possible and you won't regret it. I did it about 14 moonths ago and really wish I would have 14 years ago. It probably would have changed my life!

Another bit of advice that has worked well for me, once you figure out a price for a job, add 15%. That can give you some wiggle room should anybody ask if you can do better. You'll have the piece of mind knowing that you can go back, "sharpen the pencil" and give them "better" price if they seem like a client you want to cultivate. I they don't ask, guess what? You just earned an extra 15% you would have left on the table.

I just read this book after seeing it recommended here on s101. Its worth the purchase. I wish I had read it years ago.

 

[Splash0321]

So you charge for YOUR potential mistakes!? Wow….

How about this. DON’T make mistakes! If you do, get out of the business it’s not for you.

Its a business cost. You're not honest if you are saying you dont make mistakes...even if they are rare. And if you have employees they arent perfect either and at some point a mistake they make will cost you money. The title of this thread literally states "new guy" and the fact that hes asking about pricing reflects his lack of experience. We all started somewhere. Aside from that its common for companies to have the forsight of what human error is going to cost them in business and add that into their cost of operation. Over time that cost of error decreases.

No different than expecting equipment failure every now and again and losing a partially printed job and having to reprint it. Its simply adding in enough margin to cover the expense of these errors.

 

[Splash0321]

I am interssted in what your general rule of thumb is on pricing. I certainly know it will vary from different areas of the country. But when making a sign are you generally using a multiplier on material assuming you are not doing installation? What about a delivery fee or do you hide that in the costs?

We have a golf course interested in a couple signs they will be going indoors so I am thinking of printing them on ACM with our flatbed UV printer. The 2 signs would be 40 x 23 inches. In this case would you price is based on the just the part of the ACM board you will be using or would you just say hey, it's going to use one board and then use a multiplier from there? Would you laminate this?

Yeah sorry I am a newby. I know the subject has been beaten to death.

Thanks

Do yourself a favor regardless of what variables you choose to start basing your pricing from. Create a spreadsheet and include all of your actual costs. Not just cost of the substrates but also the costs to run your shop like equipment purchases. If the average lifespan of a piece of equipment is 7 years then factor in the replacement cost of that over 7 years, along with other equipment, computers, program subscriptions, professional subscriptions and licenses, electricity, marketing, etc. All of those little things that you generally dont even think of when calculating costs of one job...put it all into this spreadsheet so you have a realistic hourly cost to run your business. I didnt do this until 3-4 years ago and was amazed at how all of my little insignificant costs added together were pretty significant.

Nothing is worse than thinking you are charging enough but you just never seem to be able to pay yourself what you thought you were going to be able to. I have no problem answering questions if you have any, just PM me.