By Jimmy Lamb, Sawgrass Education Manager
It’s a question that every product decorator asks at some point in time: How much should I charge for this product? It may seem like a simple question, but getting to the answer can be very complex.
It all depends on how you approach your business. Some people use a set formula of cost times a multiple when setting prices. Others look at the market and make a determination of what they can sell a product for given demand and competition.
To complicate things more, you also have differences in determining your costs. Do you include your own labor, or do you simply look at the cost of raw materials? Are you compensating for shipping costs, taxes, subscriptions, memberships and other expenditures of doing business when you calculate costs? There is much more that goes into these calculations than you may think.
Here are three things to consider when setting your prices, so that you don’t leave money on the table and ensure you are making the right profit to keep growing your business.
- Rethink Your Approach to Ink: We often hear people asking how much money you spend on ink for a particular print size. This isn’t the right question to be asking, since the ink in your printer is used for more than just that print. There is ink used in maintenance cycles that keep your printer running clog-free and ready to print at a moment’s notice. Ink used in reprints and test prints, or additional prints needed when an error occurs during pressing. When you only look at ink spent on a specific print, you are not compensating for the true amount of ink expense for your business. The right question to be asking is: “How much do I spend on ink in a whole year?” By looking at the overall cost for the year, you can better divide that number between every product you sell so that those prices pay for every drop of ink you actually use.
- Evaluate all Costs: When figuring out costs for pricing, include ALL costs associated with running your business. These include: rent, utilities, insurance, packaging, software, ink, printers, paper, substrates, memberships, etc. It should also include a paycheck for yourself. All of this will give you an overhead cost, which you can further break down into an hourly cost of production. To get this down to a true cost for your products, estimate how many minutes it would take you to complete the create, print, press process for every item you make. The more you produce, the lower the cost – and the higher the profit you can make. Taking advantage of jobs where you can print and press multiple products at once will result in even greater profit.
- Set Your Prices for Profit: Once you have a more realistic idea of your real costs of production, look at the market you will be selling in. Very often, you will find that the going price of sublimated products – especially those that are personalized – is many times greater than your cost. The rule of thumb for most retailers is to multiply cost times two or three, to ensure profit. We recommend pricing as high above your cost of production as that market will bear. For example, the real cost of a sublimated phone case with a premade design may be $5. It can easily sell for $20 in most markets. That’s cost times four. Now, if you tweak the design to add in someone’s name, you can add another $5 to $10 to the price – resulting in cost times five or six. Always look at how much the market will value a product when considering how much to charge.
These three tips should help get you on your way to pricing for greater profit. You can download this spreadsheet to help in your pricing calculations, and also view Conde’s recent webinar Sublimation Cost Analysis on YouTube, for more information.