Creating A Pricing Structure That Will Work For You! Module 3

Transcription

1 Creating A Pricing Structure That Will Work For You! Module 3 The first session I showed you how to start timing all of your jobs, both the production and the artwork on Production and Artwork Tracking and Timing Spread forms. In the last session I talked about gathering all of the necessary information required for creating our Pricing Structure. I transferred all of the expenses that were embroidery related from the Expense Spread Sheet to the Cost Analysis Spread Sheet. I also showed you the Embroidery Machine Production Schedule and how you can very efficiently schedule your jobs on a daily basis. In this session I am going to take all of those figures and create an Embroidery Price List. You are going to see how all of the work you have been doing with your Production timing is going to pay off. You will see how and why all of those figures and the timing of your production are so important. We are going to be incorporating those figures into a Price List Prep Sheet and this will really tell the story of what you should be charging for each of your embroideries. You will see how the extra charges are built-in as part of the final price. To me this is the exciting part! Once you have all of this done, it is done forever! In this session I am giving you the Complete Pricing Strategy Workbook for session 3. The forms inside of this workbook are: The Cost Analysis Spread Sheet The Cost per hour-minute-seconds Sheet The Production Times Sheet The Price List Prep Sheet Your Embroidery Price List Embroidery Machine Schedule Sheet These sheets are all tied or linked together so you want to make sure that you keep them tied or linked together so that all of your figures will flow from one to 1 Joyce Jagger, The Embroidery Coach

2 another and then you will automatically have your prices figured for you as you make changes. To create the price list we will be using figures from all of those spread sheets. I am going to start with the Cost Analysis Spread Sheet that has the Break even point on it. You have to determine how much of a profit you want to create on top of the Break even point. I like to start with 150% which is the breakeven point plus 50% more. If you are in a market where you can charge more then you can add a higher percentage to that figure. 150% is not a huge profit but it still gives me a little room to negotiate if you are in the position where you need to come down on my price a little. I will be showing you that on the Price List Prep Sheet when we get to it. When you decide what percentage you want as a profit point or markup, you must change that figure to reflect the Profit Point dollar amount that you want to use. I have created a chart that you can use but I will show you that a little later. The Figures will transfer as follows: The Break even and Profit point figures from your Cost Analysis Spread Sheet will automatically transfer to your Cost per Hour- Minute- Seconds Sheet. The Cost per Minute figure will then transfer to your Price List Prep Sheet in the Cost per Minute Column. The Costs per Seconds on your Cost per Hour-Minute-Seconds Sheet will transfer to the Production Times Sheet in the Costs per Second Column. The Seconds cost from your Production Times Sheet will transfer to the Price List Prep Sheet in their respective columns. The Receiving Cost will transfer to the Receiving Cost column, the Prep Cost will transfer to the Prep Cost column and the Clean up Cost will transfer to the Clean up Cost Column in the Price List Prep Sheet. I do not have a column on the Price List Prep Sheet for supplies. If you are adding the cost of your supplies in your Cost Analysis Spread Sheet you do not need to add them to your Price List Prep Sheet; however I would like to talk about that a little bit. The average cost of your supplies for 2 Joyce Jagger, The Embroidery Coach

3 each embroidery is about $.30. This includes your backing, topping and thread. This may differ slightly between brands of products but this is a good cost to start with. Thread At $10.00 per cone it is approximately.014 per 1000 stitches. At $14.00 per cone it is approximately.02 per thousand stitches Bobbins- At $32.00 per box it is approximately.007 per 1000 stitches Backing- 2 oz - 8 inch square is about $.07 each-purchased by pack of 250 pieces. This price goes down dramatically when you purchase cut pieces in larger quantities. You use approximately 7 yards of top thread and 4 yards of bobbin thread per 1000 stitches. The actual amount of thread that you use also depends on how tight your tension is running. A tighter tension will yield more logos per cone of thread and bobbin. Price List Prep Sheet 3 Joyce Jagger, The Embroidery Coach

4 With this sheet you will have the total cost of each embroidery in each stitch count category. You can use this sheet to see where you can increase or decrease your profit percentage depending on the type of customer or even if you are bidding on a job. You will be able to see at a glance if you are going to be able to make any money on a job. This will be an invaluable tool for you when you get it set up. This is a great tool to use when someone is complaining about your pricing. You can look to see if you can decrease your price and still make any money. You will have your Total Cost per embroidery. You can take whatever Profit Point figure you have applied to your Cost Analysis Spread Sheet and add that percentage into the Profit Percentage column on the Price List Prep Sheet. When you look at your prices you can then decide if you want to increase that percentage of profit or decrease it. It all depends on your market and how much money you want to make. You will use the percentage figure from the last column of the following chart. Profit Point/Markup Percentage on Cost Analysis No. for Profit Percentage Column on Price List Prep 100% 200% 95% 195% 90% 190% 85% 185% 80% 180% 75% 175% 70% 170% 65% 165% 60% 160% 55% 155% 50% 150% 45% 145% 40% 140% 35% 135% 30% 130% 25% 125% 20% 120% 15% 115% 10% 110% 5% 105% 4 Joyce Jagger, The Embroidery Coach

5 When you add or change your profit percentage it will automatically update your Final Price. We are now ready to add these prices to our Embroidery Price List. This can be a little tricky, but you must do it correctly if you want the prices to automatically update as you make your changes. I am going to copy each price from the Final Price column into a formatted sheet that I have prepared for the Embroidery Price List. To copy each price over onto the Embroidery Price List, start with the first price in the Final Price column. 1. Left click on the column, press down the Control key and hold it while you press down the C key to copy the price. 2. Go to the tab at the bottom of the page in the Work book and find the Embroidery Price List. Left click on that tab. This will open up that page. 3. Go to the first open cell in the column that says 1 Piece across from the 1000 stitch count line. With your cursor in that cell; Right click and it will bring up a menu. 4. Scroll down to Paste Link. This will bring up another menu. At the bottom left corner you will see a Button that says Paste Link on it. Press that Button. You will now have that price linked to your Price List Prep Sheet. Go to the Final Price in the next cell below the first one and follow the same procedure. Copy that cell and then Paste Link it into the column that says 2-5 Pieces across from the 1000 stitch line. Continue each one until you are finished with your entire price list. All of your prices will be linked to the Price List Prep Sheet. As you update any of your information on the Cost Analysis Spread Sheet, the prices will automatically be updated. If you decide that you want to change your percentage point or markup, then all that you have to do is change the number in the Profit Percentage column on your Price List Prep Sheet. If you change any information in your Cost Analysis Spread Sheet your Cost Column will automatically update on your Price List Prep Sheet. This Price List Prep Sheet is going to be a very valuable tool for you. If you change the percent of your Profit Point on the Cost Analysis Spread Sheet, you should also change the Profit Percent on your Price List Prep sheet. These percents should be the same. 5 Joyce Jagger, The Embroidery Coach

6 When you make changes to your Cost Analysis Spread Sheet, do not forget to split your percentages for your different departments. For our example we have the Design set up and the Embroidery departments. This is where your information is linked from. Your Embroidery Cost Analysis is linked to the Production form and your Design Set Up Cost Analysis is linked to the Artwork Form. This is very important. On the Price List Prep Sheet and the Embroidery Price List I have quantities of up to 144 pieces and 50,000 stitches. You can increase these quantities at any time. You can even quickly add a quantity in to see if your pricing is right on a higher quantity than the 144 pieces. I do this regularly when larger quantities come in just to see if my pricing si still where I want it to be. Every few months you can re-evaluate where you are and make the appropriate changes without having to do much work. It will take you a lot of time in the beginning to get this all done, but once it is done, it is done. You only have to do it once! You will have a pricing strategy that will work for you in every situation. I am including the finished Workbook that I have created with all of the prices filled in. All you have to do is transfer your correct expenses from your workbook from session 2 into the workbook from this session on the Cost Analysis Spreadsheet. This will calculate and add the seconds of time on the Production Times and your prices are automatically calculated for you! You can clean the slate from all of my prices and start from scratch to add your own or you can just update all of your costs on the Cost Analysis Spread sheet and change your numbers at the bottom to suit your needs and the prices will automatically update and you will have your price list. To create a price list for any other area of your business Take all of the expenses that are applicable to that area and add them to another copy of the analysis spread sheet, this will be the percentages of the total business that you have figured out on your Department spread sheet from session 1. On the lower portion of your Cost Analysis spread sheet, you will figure out the amount of time that is spent on that department to come up with your breakeven point. You can basically follow the Design Setup sheet for that. Add your markup for profit that you want for your cost of doing business figure. You will then add the base cost of the item plus a markup and you will have a selling price. Your 6 Joyce Jagger, The Embroidery Coach

7 markup can be whatever you can get in your niche or your geographical area! There will be no guess work to pricing out any of your products. Just follow this formula and it will be easy! Other forms Included I am also including my Apparel and Hat Order Forms so that you will be able to see all of the extra charges that you should apply on top of your existing embroidery charge and your setup fees. These extra categories fall into the hard to hoop area on your Production Tracking and Timing Sheet. You will need to time how long it takes you to work with these items so that you can add these charges to the bottom of your order forms. The Hat Order Form is set up to make it easier for you to write up your cap order layouts to avoid errors. You can draw out your layouts and write in the wording or logo design numbers in the applicable area. I have included Appliqué in the price list. These 2 columns are hidden but I will show you how to hide and unhide your columns and rows. You will have to add for your time for laying down your appliqué pieces and the cost of the pieces of fabric for the appliqués. You will time the laying down of your appliqué pieces by the seconds or minutes and add this into the top cell of the Appliqué Cost column. You will add the amount of pieces in each appliqué set to the Appliqué Pieces column. I have the formula in the Appliqué Cost column down the page so that it will automatically add it all up. However long it takes, your cost per minute will be the cost for this process. This is the cost that should be added to the Embroidery price list cost. My cost to lay down a piece of appliqué is about $.33. That is the figure that I put in the top cell of the column. You will be able to establish this cost after you time a few. You can work out an average price per appliqué piece and place it in that cell to replace my cost. Don t forget to add for the price of the cut appliqué pieces that you have to purchase or cut with your cutter when you are figuring your final cost for your customer. You now have a pricing strategy to work with and you can create any type of price list from this point on. 7 Joyce Jagger, The Embroidery Coach

8 Remember this is only the embroidery part of your of price list. You must add for your setups and then you will add in a profit for the costs of your garments. Next session we will work on that part of the list and I will show you how to keep everything simple. You can create a pricelist combination with your garments and embroidery and be able to quote your prices in an instant. Your customers will be very happy when you can come up with instant quotes instead of having to spend a lot of time trying to figure it out. You will be happy knowing that you have the confidence to create the quote instantly and know whether or not you are actually going to make any money on the job. I was where you are at one point in my embroidery business and when I finally figured all of this out, it made life so much easier and I started making money! That is a good thing!!! Thank you for watching Module 3 of How to Create a Profitable Pricing Structure That will Work in Today s Marketplace. In our next and last session I will show you how to keep everything about your price list simple. I will also show you how to create style sheets with simple formats to be able to deliver your information to the customer faster with little effort. Joyce Jagger The Embroidery Coach joyce@theembroiderycoach.com 8 Joyce Jagger, The Embroidery Coach