Setting the right price for screen printing jobs is crucial for the success of any screen print shop. Determining the right balance between covering costs, ensuring profitability, and offering competitive pricing requires balancing various factors. While every shop has operating costs, those can differ depending on your locale. For instance, prevailing wages and rent for someone in St. Louis, MO differs greatly from a shop in Los Angeles, CA. Even with that caveat, use this guide as guideposts to pricing for profitability.
Understanding Your Costs:
From overhead to material costs, knowing your expenses helps you get an idea of the costs associated with keeping your doors open.
Material Costs:
Begin by calculating the cost of materials required for the job. The cost of the blank garments is probably the easiest calculation of this as it is a set price per piece. Your costs for inks, emulsion, chemicals and the other consumables takes a little more guesswork and study.
Labor Costs:
Factor in the labor costs associated with the entire production process. This includes the time spent preparing screens, setting up the printing press, printing, and post-production tasks. Try doing a time study by timing how long it takes to do each step and then find the average.
Overhead Costs:
Take into account the overhead costs such as rent, utilities, insurance, and other fixed expenses. Divide these costs by the number of jobs you expect to complete in a given period to determine the overhead cost per job.
Equipment Costs:
Amortize the cost of your screen printing equipment over its lifespan. Include costs related to maintenance, repairs, and depreciation. This will help ensure that your pricing reflects the investment in your machinery.
Waste and Spoilage:
Despite never wanting to admit it, shirts and screens get ruined and need to be re-done. A successful shop will understand the percentage of ruined items compared to the total output. It almost goes without saying but understanding how the waste and spoilage happened and steps you can take to minimize it are critical for profitability. Anticipate the possibility of mistakes or misprints leading to waste. Include a buffer in your pricing to account for potential material losses and the time required to rectify errors. Remember, if you price your goods too low, you remove any profit to make up for errors.
Market Analysis:
Shops can lose focus on what makes them profitable by chasing after every sale. Focusing on your market and strengths can help you price more efficiently.
Competitor Pricing:
Research and analyze the pricing strategies of your competitors. Understanding the market rate for similar services can help you position your pricing competitively. Do you want to be the low-cost printer and compete just on price? Do you offer unique services? Understanding how to position yourself and your shop is advantageous to your pricing strategy.
Target Customer Base:
Identify your target customer base and tailor your pricing strategy accordingly. Consider whether you are targeting high-end clients willing to pay a premium for quality or a more price-sensitive market that requires cost-effective options. Are you trying to serve retail customers who are going to buy what is on the shelf right now or are your customers ok to wait?
Seasonal Trends:
Be aware of seasonal trends in the demand for screen printing services. Adjust your pricing during peak seasons or consider offering promotions to attract more business during slow periods.
Pricing Models:
Once you have figured out your costs and strategic position within the marketplace, put that into practice by pricing your goods accordingly. There are various methods for pricing so figure out what makes the most sense for your business.
Cost-Plus Pricing:
Add a markup percentage to your total costs to determine the final price. This straightforward approach ensures that all your costs are covered and allows for a consistent profit margin.
Value-Based Pricing:
Assess the value your screen printing services bring to your customers. Consider factors such as quality, customization options, turnaround time and other factors outlined in the Market Analysis section above. Price your services based on the perceived value you provide.
Market-Oriented Pricing:
Align your pricing with prevailing market rates. This approach ensures that your prices remain competitive, but it may require periodic adjustments to reflect changes in the market. When doing this, it is important to remove that not all overhead costs are the same. If you go with this model, always be looking for ways to automate as shop labor is often the highest cost.
Customer Communication:
No matter what pricing strategy you choose, client communication is key. People want a sense of where the prices come from. This can often take the form of simple education for the screen printing process. Most people have no idea what it takes just to make a screen. Educate them on the skill and craft you are providing.
Transparent Pricing:
Clearly communicate your pricing structure to customers. Transparency builds trust and helps customers understand the value they are receiving for the price paid.
Provide Detailed Quotes:
Break down the costs in your quotes to help customers understand how the price is determined. This can alleviate concerns and showcase the fairness of your pricing.
Profitability and Growth:
Pricing your goods and services correctly not only keeps you in business but allows for you to expand and grow. Do you need more space, an upgrade to your printing press, or more employees? Making a profit allows for those things.
Profit Margin Goals:
Set realistic profit margin goals for your screen printing business. Regularly review your financial performance to ensure that your pricing strategy aligns with your profitability objectives.
Efficiency Improvements:
Continuously seek ways to improve efficiency in your screen printing process. Streamlining operations can reduce labor costs and increase overall productivity, contributing to better profitability.
Diversification of Services:
Consider expanding your range of services to attract a broader customer base. Offering additional customization options or related services can open up new revenue streams for your business.
In conclusion, pricing screen printing jobs is a delicate balancing act that requires a thorough understanding of costs, market dynamics, and customer expectations. By adopting a strategic approach to pricing, communicating transparently with customers, and maintaining a focus on profitability, screen print shop owners can ensure the long-term success and sustainability of their businesses in a competitive market. Regularly reassess and adjust your pricing strategy as needed to adapt to changing market conditions and to position your business for growth.
