Embroidery: Production

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December 22, 2014

If you’ve been embroidering for a while, you may have wondered, “If I’m so busy, why aren’t I rich?”

There’s little doubt that most of us could tweak our pricing practices. After all, prices in all other areas of our lives are like moving targets, so it’s reasonable that we should evaluate our embroidery pricing regularly to ensure we are hitting our revenue targets. Of course, to do this, you first must establish a target.

Avoid pricing simply out of habit or by copying another embroiderer’s prices. Your costs almost certainly are different and you don’t even know whether the other shop is profitable. Instead, be proactive about your pricing policies; it can impact your business in a positive way.

WHAT ARE YOU SELLING?
It’s a good idea to stop and think about what you’re really selling. You’re not selling thread in fabric. You’re not selling logos. You’re selling a service combined with a product, which requires your time, talent and expertise. All of these things have value. Unfortunately, many people focus on their price per thousand stitches, making their embroidery work a commodity rather than the complex combination that it really is.

It’s generally more profitable to sell garments or other products, such as bags or blankets, rather than simply providing the embroidery. You and your customer reap several benefits when you recommend products that are familiar to you. If you choose wisely, you are recommending and selling a product that:

• has good characteristics for embroidery
• is long-lasting, and washes and wears well
• is easily obtainable
• supports a good mark-up.

I advise bundling the price for the embroidery and your recommended product, allowing you to give your customer a single price. This is a better pricing strategy than possibly confusing customers with details they don’t care about anyway. Plus, you may unknowingly cause them to make incorrect comparisons between your prices and those of your competitor when you break down the costs of the embroidery and garment separately.

The amount of margin that you can reasonably expect varies between promotional priced items and more upscale garments. For example, you may be able to double the price of a $10 shirt by adding the price of embroidery, thus resulting in the bundled price of the completed garment. This is called keystoning. However, you’re less likely to be able to keystone an upscale branded shirt that costs $30. Your margin may be lower, but you still make a reasonable dollar amount per garment, plus your embroidery price.

CALCULATING PRICE PER THOUSAND STITCHES
To add the price for embroidery, most embroiderers use the price-per-thousand-stitches approach. Calculating your price by stitch count may play a part pricing formula, but it isn’t the whole story. Here’s why:

Let’s say that you decided to charge $1.50 per thousand stitches. Men’s shirt-cuff monograms can be profitable, but a 300-stitch monogram would only cost about $0.50 using the price-per-thousand-stitches formula. Two pricing policies should be established: minimum price per piece and minimum price per order.

For example, let’s say that a singlehead machine owner chooses $7.50 as the minimum price per piece and $17.50 as the minimum per order. A customer with two shirt-cuff monograms at $7.50 would pay $17.50 for the two monograms to meet the minimum price per order requirement. The customer should bring three shirts to get the best value.

It’s helpful to know the average cost of producing a thousand stitches in your shop or studio. Knowing the cost of producing embroidery can help you price more profitably. In many shops, this cost is more than the owner imagines.

PRICE LIST ANYONE?
If you ask 100 embroiderers if they have a price list, most would say that the nature of custom embroidery doesn’t allow price lists. Certainly, variables must be taken into account, so I prefer having a price guide. A well-designed price guide can give your customers a high level of confidence and actually help you sell.

A colleague, Frank Gawronksi, illustrates that point by asking the following: “Do you feel more comfortable getting into a cab with a meter or a cab without a meter?” Your price guide is a sort of meter that gives your customer a base price.

I like the approach of creating a price guide by using a threshold stitch count for the embroidery, combined with your recommended product marked up at a profitable margin. This type of guide also shows bundled prices for popular items stitched with logos containing up to 8,000 stitches.

In other words, the price guide may list a particular style number with embroidery — up to 8,000 stitches — included. If the logo has less than 8,000 stitches, you make a bit more profit, or when the customer is on a budget, you have built-in room to “sharpen your pencil.”

For logos with more than your threshold stitch count — special services, such as appliqué or embroidery foam — your price guide should contain a disclosure statement like the following: “This is only a guide. The customized nature of embroidery requires that the actual price of each job be quoted individually. Stitches in excess of 8,000 will be charged at the current rate per thousand stitches.”

A statement similar to this allows additional charges to cover non-standard stitch counts, processes or materials.

TARGET REVENUE
I use the concept of target revenue for establishing a price guide. First, I determine how much money I want to make — my target revenue. Then, I use my understanding of how much I can produce per hour, combined with the number of hours I can work at embroidery, to calculate my prices.

Here’s how it works: Decide how much money you would like to generate from your embroidery operation in a year. For example, let’s say you want to embroider on a part-time basis while you continue to work until retirement. At that point, let’s say you plan to embroider full time. Decide approximately how many hours you have available to embroider. Full-time embroidery is about 2,000 hours annually. Let’s say that you plan to embroider part time — evenings and weekends — for about 1,000 hours annually.

Now, you need to have an understanding of your capacity — how much you can produce in an hour. A conservative estimate would be about 18,000-20,000 stitches per hour, per embroidery head. You can make a spreadsheet to see examples of your potential revenue using this hourly capacity, including different estimates in the price-per-thousand-stitches column.

This only is the revenue for the embroidery portion of your jobs. You make about half your money from the garments you sell, so if you always sell the garment, you could roughly double the revenue figures.

Remember the customer with the shirt-cuff monograms? This is how establishing your target revenue helps — even with that pricing scenario where stitch count doesn’t apply.

SETUP CHARGES
In the case of logos and custom designs, I recommend charging a one-time setup fee. Some embroidery houses say the digitizing is “free.” Of course, it’s buried in the price of the products. Charging the customer an inflated price every time he orders or confusing him with different prices on different orders could cost you that person’s business. I recommend speaking plainly about the need for a one-time charge to professionally interpret the logo into a digitized design that can be read by an embroidery machine.

Sometimes you may use a stock design combined with keyboard lettering to fulfill a request with a quick turnaround or a small order for a customer who has no logo. You should charge something for your time and expertise. I suggest designating an hourly rate for computer setup. For example, if your rate for computer work is $60 an hour, a 15-minute set-up would cost the customer $15.

What about setup fees for monogram customers? I suggest offering a small group of preselected embroidery designs that have no more than three or four colors, split among men’s, ladies and children’s themes. You may choose to charge a small additional amount to include one of these accent designs in a monogram.

Track your average production to adjust your capacity and price per thousand stitches, if necessary, to achieve your target revenue. I believe this method is a good starting point to establish a pricing strategy that works best for you. Review it regularly and you will see how you need to adjust your formula to be as profitable as you envisioned when you bought your embroidery machine.

Deborah Jones is a commercial and home embroiderer with more than 30 years of experience in the computerized embroidery field. She runs myembroiderymentor.com and regularly speaks at the Imprinted Sportswear Shows (ISS). For more information or to comment on this article, email her at djones@myembroiderymentor.com.

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Pricing Software

There are several software programs available for pricing your embroidery. You can designate your pricing parameters in the software and let it automatically create quotes for you. In some programs, you can import price lists from major suppliers to streamline the process. If you take the time to set up your parameters properly within the pricing software, it can be a great tool for making the pricing process more manageable.

For example, in the pricing program Fast Accurate Bids users can select among higher or lower pricing profiles, which allows for quick adjustments. See the following list of pricing software to research which program is right for you. Note: This list is a sampling of software providers, and is not all-encompassing.

EstiMate Pricing Software
estimatesoftware.com

EZ Estimator
ezestimator.net
(301) 253-3971

Fast Accurate Bids
fastaccuratebids.com
(360) 752-3310

PriceIt Software
priceitsoftware.com
(802) 257-5188

Pricelist Professional
(SMR Software)
smrsoftware.com
(218) 326-0890

Printavo
printavo.com

ShopWorks
shopworx.com
(561) 491-6000