Calculating Your True Costs of Screen Printing to Make a Profit
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Please find some links and notes from the 2 Regular Guys Podcast. If we are in this industry as a business the goal is to turn a profit. Terry and Aaron have seen way too many businesses struggle just to break even and the main culprit is the inability to truly calculate their costs and then accurately set their prices. This week is the 3rd of the series where Terry and Aaron will discuss calculating your true costs of screen printing. Then they will dive into some pricing strategies and provide you with some great info that can help your business turn a profit.
Sponsored by: Equipment Zone and Siser N.A.
Our regular listeners know this, but 2 Regular Guys are all about garment decorating, a bit of fun, and no rants or lectures or selling. We are not doing this for our employers, but rather for our industry. Since February 2013, The 2 Regular Guys have been the first and the most listened to garment decorating industry podcast on this planet! We are humbled by all of you tuning in each week. We work hard to bring you information that will make your business better, and our industry better. Take a look at our incredible weekly guest list and you’ll understand where this industry goes for news, interviews and the heartbeat of garment decorating. Thanks for listening!
News and Notes
- Teespring Undergoes Stiff Layoffs In Corporate “Restructuring” May 23, 2017 – Sources told Crunchbase News that, over the past several weeks, Teespring underwent steep layoffs, leaving a skeleton crew of twenty to thirty people at the company’s main office in San Francisco’s SoMa neighborhood. This most recent round of layoffs included both remote workers and employees now formerly present at the company’s headquarters.
Calculating Your True Costs of Direct to Garment
Aaron: Give us the overview of screen printing costs and pricing.
- Unlike last week’s limited variables in DTG printing, the number of colors/screens, flashing, specialty inks can impact productivity. A screen printer can go from a manual press to an automatic press and substantially increase production capability with virtually the same staff. A screen printer can add a second manual press with just the addition of another worker wage, but make a substantial impact on productivity. In other words, we can spread our costs over additional production hours.
- And every shop is totally different in their ability to cover their costs through productivity. I’m talking night and day difference in the amount of time involved in producing a job.
- Again if you’re a new business, you need to allow for cash on hand while you build up to the numbers we’ll be talking about here. You’ll need to allow to learn the business and the machines. You’ll need to allow for a learning curve.
- My plan again for today’s show just like last week when we talked DTG is to take a simplified overview of costs and pricing. And to make some general assumptions about costs and production times. In the end, it’s all about making educated estimates anyway. The further down the road we get with our businesses, the more educated our estimates will get.
- I’m also going to assume we have or we can get enough business to keep the presses running and pay the bills. Doing that is for another show!
Aaron: As we talked before, you focus on available production time as a chief factor in covering your costs. Talk about how this relates to screen printing.
- What we’re talking about is indirect and direct production time. Indirect production time is preparing art, burning screens, mixing inks, etc. Direct production time is actual time spent printing shirts. And then there are of course the indirect functions of running the business as well.
- Direct production time is when we’re making money, so this is where we’re going to focus our attention. In the scenario I want to build here, I’m going to say our example business has two employees and one manual press. In this example one employee does indirect activities such as sales, paying the bills, maintaining the website, etc. The second employee spends one hour every day working on indirect production… coating screens, cleaning screens, etc., leaving 35 hours per week to do production. We’re closed two weeks during the year – one week in July and one week in December. So we have 50 remaining weeks x 35 hours equals 1,750 direct production hours.
- This is where new businesses get into trouble, not being realistic about how much production you will really have time to accomplish. Basing their numbers on what they wish they could do rather than what they’re actually capable of doing.
Aaron: Let’s talk about paying the bills – our overhead expenses and breaking them down.
- We’re going to look at fixed costs such as rent, insurance, power, water, the lease on our equipment and wages for our two employees. When you start your business these will be estimates. Ink is screen printing could be built into the per shirt pricing, but in reality it is a very minimal amount, pennies per print, so I’m going to drop the estimated dollars I’ll spend on inks this year into overhead. If we sell twice as much as we expect, the per print pricing will easily cover the increased ink expense. In our example let’s say all our overhead expenses for the year are $100,000.
Aaron: Now we’re getting to the part that listeners tuned in to hear. How about the actual costs of producing a garment?
- First, you can break out some costs that are specific to setup such as screens, emulsions and chemicals, film positives, etc. In this example let’s break out some of these costs and cover them with setup charges.
- Screens are commonly reclaimed and reused for future jobs, so we’ll call the cost per screen use $.50. A static aluminum screen with mesh is about $22.00, and we’ll use it repeatedly.
- A film positive will be approximately $1.20. There’s a film required for each color.
- We’ll place the cost of other chemicals used at $.30 per screen.
- The hard cost per color is now $2.00.
- Also in the setup fee we hope to cover some of our labor costs while we’re setting up and tearing down the press… and not making money. Setup and breakdown time is what makes or breaks a screen printing business.
- I charge $20 per screen (per color) as a setup fee. I hear prices from $15-$25.
Aaron: So here’s where we’re going to talk about efficiency, right?
- Yes! In screen printing the key factors are 1) the price you charge and 2) how efficient you are at what you do.
- Two printers could charge $500 for the exact same order. One printer could have a $200 profit from the order, and the next printer could lose $200 on the order. It all comes down to how efficient you are at your craft. It is critical to understand your Estimated Production Time numbers.
- My book on Amazon “Scheduling and Estimated Production Time” explains in detail how to accomplish this task.
Aaron: Are there some ways to improve efficiencies to have more production time?
- Where to start???
- Create a downtime log for starters
- And of course training
- No order goes on the schedule until it’s complete
- Tools and supplies in their place
- Enough screens on hand to have several days production burned and ready
Aaron: Let’s talk about what we charge and making a profit
- I’m going to take a different approach this week. Let’s look at our per hour expenses.
- In our example, just like last week our overhead which includes estimated inks and supplies is $100,000. Divide those expenses by 1,750 direct production hours = $57.15 to break even.
- Let’s look at 40% of selling price as our projected profit margin. We multiply $57.15 by 1.67 = $95.44, let’s call it $95.50 per hour to pay the bills and make a profit.
Pricing example breakdown:
Setup per screen: $20.00
Art Prep per hour: $35.00
Color change per: $10.00
Customer garment: x1.25
Garment + shipping: x2
- What we need to study is how long it takes us to create an order from start to finish. Reaching for the first screen, setting up, printing the job, tearing down, and reaching for the first screen for the next job. In this scenario, we can calculate how much money we have taken in, less the cost of the goods printed and then divided by the number of hours it took to print. If that number is $95.50 or greater, we’re right on track. If it’s less, and certainly if it’s less than our drop dead costs of $57.15, then we have to address what we’re charging.
Aaron: Anything you want to share to wrap up this Screen Printing portion of our series?
- Just like last week, be brutally honest with your numbers. You absolutely must use a system like Estimating Production Time and use your own unique shop numbers in the process. Fudging the numbers to make them fit the scenario you want to accomplish means you’ll be just another statistic on the graph of failed businesses. In most screen printing shops, there’s incredible room for improvement and innovation, but what we have to work with is what we’re capable of accomplishing right now today!
- Complete Screen Printing Business Course – Workhorse Products in Phoenix – June 24-25
- How to Make Money with Digital Decorating – Mind’s Eye Graphics – Oct 6-7
- IPIC (International Print + Imaging Conference) – Jul 10 – 12
- ASI Chicago – Jul 12 – 13
- NBM Long Beach – Jul 20 – 22
- NBM Secaucus – Aug 17 – 19
- ISS Orlando – Sep 7 – 9
- NBM Denver – Sep 8 – 9
- ISS Ft. Worth – Sep 22 – 24
- SGIA (Specialty Graphic Imaging Association) – Oct 10 – 12
- NBM Charlotte – Oct 26 – 28
Screen Printing: A Practical Guide to Starting Your Own T-Shirt Business Just $4.95 as an e-book.
Direct to Garment: A Practical Guide to Starting Your Own T-Shirt Business Just $4.95 as an e-book.
Scheduling and Estimating Production Time for Garment Screen Printing Just $2.99 as an e-book
This show is brought to you for a full hour by:
Equipment Zone, with 20 years experience selling garment printing equipment nationwide. Equipment Zone offers the new Epson F2000 SureColor direct-to-garment printer, their own VelociJet-XL DTG printer, and the all new SpeedTreater-TX automatic pretreat machine with a full 16”x24” pretreat area. Equipment Zone also carries a full line of DTG inks and supplies. Go to EquipmentZone.com
Siser North America’s new and improved website! Just recently Siser NA’s website was updated with a ton of new colors, helpful tools, and fun things to read. Head over to www.siserna.com and check out for yourself. A new great add-on to the site is the “Cutter Settings”. You will be able to get an idea of how you should have your vinyl cutter set up for each Siser material type. Then find out how each Siser product is applied, with the instructions available right there for you. Have you heard about the EasyPatterns™? There is a whole separate tab that will show all the different printed patterns Siser offers. Then while you’re at it, check out the Siser Blog. Get a great scope of all the “out of the box” ideas you can achieve with Siser HTV!
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