Q. How can I price my embroidery for profit? I have a hard time knowing if I’m really making money on a given job or if I’m making enough – I just don’t seem to be getting what I want out of the business. How do I know what to ask for?
A. There’s more than a mathematical problem with your pricing, but let’s start with the numbers. If you’ve been in business for any length of time, you know pricing can be slippery. What you should also know, however, is how much it costs to run your business. Calculate how much it costs to “keep the doors open” for a month. Figure out your overhead: your rent (even if you are in a home-based business, calculate for your space), your utilities, your supplies, your labor (once again, even if you are the sole source of labor, figure out a realistic operator’s salary here), equipment leases, software subscriptions, Web space – everything it takes to keep you in business, save the garments.
Once you have your magic number for the month, divide that by the number of hours you reasonably expect to work for the month, and that’s the rough amount of money you need to cover costs. Your average embroidery machine will generally give you 500 stitches a minute. Don’t be tempted to use your top speed for this calculation; it’s not good for the embroidery to run full-tilt for every design, and we’re averaging in our color-change and hooping time. You may even want to pull your number down a bit to 300 or 400 for a more conservative estimate. Count up your machine heads, and you’ll know about how many stitches per hour you can execute; since you’ve already calculated your break-even point by the hour and you know roughly how many stitches you can manage in that hour, you know how much you have to charge by the stitch to keep afloat.
If you’re looking for profit on your embroidery, add some margin to offset your inevitable downtime and then mark up for profit. If you do that, your stitching alone will be profitable. If you supply garments, make sure you mark them up adequately, charge appropriately for shipping, and you’ll be set to make money. Per-thousand stitch pricing is a good old standard, but it doesn’t adequately describe how we’re valued. After all, we know you can buy a similarly decorated garment from any one of several stores and end up paying more for roughly the same amount of “work” done on the garment – the huge difference here is in perceived value.
This is where profit-building is done. The way you’re valued goes beyond how many stitches you can produce, and the value you can provide a customer is your method for differentiating yourself from the competition. There are many ways to set yourself apart: providing quality customer service, ease of ordering, quality of decoration execution, quality of materials and garments, creativity and complexity of art, knowledge of apparel style and decoration techniques, style, niche-market appeal, company culture and mission, finishing and packaging of orders, and even ambiance in the customer-facing spaces of your shop. All shape your customer’s perceived value of your finished product.
The best way to increase your perceived value is to sell your customer solutions to their apparel problems, not the apparel itself. Be a consultant and a colleague in their aims, whether that’s in business, team sports or even gift-giving; you want to be a knowledgeable “friend in the business” who provides a quality product with consideration of the customer’s needs. If you can become a seller of solutions, rather than a producer of commodity garments, you’ll be able to charge more for the same hour of work your machine will produce. Be educated, be ready to answer questions, be responsive in all communications, and dare to care about your customer’s needs.
Another problem you may have is simply a matter of confidence; some embroiderers just don’t like to talk money. For some who started as hobbyists, they’ve yet to grasp that their work, albeit enjoyable, is real, worthwhile labor that deserves pay. For those who start from a creative place, they may either get lost too easily in the solving of the design problems to care about costs, or may even feel that creativity is derailed by discussions of price. Both of these are bad habits when it comes to business; it’s why one of the things I’ve always said, is that you have to have the audacity to demand what you’re worth. It’s something many of us have trouble with, especially in creative fields, but working through this block is something that can save you years of suffering and letting your business be a drain rather than a bolster. You’re being sought by your customer because they need your expertise and your capabilities; certainly you have to deliver, but when you do, you deserve to be compensated.
Erich Campbell, an industry veteran, is an award-winning embroidery digitizer at Albuquerque, NM-based Black Duck Screen Printing and Embroidery (asi/700415). He also has experience in designing, implementing and maintaining e-commerce websites. Contact him at email@example.com.