posted
Great topic ... If you don't know your costs, how can you set a price??
Shop cost is easy to calculate, just look at last years financial statements, add all your expenses (except costs of goods sold (materials)), and divide by the number of billable hours in a year. That's your shop cost. Like anything else you sell, the shopcost must be sold with a profit margin added, otherwise you would be working hard to turn a dollar into four quarters. Based on past experience (and financials) I know my shop costs (all in) to be around $32 per man/hour, thus when I set labour rate at $55 per hour I know I can rely on a 40% margin of profit.
-------------------- Mike O'Neill
It has yet to be proven that intelligence has any survival value. - Arthur C. Clarke
posted
Judi and I have taught many seminars on this topic and are always amazed at the number of students who don't even know the price of a loaf of bread. Signs have value for which you are entitled to charge for each of the three main factors: artistic value, intrinsic value and purpose value. We used this base for QuikPrice when we developed it (and it is in final stages of rewrite now). The artistic value is time, effort and knowledge background that is a part of the design and its execution. The instrinsic value is the materials and components and their related costs including installation. The purpose value or job value is that which the sign does once in place. The last one is also related to the value in sales the sign has over its lifespan which the customer realizes.
We tend to do the more custom projects in our area and most of our competitors send many of those to us. What they charge for their work is of little interest to me. While it is necessary to know about the local market place, I tend to believe that what I do is like no one else is doing or could do. My customers come to me because they want me to do their work. Certainly we do what is necessary to please them but we charge accordingly as well. June 30 will be our 75th anniversary so much of what we do has kept us in business quite comfortably. I only work late or weekends by choice and have for many years. Once in a while we get fooled by circumstances but we know our costs and we price our work so that we are profitable. Judi does complete job cost accounting and our work orders and invoices track that with a coding system that allows us to take our own pulse. We can adjust our pricing yearly, monthly, weekly or daily if we need to do so. I have always been amazed and saddened by those who wish to charge strictly by the hour, by the square foot, by the number of letters or some other equally irrelevant system. Every job is custom in this business, at least to some degree, and all the factors of the job must be considered in pricing.
As I get older, I am much less likely to lower my price or charge outdated prices. After all, I must make those premiums for long term care insurance and consider helping the grandkids with college tuition. I also think that those of us who have put in the time, deserve to profit from our experience. That never means gouging a customer but making a good profit keeps me here and available when they need me again.
-------------------- Kent Smith Smith Sign Studio P.O.Box 2385, Estes Park, CO 80517-2385 kent@smithsignstudio.com Posts: 1025 | From: Estes Park, CO | Registered: Nov 1998
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posted
I sort of got overwhelmed here yesterday, but I did take a few minutes to investigate Mark's ProfitWatch Program. It's excellant! Download and install it.
I really think we should be addressing 2 issues here. Do you know what it costs to run your household a year?
A few years back, Barb and I reached a point that resulted in a "serious discussion." We were both working long hours at the shop and charging what seemed like a reasonable shop rate. We never took vacations and lived a very simple lifestyle. The truth is we were always had more month than income.
We've all heard our Dads and GrandDads talk about the good old days. You know the drill. "In my day we worked for a dollar a day...blah, blah, blah" In the 70's, I worked in factories where $3 an hour was the top rate. When I left that job in 1983, the rate for the same job was $12. I remember working lots of overtime that last year and making $18,000. Heck! Managers only made $25,000.
Let's jump ahead 10 years. Barb and I are having our "discussion." I'm a bigshot signmaker with my own shop...earning almost as much as those managers I remember. I explain the real problem is Barb's weekly habit of grocery shopping for our growing family of 6. The kids are leaving lights on! That thermostat should never be above 68F! You're spending money like a drunken sailor!
A bookeeper friend sat down with us and introduced us to a budget. When I finally sat down and added up how expenses had grown over the years, I was shocked. I had a hard time dealing with the reality but at least we finally knew what our real challenge was.
I only tell you all this in case there is anyone else out there that is living in the past. You may be single now, but there is a good chance you will have a family to house and feed in the near future.
If you don't know what your personal income needs to be, you might want to consider doing a second worksheet to determine what you need to make a year. Include items like health/life insurance, along with a vacation. These should not be luxuries, work them into your wage.
When you finally know what you need a year, it's time to figure in how much tax you need to pay in order to keep that amount. This is an area someone else will have to jump in on, as rates differ.
We haven't talked about profit. As a business owner, you are making an investment. When you invest in a business, you should be looking for a return on your investment. This is another area I don't feel qualified to talk about. I know some of what we have already talked about here is scaring the hell out of some of you.
The plan here is to come up with a realistic figure of what you need to get by annually. We'll enter this figure as the first item on our determining an hourly rate project. Anyone still with me? If I've omitted anything, please elaborate.
[ February 18, 2003, 11:31 PM: Message edited by: Steve Shortreed ]
-------------------- Steve Shortreed 144 Hill St., E. Fergus, Ontario Canada N1M 1G9 519-787-2673
posted
Steve, The one thing that is a "must" item has to be some sort of retirement fund for the shop owner/operator. Nobody works till they drop, and once they quit working, there has to be some sort of nest egg built up that can generate enough income to live on. Failure to account for that item = living on welfare in your old age. How attractive is that prospect?
-------------------- Ken Henry Henry & Henry Signs London, Ontario Canada (519) 439-1881 e-mail: kjmlhenry@rogers.com
Why do I get all those on-line offers to sell me Viagara, when the only thing hardening is my arteries ? Posts: 2689 | From: London,Ontario, Canada | Registered: Feb 1999
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posted
Good Post!!. Since being in business on my own I worked every weekend because I was paying off a house, 2 cars a motorbike and my workshop. When I got my Gerber 4A in 1985 I was able to put off the bludgers that I employed and Liddy was able to help me apply vinyl. By 1990 I was able to employ a good trustworthy tradesman and a good office girl, and me and Liddy had a 3 month around the world trip. This happened because we charged exactly the same price for signs that we had been and were even cutting vinyl for other signwriters. I remember a rep from Letraset (Where we purchased our computer) saying that most signies were idiots because they paid big money to put in the new technology so they could drop prices, and so the era of the "vinyl jockey" was born very early. Over the years the price structure has eroded slightly but I sell by telling my customers that vinyl does last better than paint and that they are being charged for professionalism from an old tradesman who did the hard yards and they are still better off by having the new way of doing things. I must admit though that Liddy is a better businessperson than myself and she actually keeps an eye on me, because I am a softy and would let a lot of customers pull the wool over my eyes.
-------------------- Drane Signs Sunshine Coast Nambour, Qld. dranesigns@bigpond.com Downunder "To err is human, but to really foul things up requires a computer" Posts: 965 | From: Nambour, Qld. Australia | Registered: Nov 1998
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posted
That sure is a nice looking sign Glenn, But printing the entire thing on the Edge does explain why you have to charge $750.00 especially with the UV Clear. But if that was handpainted, which I don't do anymore, I know I should do more, but would'nt one be able to do it a little cheaper using that technique? or even just printing the logos? and using paint or vinyl for the rest.
4x8 32ft at 20 dollars a ft $640, yep you wold most certinly have to charge that price.
Nice job, thanks for posting the shot.
By the way Ray, I agree with you, "Totally." End of thought.
[ February 19, 2003, 07:07 AM: Message edited by: Neil D. Butler ]
-------------------- "Keep Positive"
SIGNS1st. Neil Butler Paradise, NF Posts: 6277 | From: St. John's NF Canada | Registered: Mar 1999
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posted
Signcraft used to do a feature called "What did you get for it?" Maybe we could do the same thing here for comparisons on customers and areas of the country. It might possibly help some of us that might not be getting the price needed for a job, based on materials, and difficulty. Id be willing to post some of mine and the prices I received for them and would consider it a great learning experience to see what others get for their work.
-------------------- Maker of fine signs and other creative stuff. Located at 109 N. Cumberland ave. Harlan, Ky. 40831 606-837-0242 Posts: 4172 | From: Ages-Brookside, Ky. Up the Holler... | Registered: Jul 1999
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Yep that can be downloaded, modified in Excel if you have it, and printed. As it is it doesnt have spaces for every possible expense, but they can be added easily.
You'll notice the worksheet also has areas for personal and household expenses, as I personally figure all that stuff into my own overhead cause hey, the business has to pay for that stuff eventually one way or another!
-------------------- "If I share all my wisdom I won't have any left for myself."
Mike Pipes stickerpimp.com Lake Havasu, AZ mike@stickerpimp.com Posts: 8746 | From: Lake Havasu, AZ USA | Registered: Jun 2000
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On John's suggestion of posting some comparative pricing info, I just looked at a page on my website. I haven't looked at my site, much less updated it in years, so I'm not completely proud of it anymore, but the price info on my pricing page is still close to representative of my prices. The $400 4x8 was for my landlord & the job included 2 4x8's, but I would ask at least $400 each without installation, although back then I included the install. Also Sam's trucking included an on-site visit & design work (not a source of pride, but even basic designs would add some cost to my $200 price these days.
[ February 19, 2003, 01:12 PM: Message edited by: Doug Allan ]
posted
Yes John that's a real good Idea, But the only thing I have a problem with is that maybe your competition will see it, go to the customer, and say "See? You paid too much for that Job, I could have done it for such and such. It could happen, it happened to me, but the Customer threw the Guy out... seems he started off with saying that I'm a Rip-off, Man I tell you, I wish the sign Guys around here would smarten up and make some money for themselves.
-------------------- "Keep Positive"
SIGNS1st. Neil Butler Paradise, NF Posts: 6277 | From: St. John's NF Canada | Registered: Mar 1999
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posted
I first used the worksheet that Jeff Cahill had on Signcraft. I used it a few years ago. When ProfitWatch came out, I tried it out. I got the same exact hourly rate as the worksheet.
So I keep Profit Watch because it's alot easier than keeping copies of the worksheet. They both do pretty much the same thing.
I think the part that you need to be particularly careful about is the "production hours" you actually are producing. I figured out how many hours I wanted to produce in a week to meet by goals. This produced a nice hourly rate of $60.00 per hour. Now, everything I do is based on time. I don't care if it's shop time with the plotter, artwork time, weeding, masking...everything gets the $60.00 per hour.
That works for me.
Randy
-------------------- Randy Graphic Details Promotional Merchandise Distributor South Glens Falls, NY Posts: 381 | From: South Glens Falls, NY USA | Registered: Mar 2001
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posted
Mark,Im still waiting on you to develop an estimate program for macs. Sure would like to see one someday.
-------------------- Maker of fine signs and other creative stuff. Located at 109 N. Cumberland ave. Harlan, Ky. 40831 606-837-0242 Posts: 4172 | From: Ages-Brookside, Ky. Up the Holler... | Registered: Jul 1999
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I know it's not a perfect answer, but EstiMate works like a charm under Virtual PC. Virtual PC will run Windows XP in a Mac window, and run any Windows program including EstiMate.
Thanks for your continued interest!
-------------------- Best Regards, Mark Smith EstiMate Sign Pricing Software It's Not Luck. It's EstiMate.™ http://www.EstiMateSoftware.com 1-888-304-3300 Posts: 724 | From: Asheville, NC, USA | Registered: Nov 1998
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posted
You get a request from customer for a sign, after collecting all the info and a trip to the site you return to the shop and start working on your idea. Special colors? logos? sizes? etc. and still have yet to make a penny. You make a sample to e-mail or bring to client. Here is my per hour rate. $65.00 plus local travel time per hour with additional 2.00 per mile outside of area. Works for me.
-------------------- Lewis Richards Just Signs Inc. Philadelphia Pa. justsignsinc@aol.com Posts: 2 | From: Philadelphia | Registered: Feb 2003
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