Full Version: Pricing name badges
From: Mike (MIKEN) [#8]
6 Mar 2007
To: Precision Laser Creations (PIZZAMAN) [#6] 6 Mar 2007
From: Precision Laser Creations (PIZZAMAN) [#9]
6 Mar 2007
To: ALL
Thanks guys. It's obvious that there is a big difference in what everyone charges. I guess somewhere in the middle is where I'll probably land.
Tony
From: Doc (GREAT_ATLANTIC) [#10]
6 Mar 2007
To: Precision Laser Creations (PIZZAMAN) [#1] Unread
From: Laser Image (LASER_IMAGE) [#11]
6 Mar 2007
To: Doc (GREAT_ATLANTIC) [#10] 7 Mar 2007
From: Gary (GNELSON) [#12]
7 Mar 2007
To: gt350ed [#2] 8 Mar 2007
From: Peter [#13]
7 Mar 2007
To: ALL
I don get it ?
if you sell your badges for less than $10.00 each you will not sell any less than you are selling now..
And I am bemused by the amazement of those of you that think it is difficult to sell badges for what they are worth . 8-O
By selling badges for less than that I would deduce that.
Nah..cant be bothered....
We have nutters here in Adelaide selling full colour Millenium printed badges ..with magnets for....$ 5.00....but it still doesnt prevent us from selling badges for what they are worth..
Now, I should say..we have to match these guys, My God ..if we dont..we will go out of business...Oh No...its competition at work....yet..well we dont..
We just continue to sell ours for what they are truly worth...and we still get the business....( funny that :O) )...and when we get the odd scab come in and ask us to match the price...we simply smile and begin to work through, what they will achieve by shopping with us..some just walk out....
Oh...How sad. :-( .....But most begin to soon realise why they walked in our door.. :-)
I am truly not trying to be smug or up myself.......truly (angel)
But it isnt hard to make a living in this business..if you simply stick to your guns...know your business plan, know your market and your goals, know your costs and overheads and know what you need to make for profit.....blah blah blah... :P
:@
regards
Peter
From: Engravin' Dave (DATAKES) [#14]
7 Mar 2007
To: Peter [#13] 9 Mar 2007
.I believe there are some companies who attract business based on price. Their business will be built around that type of customer, which is not very loyal. As soon as they begin to raise prices to where they should be, a percentage of that customer base runs to the next low-priced supplier. For some, that thought gets them out of their comfort zone.
Since there is money being left on the table, it makes sense to raise prices 25%, knowing that they will likely lose 25% of their business, but still keep revenues the same. At that point they will have surplus production capacity to focus on other products or markets to generate even more revenue. This is an example why you should never leave money on the table..
It may not be quite as simple as I have stated above, but that is the way markets work in general.
EDITED: 7 Mar 2007 by DATAKES
From: Jerry (JERRYERVIN) [#15]
8 Mar 2007
To: ALL
I have been in the Custom Picture Framing business for over 16 years. I have added an engraver to the mix and will soon offer trophies and awards to my customers.
I just wanted to add that in our industry, we have the exact same conversations.
Those of us that can't or won't charge enough for our goods and services don't make it in business very long.
Thanks Guys for reminding me that it is all the same world.
Jerry
From: UncleSteve [#16]
8 Mar 2007
To: Engravin' Dave (DATAKES) [#14] 8 Mar 2007
Why in the world would anyone make standard 1x3 name tags when you can buy them engraved with a pin or two studs on the back for under $3.00 and sell them for $10+?
From: Doc (GREAT_ATLANTIC) [#17]
8 Mar 2007
To: Peter [#13] 9 Mar 2007
I must have missed that class. The laws of supply and demand in a very competitive market may have a little something to say about this overly broad assumption. Perhaps the economics are different in Adelaide, but here in the Center of the Universe ( ;-) ) we're driven by the dynamics of competition.
Our store is located in Fairfield County - among other things, essentially the bedroom community for Wall Street. Additionally, the adjacent town of Stamford is the second largest concentration of corporate headquarters in the U.S. (behind only Manhattan.) Unlike the Lodge Poohbah who might buy 5 badges at a time, the people who buy these types of items are professional buyers who purchase 500 at a time. Forget the Internet, if we were to even suggest a price resembling $10 for a name badge, not only would we not get any orders, but we'd also lose credibility for dozens of other product types they purchase: plaques, awards, crystal, client gifts, etc.
"What they are worth" is what the client willing to pay....nothing more or less, no magic formula, nothing steeped in tradition. And in fairness, it's important to examine the economics here. Consider a typical 3x1 name badge, laser engraved with a magnet:
Plastic: $.14 (a quarter-sheet of Rowmark LazerMax yields 73 badges of this size)
Magnet: $.29
Labor: $1.50 (based on 40 seconds at $135/hour)
Amortized Overhead: $.01
Total Cost: $1.94
At $5.25, the margin is 2.7 times cost. Now, how many times do you think the average retailer will reject that kind of return on an incidental item like a name badge? We have a little saying in this company: Hogs get fat, but pigs get slaughtered.
Just a thought.
From: PenTrophy (PENINSULATROPHY) [#18]
8 Mar 2007
To: Doc (GREAT_ATLANTIC) [#17] 8 Mar 2007
From: Dave Jones (DAVERJ) [#19]
8 Mar 2007
To: Doc (GREAT_ATLANTIC) [#17] 8 Mar 2007
In your expenses you show 40 seconds on the laser, but I'm guessing there's a couple minutes involved there somewhere, such as taking the order, entering the name in the computer, positioning the name to the next available space on the plastic, putting the plastic in, removing the final part, cleaning it and wrapping it, etc... At least if you're making the badges in small quantities. Obviously less extra time per badge when doing large quantities.
$0.01 overhead amazes me. If that's based on 40 seconds, then that's $12/day (assuming you can bill customers for ever second of an 8 hour day), or $60/week or $240 per month. That means you can pay the rent, utilities, equipment costs, insurance, garbage pickup, showroom materials, office supplies, workers time not spent on billable jobs, your time cleaning the laser, accountant, etc... all for $240 per month. But if the real job took longer than the 40 seconds of laser time, lets say 3 minutes each for one or two badges, then that $0.01 comes out to more like $32/month to cover all of your overhead.
I don't know your business at all, but if it does take a couple extra minutes per badge in small quantities, and your overhead is more like the typical couple thousand a month that most small businesses have, then I'd add another couple of dollars to that cost, bringing it closer to $4 for a $5.25 sale. But I'm making a lot of assumptions and could be completely wrong here.
From: Mike (MIKEN) [#20]
8 Mar 2007
To: ALL
I have several wholesale customers which I sell as a group. I have a fixed price for all of them whether their order is one or a 100. All but one customer in this group sells 1500 to 3000 of these name tags per year each. They all sell at the price I established as "magic". But one of the members insists on setting their own price which is 20% higher--and even though it is well under $10 per name tag they haven't sold a single one in more than three years.
From: PenTrophy (PENINSULATROPHY) [#21]
8 Mar 2007
To: Dave Jones (DAVERJ) [#19] 8 Mar 2007
I am reading from your method of billing, when a customer walks in your store the meter begins to run. $1 per question and a sir charge if you have to further explain the answer. ......LOL....
I don't know how others laser/rotary machines work but I can run an entire set of name plates without repositioning the plastic. If the customer e-mails me.... Even better.. Merge Print.. A teams worth of trophy plates and all I type in is year and team name once.
I will admit rounding the corners and placing a bar pin or magnet and then packing the item take extra time. And of course preparing the bill and if they pay by check.... well then there's a trip to your bank or the % fee for processing a credit card..... and on and on.
Some of use charge $4.50 and some charge 18.50 (with a $15.00 set up fee)....... and ther rest of us are in the middle.
Where does it end....... :@
From: Doc (GREAT_ATLANTIC) [#22]
8 Mar 2007
To: Dave Jones (DAVERJ) [#19] 8 Mar 2007
President
takes 34 seconds to laser (...like I don't have enough to do, I actually threw one in the machine as a reality check.) If it's taking you a total of 3 minutes per badge on average, perhaps there's a more efficient method you might consider.
Second, I think you're confusing the overhead issue. Overhead is a relatively fixed cost. But to amortize its effect on your business, you really have to carve it up based on total gross sales over the course a full fiscal year, not as a component of time or a single sale. Remember that more products are being produced and sold at the same time as the individual badge is spending in the laser.
Finally, you're missing the hourly rate at which labor has been accounted. In our case it's $135.00, which could be more or less depending on your own business model. Once again, this is a component not only of the margin, but also as a credit on the balance sheet against amortized cost (...and overhead.)
In our case, $5.25/badge yields an acceptable profit based on volume. Show me a competitor that charges my client base $12.50, and I'll show you an ex-competitor.
From: Dave Jones (DAVERJ) [#23]
9 Mar 2007
To: Doc (GREAT_ATLANTIC) [#22] 9 Mar 2007
My whole point was that in calculating your costs on an item, there is more time spent on an item than just the laser time. And that extra time needs to be calculated into what it cost you to do the job in order to see your real profit on the job.
Overhead is not completely fixed, but usually is fairly consistent. Overhead has to include everything that costs you money that is not directly added to an invoice for a sale. So if your phone bill or electric bill goes up, so does your overhead. You can average it over the year, but need to add enough to each product made and sold to cover it or it ends up coming out of your calculated profit, in which case your profit isn't what you thought it was.
And overhead does relate to billable hours, because time you spend doing things that are not billable, such as cleaning the laser, means time spent that you're not paying the overhead. If a person running a one man shop works 40 hours a week and only 30 of that is billable work time, then they need to calculate the overhead to add to each job based on those 30 hours, not 40. Which means the amount added for overhead is a bit higher than if calculated at a 40 hr week.
It's not that much more complicated with a multi-person shop. If the total number of jobs done in a week in a larger shop add up to 150 hr of billable time, then the overhead gets divided by that many hours instead of 30. But in a multi-person shop the overhead is also much higher, so it tends to still be a fair amount that needs to be added.
At $0.01 added for a 1 minute job in a one man shop that can bill for 30 hours of every week, that's $18/week to cover overhead. Even if you have 3 jobs going out the door at the same time, that's $54/week to cover overhead. Even a shop running out of a basement has more overhead than that. Even at 34 seconds per badge, that's $31/week if it's a single job at a time and $93/week for 3 jobs at a time. To pay an overhead of $2000/month you would have to make the equivalent of 200,000 badges per month if there is only $0.01 per badge to cover it. That's 63 hours a day worth of badges at 34 seconds each.
From: Doc (GREAT_ATLANTIC) [#24]
9 Mar 2007
To: Dave Jones (DAVERJ) [#23] 9 Mar 2007
Here's an example: there are four of us working here. While one is creating 100 name badges, another is fulfilling a custom resin order of 300 pieces, another is processing a set of 30 state plaques for a tournament and yet another is rotary engraving 150 handles for curling stones. The overhead costs are fixed....insurance, rent, etc. remains the same, and even the electricity is fairly constant since the machines are almost always running. But the total gross revenue is being credited against that overhead....not the individual hours of the each job.
....and if my overhead was only $2,000/month, I'd throw a party. :'-(
EDITED: 9 Mar 2007 by GREAT_ATLANTIC
From: Harvey only (HARVEY-ONLY) [#25]
9 Mar 2007
To: Doc (GREAT_ATLANTIC) [#24] 9 Mar 2007
That will get you into a whole load of financial problems.
There are more complicated ways of figuring it that are more accurate but this will give you a handle.
Take all of your costs, less material costs. Divide that by the hours that are worked, let's say on a monthly basis. That is the real cost of an hour of anyone's time. I had a spreadsheet and a method of figuring posted at one time that could give you the cost of each person's time easily.
It usually turns out to be between 3 and 15 times the person's actual salary. Large companies run about 5X, smaller ones about 8-10X. More than that and you could be in trouble unless you have a fantastic markup.
From: Doc (GREAT_ATLANTIC) [#26]
9 Mar 2007
To: Harvey only (HARVEY-ONLY) [#25] 9 Mar 2007
In other words, can you justify selling at $12.00? Absolutely...in a vacuum. But unless you calculate your absolute costs against gross revenue, you'll never get a picture of your low-end profitability when it's needed. And unless you create something that is truly unique, patented, sold only by you....the competition at some level will always exist.
From: Dave Jones (DAVERJ) [#27]
9 Mar 2007
To: Doc (GREAT_ATLANTIC) [#24] 9 Mar 2007
I didn't miss the multiple jobs part. I did mention that in the second half of my post. If you have 4 people working 8 hours a day and every minute of every hour they work can be charged to a customer (aka billable hours), which is not likely but possible, then your overhead should be spread across 32 hours of jobs per day.
But you're missing my point. At $0.01 to cover overhead on 40 seconds of work, for 32 hours in a day (4 people all working at the same time on 4 different jobs) that still only brings in $28.80 a day from all the work those people did to cover your overhead. That's only going to cover $576 of your overhead that month. The rest of your overhead is coming out of what you calculated as profit.
I'm not saying you aren't making plenty of money to cover your overhead. I'm saying your calculation of your profit per job is flawed if you don't account for enough of the overhead, and for the extra small pieces of time involved in completing the job, beyond the laser time.
Here's another way to look at it, and why you should charge overhead based on time instead of gross sales. These figures are exagerations, but bear with me. Say you have one type of product that makes you $10 per hour profit and another one that makes you $1000 per hour profit. Lets say that based on dividing overhead by billable time your overhead costs you $1 per hour. If you charge it based on gross sales then you would add $0.01 to the calculation of the $10/hr profit job and $0.99 to the $1000/hr profit job. But then what happens if in a given month you only get orders for the one that pays $10/hr profit? You end up only covering 1% of your overhead. If you had calculated both at the $1/hour overhead then no matter what orders come in, the overhead is covered.
And on your comment about several minutes per badge being extreme. That example was based on doing a couple of badges, not 500. No matter how many you do there is more time involved than just the laser time. For a small order the extra time might be several minutes divided by only a couple of badges. For a large order it might be more minutes divided by a lot more badges, so might only average a few extra seconds per badge. But it's still time beyond laser time that should be calculated into your cost analysis. Your cost per badge is quite different if you get an order for 2 badges vs an order for 500.