Whats your target profit margin? 20, 30, 40%, more?

[dsbrooks]

Whats your target profit and the minimum profit you will except?

I think I read in Impressions magazine that the average profit margin in screen printing biz is about 20% I like to shoot for at least 30 - 40%. I don't do this full time nor do I rely on it to pay the bills, so I can afford to loose a job to a cheaper competitor. If the first thing the customer wants to talk about is price, I get too busy to do their job and walk away. In the past, I have been able to smell problem customers quick.

I wonder if being expensive is going to hurt me if I ever do go full time? I would like to think it's helping the market as a whole to bring prices and perception up and at least giving the full time guy most of the work. It is nice to cherry pick and do the jobs I want to, for people I want to, and make a fair healthy profit at the same time.  

Just curious

Steve B.

[SicGraFX]

I shoot for 40% or better. I don't pay my personal bills from screen printing either. I look at it kinda like retail sales. In retail they generally jack the price 100-200% and discount from there. Even when something is on clearance it's still over 40% profit for most retailers. (My wife has two friends in retail management one at Fashion Bug the other used to be at American Eagle but now works for the Gap) Kind of disturbing to know that the 5 color t-shirt in the Gap selling for $22 was purchased for around $5 and when discounted to $12-$14 it's flying off the shelves...still at 100% profit!

Since I don't feed myself with the earnings I make from screen printing (hell, I don't even pay myself yet) I'll refuse to do anything at less than 30%. Anything less and I think it's the customer that's abusing the business. Pay it or piss off... that's is my attitude.

Right, wrong, or indifferent...my baby(business) needs money. When it grows up and moves out, I may change my attitude.

[superjadex12]

Regarding this margin queston I'd like to bring the issue up of just how margins are calculated.

It seems that different shops have different opinions on what exactly constitutes a profit margin.

For example over in screenprinters.net it was mentioned a while ago about how someone (and I won't mention the user) was in at roughly 48% margin.
And a couple other guys went on to say this was INCREDIBLE since on a good month they'd get 20-30% . It had the air of "i don't believe you" but it was merely implied rather than stated. I went on to argue that the guy in question was probably NOT PAYING HIMSELF, and not taking into account how many true man hours go into a job, and then having a base man-hour cost. The guy never completely answered and only said "all that matters is what you can get a product for , and what you can sell it for"

Ok so clearly there are some issues here.

In order for us to all communicate better and help eachother reach the next level, it is best if we are all on the same page.

I believe the simplest way but CORRECT way for determing profit margin is to factor in total cost of goods (including shipping/spoilage/insurance/supplies etc).
This would be RAW GOODS cost. Then there would be labor expressed in man-hours. Total labor for a job includes all customer service, art work, setups, tear down, printing, folding/boxing, invoicing, and delivery. Basically the idea is how many man hours did it take for a job to get done and for you to return to back to normal (i.e 5 coated screens ready to go, returned to 5 coated screens ready to go). Ok NOW , once we have an estimated man hour time for the job, we tack on a price to that - 40 bucks an hour or what not. Finally, we figure in some electrical/water costs based on manhours. For example 1 hour of print time means one hour of dryer/flash usage. Etc.

Now keep in mind i am no expert, and im not some pretentious college jerk that took a business course. So I may not have all the fact, nor use all the correct terms. These are just my experience and logical conclusions. SUrely their may be more costs I have missed, which is why i noted it was the "simple" way.

The thing is I see home shops completely tear out the man hours involved with the thinking that since they do it themselves its not a cost. Additionally they may also think, since I DON'T PAY MYSELF, its not a cost. But from a scientific standpoint, it still is a cost that would benefit you in including for the sake of the effectiveness of the equation. So even if you don't pay yourself, even if you don't have man-hour calculation, it would BENEFIT you to include these things because you could key in more on how much you are REALLY making ?

Above all , it would put us all on the same page, and all more able to understand and help eachother.

Going on that, I think most shops with commercial location average 20% ? Which even homade shops should average IF they included man-hours into their equation. Your time is a cost no matter if you pay yourslef or not , still good to know right?

Any thoughts on this is appreciated.

Thanks for reading this far!

[SicGraFX]

Just because I don't pay myself does not mean that I don't figure my labor into the expense of each job. I simply don't pay myself and fold everything I SHOULD BE PAID right back into the business.

I give all my labor and wages owed to me right back to the business...just wanted to clarify that.

It's a fact that most successful entrepreneurs never earn a dime their first few years in any new business start-up. Why should you anyway? The IRS allows you to operate at a NET LOSS for 4 years before they make you pack it in. Seems silly to not take advantage of that leeway.

The bottom line is I'll always do things my way no matter what any book, teacher, or forum post says... and if it's making money then it's working. Just because you post a loss for any given year does not mean that you really "lost" money that year.

[dcasius]

Based on Superjadex's post On my next job, I we will have a 54% profit margin.

[staned]

in my shop i only print profit after i print payoff and i mean payoff everything, ink, equipment, power, t-shirt stock etc. sounds stupid but when you get to the point where it is profit those are the sweetest shirts you will ever run. now i'm going back to payoff printing for a year or two. sucks but takes money to make money.

[Pappaw]

This is how I do it, right or wrong.

Every month I take my bank statement and take the total debits minus bank charges and substrate orders. Then I add that amount to the figures for the previous 11 months to get a year's worth of operating expenses. Then divide that number by 12, then again by 4.25 (weeks in a month) and once more by 46 (hours of operation) to get my operating expenses per hour. Last I add my hourly wage (1 man shop) to get a total business cost per hour.

By taking several time studies, I know (or at least within reason) how long any job will take me. Job cost: Take the time of doing the job times hourly business cost. Take that number and add substrate COST. Then that number times 1.5 (50% markup on cost) then add shipping (I'm not sure why I don't markup shipping) to get the price for the customer.

Sounds a little complicated, but I have it all in a spreadsheet and I can figure a price in mere seconds. The nice thing is that I know I have accounted for all expenses and have a 33.3% profit. Plus, I know how much $$$ that profit is.

Once I got this all worked out, I did a little phone "shopping" and was pleased to find out that my prices fall about in the middle of the local market. I also know that if I WANTED to, I could be the cheap guy. If I need to play "who's got the best price" I can just drop the 50% as much as I'm comfortable with and know as long as I don't zero out, I'll still make some kind of profit.

Like I said, right or wrong, that's how I do it.

[NSPE]

Just be sure you're talking apples to apples with the math.

Profit ($) = Final Sell Price Before Taxes ($) - Total Costs & Expenses ($)

Margin (%) = Profit ($) / Final Sell Price Before Taxes ($)

as opposed to...

Markup (%) = Profit ($) / Total Costs & Expenses ($)

Simple Example: if Sell = $300 and Cost = $100, then Profit = $200, Margin = 66.67%, and Markup = 200%

Some people mistakenly throw out their markup and call it margin, which can be a little to a lot misleading (and incorrect). If someone tells you they are making a 200% profit margin, be sure they aren't just marking the cost up 200%, while actually only making a 66.67% profit margin.

[trebor]

Over the years this topic has been brought up many times. For the sake of comparing with how other shops do in comparison to you there is really only one way. That is with gross profit margin. Sales minus labor cost, minus textile cost, minus cost of supplies dirctly related to printing, equals gross profit. We are all capable of figuring the percentage. These are the only things that we all have in common. With this formula we can compare large shops to small, garage guys to storefronts, contract to retail. During the twenty years I have been in business this number has ranged from about 45% up to 60% depending on our emphasis on the product mix. Contract actually turns a higher percentage of gross profit for us. The question that then must be answered is would you rather have 60% of 100,000 or 40% of 150,000. Or however it might work out for you.
This by no way means you should not know your overhead for youer entire operation and set your pricing from that figure. It is just a quick snapshot of what kind of printing operation you run and the other stuff tells you what kind of businessman you are.
Remember, those things are the only common ground we all have.....so why compare anything else?

[staned]

wow this post is three years old! i don't remember responding, hell i don't even remember what profit is. this is how bad it is, two weeks ago this girl i had dated a couple times called for shirts and i quoted her $80 to run white discharge on 20 black garments that she would supply. she ask me if i saw the ad for a screen printing machine on tv, i said no but she kept talking about it. this week i saw the ad for the yu-do. she has not called back, my state of the art water base ink print shop just got blown off for a yu-du. it's bad enough she choose another guy over me last summer, hell maybe he had a bigger dick but this yu-du thing pisses me off and i have to call her and tell her how she really landed a low blow and i'll du the fraking shirts for free as long as she tells me several times how good the shirts look and what a master printer i am. stan

[stitches4815]

To hell with the douche bag, her new big dick boyfriend, and her Yudo. If she decided to go with the screen printing gimmick that should tell you about her new big dick gimmick........ I mean boyfriend. Now piss off.  

[imagep]

I think that superjadex12 has the correct answer as to what "markup" is.

I really dont pay a lot of attention to "markup" though. I just watch the bottom line.

But to sort-of answer the question, our cost of goods (including all ink/chemicals/substraits/pre-press materials/tape/etc, but excluding labor) is 35%. Of course that is on a mixed basket of products that we offer (screen printing, offset, signage, etc). So I guess that, excluding labor, one could extrapolate that our average markup is something like 200% over materials cost.  I know that sounds like a huge markup, but most of our "markup" is due to the value we add to products through our labor and equipment usage, not just because we triple the cost of our materials.