Preparing A Price List


Discover the benefits of putting together price lists—even if you don’t share them with customers.

It’s often the first question customers ask, and it’s one of the most difficult to answer: “What will it cost?”

Coming up with a price list for screen printing presents a challenge for most decorators because of the many variables involved. After all, it’s not like a loaf of bread or a gallon of milk at the grocery store, where each one is identical and therefore costs the same. With a screen printing order, variables range from garment type and number of colors to print locations, decoration processes required and order size. So how can one single pricing sheet possibly convey all of that information?

A number of industry-specific software programs are available to help with the difficult job of giving customers prices for screen printing, but with or without such programs, there’s still a fair amount of research you must do. True, the software helps automate the pricing process — and that’s no small feat — but in the end, you still must input the numbers required for the software to crunch out a price.

Ultimately, every shop must develop their own system for providing customers with pricing information — one that works best for its particular needs. Still, it’s a huge help to get some advice from screen printers who’ve been there before, as well as suppliers who know the ins and outs of the business.

Why They Matter
Some screen printers may be tempted to just figure out prices right on the spot for each prospective customer rather than taking the time to make a pricing list or purchase pricing software. Bad idea, veterans say. For starters, it takes time to figure up a price from scratch — time that your customer doesn’t want to spend.

Brian Kavanagh, co-owner, Slick Shirts Screen Printing Inc., Lansing, Mich., did an experiment where one of his employees called every local screen printer and asked for a price quote. “A lot of them took a long time, and some of them had to call him back with a price,” he says. “People don’t want to fiddle around. They want a price, and they don’t want to wait. My employees can give a quote over the phone in a matter of minutes. That’s one of the best advantages we have over the competition.”

Even if you can offer a price quickly, that doesn’t do much good when you’re out of the office, says Brian Walker, president, T-Quoter, New Philadelphia, Pa. “We created our pricing software because when people called our shop for a quote and I wasn’t there, an employee would say, ‘The owner will call you back with a price,’ and the customer would just hang up,” Walker says. “Now employees can give the same price I would’ve given. I can leave the office and they can quote jobs.”

Adds Andy Lantzman, president, Classic Impressions, Pittsburgh, Pa.: “With custom jobs, the important thing is to quote somebody reasonably fast,” he says. “You need to generate it within five minutes, so you need something to refer to.”

Kavanagh, who currently uses Microsoft Excel spread sheets to compute pricing, initially spent several months configuring Excel the way he wanted it and set it up so he could dump his favorite distributors’ Excel price data into his master file to create his price lists. The process was a “pain in the butt,” but one that was worth the effort, he says. One big plus: His shop’s prices are consistent. “If one employee gives a price, and the customer calls back, another employee would still give the same price,” he says. “Some people fudge as they go, but we make sure we’re consistent.”

Handing out Price Lists
Of course, developing a price list doesn’t necessarily mean that it’s going to be something you share with the public. Some printers develop sheets for internal use only, as a way to quickly provide quotes for customers. Others don’t develop printed price lists at all; they generate quotes in real-time using pricing software. But in either case, many printers prefer to provide customers a verbal and written quote only — one that’s specific to the job and doesn’t reveal the shop’s entire pricing structure.

“We give prices right over the phone, or written if they need it, but we don’t want them to hand our price list to competitors,” Kavanagh says. “When some of the larger corporations and government offices need something in writing to submit to their bosses, we’ll fax or e-mail it.”

Walker — whose company makes software allows him to e-mail quotes in PDF format — doesn’t use a price list, instead pricing each job individually using his software. “The problem with a price list is the amount of items in each vendor’s catalog. You have so many styles to deal with,” he says. “Also, price lists open you up so that your competitors know exactly what your prices are.”

Price lists also facilitate price wars among screen printers, Walker says, creating what he calls the “toilet bowl effect,” where prices keep spiraling downward. “Screen printers are our own worst enemy. Company A is an established shop with a printed price lists. Company B wants more business, so it takes Company A’s price list and charges less,” Walker says. “So Company C comes on the scene and gets Company B’s price list, and charges a little less than him.”

However, Jay Malanga, president, Shopworks, West Palm Beach, Fla., cautions that printers who don’t offer printed price lists can come across as secretive. “A lot of customers just want to know prices, they’re not price shopping,” he says. “You should publish your prices, at least on the Web. People will see them and call you with a price in mind. Even if you give them a discount for a higher quantity, you have something to work from. It accelerates the process.”

The debate about whether or not to hand out price lists may be a mute point since most customers rarely ask for one anyway, says Ron Lykens, president, Xtreme Wear Printing, DuBois, Pa. “They just call and ask for quotes,” he says, although he points out the contract customers are the exception.

Lanztman says he generally doesn’t even provide written quotes to customers, although he occasionally will e-mail one, if they must have documentation. “I hate paper,” he says. “We just save the customer’s quote in Shopworks software.”

Assembling a price list isn’t easy and requires considerable research to do it right. Here, veterans reveal how they developed their price lists.

 

Most screen printers will tell you that it’s critical to have a price list — whether or not you share it with the public — so you can offer fast, consistent quotes to prospective customers (see “Preparing A Price List, part one). But how does one go about developing a price list?

To a large degree, the answer depends on your pricing philosophy in general. And as most screen printers know, there are as many schools of thought on pricing as there on parenting and politics—and everyone tends to feel just as strongly about their respective pricing philosophies, too. That aside, it also depends on whether you want to do things manually, or use software, which helps automate the pricing process — or simply base your prices on those of other printers.

Extensive Lists
For Brian Kavanagh, co-owner, Slick Shirts Screen Printing Inc., Lansing, Mich., the ideal approach to pricing is to look at the cost of goods and add a margin, which he does on a curve.

First, he receives price lists from his apparel wholesalers in Excel format; then he inputs those figures into a spreadsheet with formulas he created for his pricing needs. He creates a binder, which is filled with each distributor’s style numbers, product descriptions, colors, sizes and page numbers in the respective catalogs. “Once I load in the price lists, Excel marks up everything. It only takes about 15 minutes per list,” he says.

The formula marks up items on a curve so that lower-priced items get a significantly higher markup than higher-priced ones, he explains. “A fifty-cent item gets marked up about 400%, but a $100 item gets marked up only 20% to 30%,” Kavanagh says.

He has developed nearly two-dozen price lists, each one particular to the apparel distributors his company uses. He updates the lists once a year. Once he updates the info, he makes 10 duplicate binders for his employees to use when quoting.

“In the long run, it saves me so much time. You just flip the page, and there’s the price,” Kavanagh says. “I’ve got lots of employees who quote jobs. I don’t want to be the one tied to a desk quoting jobs, so they all have price lists that correspond to the distributors’ catalogs. The employee just goes to the appropriate page, looks at how many pieces they want, and there’s a set price for a one-color print.”

Most distributors are more than willing to provide these detailed Excel price sheets. “If they don’t give it to me, I’m not going to sell their product,” Kavanagh says.

However, some industry veterans feel that making price lists for a variety of products is not the best approach. “There are some advantages to taking your most common items and committing them to a price list,” admits Jay Malanga, president, Shopworks, West Palm Beach, Fla. “But most people carry so many products that they’d have a price list of thousands of items.”

Examining Your Costs
For Ron Lykens, president, Xtreme Wear Printing, DuBois, Pa., developing a pricing structure and list began with studying his staff’s production time to track labor costs. “I also took the average cost per month for my equipment, and divided that by the hour,” he says. “This way, I could break my costs down to the hour — my labor and my cost of goods.”

Lykens used that information to develop a matrix spreadsheet that he uses to figure prices. “We tried to get it computerized, but the numbers got thrown so out of whack,” he says. “We don’t use a computer; we just use the rough price sheet.”

Getting all the information necessary to put together the pricing sheets was a time-consuming process, he says. “We spent two weeks mulling it over and getting the information for our sheets,” Lykens says. “I called a lot of my competitors as a guideline. Then, when we started generating profit-and-loss statements after our first six weeks in business, we adjusted our prices to give us a 45% gross profit, which is the guideline suggested to us by [industry consultant] Mark Venit.”

For lower quantities, Lykens set up his price list to have higher markups on lower quantities, and vice versa. “But at the end of the month, we want to average 45%,” he says.

Meanwhile, Malanga strongly recommends that screen printers build price lists around the market and their margins, not their costs. “The market decides how much you can charge,” he says. “When you’re looking at cost of goods, how do you capture labor and marketing? It’s almost impossible.”

Ask the Competition
Andy Lantzman, president, Classic Impressions, Pittsburgh, Pa., initially developed his pricing list the easy way: He called other printers to see what they charged, and he followed suit. It’s a simple solution for most printers, he says, given that “50% of them don’t even know what margins are. Doing price lists the right way is difficult because of all the variables,” he says.

In keeping with his simple approach to pricing, Lantzman doesn’t use software to automate the process. He works with new employees on the first few dozen price quotes they put together, and then reviews the next two dozen that they do on their own. “Once they’re comfortable doing quotes, I’m out of the loop,” he says.

If using competitors’ pricing as a starting point is the approach you take, try to find a happy medium between the high and low ends of their prices for your own, Malanga advises. “When you call around, you’ll get a wide range,” he says. “I never wanted to be at the top or the bottom; I wanted my prices about two-thirds of the way to the top. If you’re starting at rock bottom, there’s no room to negotiate.”

However, using a competitor’s price list to build your own is risky business, many industry veterans say. “Company A might be able to price the job for $5 and make money, but Company B might lose money on the job at that price,” says Brian Walker, president, T-Quoter, New Philadelphia, Pa. “That happens because some printers don’t want to figure it out; they want to be told what to charge.”

Daunted at the thought of figuring prices manually? Consider the various software options that can simplify the process — after you do a little homework.

 

Establishing pricing for your screen printing shop can be a bewilderingly complex process, which perhaps is why so many shops simply base their prices on those of their competitors (see “Making Price Lists, Part Two”). But there is a way to make things simpler: pricing software or tools available in screen printing specific shop management programs.

No, pricing software doesn’t automatically tell you what your shop should charge. Rather, it automates the actual calculation of price, based on the information you provide the software. After the software is set up with costs and information specific to your shop, getting a quote is just a matter of asking a customer about variables such as number of colors, shirt style, and quantity, suppliers say.

“There’s no way you can put some numbers in, and out pops the answers. You have to come up with a price list and see how it does. How does it affect sales and margins? Are you making the kind of money you thought you would?” asks Jay Malanga, president, Shopworks, West Palm Beach, Fla. “Then you can adjust your prices from there.”

Some software programs make it easier for users to update pricing information from wholesalers. “We put catalogs for about 30 or 40 wholesalers in a downloadable format for our users and post them on our Web site,” Malanga says. “They typically change twice a year, and the user can download it and automatically update the prices.”

Another plus: Pricing software forces printers to track and gather information they should have anyway, veterans say. For instance, many home-based printers have no idea what their overhead costs are — and some don’t even realize they have overhead costs.

“They’re not charging for it, and then when they grow their business, their costs increase, but customers still expect those low prices,” says Brian Walker, president, T-Quoter, New Philadelphia, Pa. “They need to take those expenses into account all along. That’s where pricing software can help.”

Pricing software can pay for itself in time savings, suppliers say, and by eliminating human error. It also can provide professional-looking quotes in PDF format, among other functions, depending on the program. Additionally, prices that are spit out from the computer also seem more legitimate to customers than one that simply comes off the top of the printer’s head, veterans say.

“They figure if it’s coming from the computer, it must be correct,” Walker says. “If you’re pulling from a price sheet and doing stuff manually, they’re more inclined to want to bargain with you.”

Software Choices
Some programs are aimed at mom-and-pop shops and cost around $1,000, while others — such as Shopworks, which starts at about $5,000 — are intended for growing shops earning at least $350,000-plus annually or more. Shopworks — which has a vast number of capabilities besides pricing — also has multiple pricing tiers, such as bronze, silver and gold, so that printers can give better prices to premium customers, for instance.

Malanga says that some software approaches pricing from a manufacturing standpoint, looking at costs for labor, materials and overhead, and adding a profit margin. “I subscribe to the Mark Venit school of thought, which is that your price should be market driven, not manufacturing driven,” he says. “Our software figures price based on knowing your margins.”

Shopworks allows Andy Lantzman, president, Classic Impressions, Pittsburgh, Pa., to track his margins and make sure he’s maintaining the desired amount. “It’s a helpful tool,” he says.

Walker’s T-Quoter software, which costs about $1,000, can price three ways: One uses a formula to calculate pricing based on factors such as production rate, production hours per month and other expenses; the second uses a price matrix that looks at issues such as quantity and the number-of-colors-per-print cost; the third creates more traditional price sheets. “Most customers are using a hybrid of the formula and the price matrix,” Walker says.

Inputting the required info into T-Quoter the first time takes only about an hour, Walker says. “And you can modify your expenses as you go along. If you add an employee or buy a new press, the software takes those overhead costs into account,” he says.

The formula-based pricing system requires the printer to input all of his monthly expenses, including phone bills and labor rates. They’ll also need to know their print production rate. “If they don’t know the rate, they can keep a log,” Walker says. “You track time spent on each job, taking into account your misprint rate.”

Fast Manager, which sells for $1,295, is aimed at small decorators with three or four software users. Future updates will allow users to download catalog updates. With Fast Manager, you manually input information such as overhead costs, production capacity and length of run into the system, as well as the profitability you’re hoping to achieve.

Ultimately, though, any pricing system must serve as a general guideline, not a hard and fast set of rules — even when using pricing software. “Every shop is different, and there are variables that you can’t account for. The reality is that every job should be costed on its own because every job is different,” says Chris Waldick, programmer, Fast Manager, West Palm Beach, Fla. “No program accounts for things like the fact that cool down might be required after the first flash. It’s impossible to account for those things.”

Price List Formats
The way in which printers’ present price lists varies widely. For instance, Andy Lantzman, president, Classic Impressions, Pittsburgh, Pa., has price lists with quantity columns across the top. For the contract pricing sheet, the left side has rows for one, two and three colors, based on a white garment. On the custom sheet, the left side has rows for 10 of his most popular garments. “My employees can extrapolate from there,” he says. “This covers 96% of everything out there.”

Ron Lykens, president, Xtreme Wear Printing, DuBois, Pa., says his custom pricing sheet is broken down into five apparel categories: T-shirts, sports shirts, fleece, jackets and caps. “When customers want an item that’s not listed, we add in separately the garment’s cost,” he says.

Besides price information, many printers’ price lists include a variety of pertinent information, including disclaimers, contact information, date, and the shop’s logo. Jay Malanga, president, Shopworks, West Palm Beach, Fla., suggests that price lists also include a disclaimer about prices being subject to change and effective dates for the quote.

Chris Waldick, programmer, Fast Manager, West Palm Beach, Fla., agrees. “One of the most important things to include is that price is subject to change,” he says. “On my price list, I had a big note that this was merely an indication, and final prices would be established one the job comes in — especially with contract printing.”

Keep it Fresh?
With market conditions, including the cost of garments, changing constantly, how often does one need to update a pricing list? The answer varies, but many don’t do it more than once a twice, while some never do it. “The only two reasons for changing your price lists are radical price increases and radical overhead changes,” says Andy Lantzman, president, Classic Impressions, Pittsburgh, Pa.

Ron Lykens, president, Xtreme Wear Printing, DuBois, Pa., admits that he has never updated his pricing sheet. “Even though garment prices have come down, we haven’t lowered our prices,” he says. However, he does adjust his four-page contract pricing sheets fairly frequently because the margins are so tight for that type of job, he says.

Author’s URL:  Deborah Sextonhttps://mrroggers.wordpress.com/2008/03/21/deborah-sexton/ 

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