April '17

For the Business of Apparel Decorating

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20 THE SUBLIMATION REPORT • Spring 2017 • to compete with online retailers. If your business is only walk-in then you could remove this, but make sure you will never have to eat the cost of shipping something before taking this off your cost calculation. TOTAL cost to produce: $7 COMMON PRICING TECHNIQUES Now that we have a pretty good representa- tion of our cost to pro- duce the items, we need to figure out the price of the product to reach our goals. In this pricing, figure out what you need to make from a profit perspective, as well as making sure you cover your other costs, like rent, equipment lease payments and/ or taxes, etc. To get to that final figure, t h e r e a r e s e v e r a l variations of pricing techniques that you could spend hours researching. Instead, let's explore two common methods, noting my personal recommendation. T h e f i r s t i s a cost plus markup m e t h o d . T h i s method is typically used by someone with an accounting- o r n u m b e r s - b a s e d background. In the purest form, you plug your cost to produce from above and then add a markup percentage to that which will satisfy your overhead and profit needs. For the mousepad example, let's say our markup percentage was 60 percent. You take the $7, divide by .40, and come up with a price of $17.50 as your sell price. Plug that into your spreadsheet and you have the selling price for all of your products. The second method is a market value method. This method takes more time and research, but in my opinion is the better way to determine your selling price. Start with a percentage value that is needed to cover your bills and take that percentage and add it to your cost to produce. Let's say you need 25 percent to cover your bills—you would take the $7 cost, times 1.25, and come up with a figure of $8.75 each. Then you would go out and do some research and determine what the market will buy a similar product for. The average price you discover people are willing to pay for the mousepad example that is sublimated and delivered to their door is $15. You set your price at that level and continue to track the trends. Are they selling faster than you can make them? Maybe move the price up a bit. Are they sitting on a shelf getting dusty? Maybe it's time for a sale where you sell them for $10 each for a limited time. This method is much more flexible and allows you to maximize your profits. The problem with the first method is that many times you are not going to make as much as you could on some items and you will be priced right out of the market on others, like the mousepad example. On the flip side, maybe you are selling phone cases that cost you $4 to produce. With the cost plus method, you would sell those at $10 each, but if you did some market research you would find that people are willing to pay $20 each for a phone case, so you are leaving a 10 dollar bill on the table every time you sell one. ADDING EXTRA VALUE TO YOUR OFFERING This is what truly sets sublimation apar t from other analog decorating methods. How can you add extra value to your product to increase profit? Value is a perceived number and as humans, we have no idea what it costs people to make most things we buy. Does the Cadillac cost that much more to make than the Ford? Not really, yet people are willing to pay more for the Cadillac in most cases because of its perceived value. This is where you have to think about The size and quantity of substrate you are sublimating, along with the equipment you're using, all play a role in your pricing calculations.

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