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badalou · July 30th, 2008

Got a call the other day and in my discussion with the person he told me what he was selling his shirts for. My response was.. You are losing money. He said no he was making a profit. I said no you are making some cost but not all. I asked where his profit was. So he told me.. can you figure out what is missing?
Heat transfers, his cost 75 cents each
Tee shirt His cost $1.50 each
His cost was $2.25
He sold his 100 shirts at $5.00 each. he said he made a profit of $2.75 per shirt. OK.. here is the test.. did he lose money? When I told him how much he lost he realized he had.
So let's go through this list.. You are welcome to add to this list.
Transfers, his cost was 75 cents a sheet..
Then I asked did you pay shipping he said yes almost $20.00 and he bought 100 sheet. so I said then you your cost was 95 cents not 75.
Shirt cost $1.50 each. I asked same question Shipping $35.00. He did not include in his cost. he bought 125 shirts. So we added we added another 30 cents (rounded it off) So the shirts were $1.85.
OK.. I said you printed those transfers right. Of course his answer was yes. And I asked.. Cartridge or CIS system. he said cartridge and he went through almost all his ink.. So we figured his cost of ink at $60.00 and added another 60 cents to his cost sheet. (Could have saved a lot with a CIS)
Then I wanted to know did he have to cut each transfer? He said yes, no big deal.. I said wait. That is called labor. But I work for myself, he said. I said not for long... I said I get $40.00 and hour and I build that into my price. Wow, really.. was his response.. so lets use that as figure. He said it took about an hour. So we added another 40 cents into out cost sheet.
OK, I asked.. how long did it take you to press the shirts. He said 3 hours.. And of course I asked if he was using my tool.. he gave the right answer on that one.. 3 hours. So he spent about 2 minutes pressing each shirt. he said he noted in one of my videos that I like to press the whole shirt for the customers. So he followed my lead. But still the labor cost was 3@$40.00 per hour or $120. or $1.20 per shirt. Lets see what we have now.
transfer .90
Shirt $1.85
Ink .60
Cutting labor .40
Pressing labor $1.20
So I said right there we have $4.95 cents which means he made 5 cents a shirt. I think I heard him crying on the other end of the phone.
Then I added.. John, (not his real name as he is a member and I do know your equipment will be used long term but it also has a cost associated with it. I mean when it breaks down you need to replace it right? Where do you think the money comes from?. OK I said.. lets add another 50 cents per shirt.
$5.45 was his cost.. OK gang.. here is where you come in to play.. what should John have sold his shirts for? I gave him my figure. But this is kind of a test and maybe help a lot of you realize the hidden cost in doing this business. I can add at least 3 other cost involved in doing each job, maybe more. But like I said your turn. Lou.

spankthafunk · July 30th, 2008

Great Post!

Well, you gotta take into consideration all of your utilities, such as electric to run the equipment and maybe his phone bill for talking to you, plus rent.

What about the artwork, is it something he did himself or did he pay someone else to do it? Either way, you're paying for the artwork or for the labor of making it.

What about delivery and packaging? How did he ship the items to his customers? Did he need to pay for packaging or boxes to ship them in?

Then there's monthly fees you can add in for random stuff like domain names, hosting, licensing, and so on.

I do silk screening (from my inexperience I'm assuming this is heat presses), so I would say the number is starting to look more like $7 a shirt. I don't really know though.

Rodney · July 30th, 2008

Great breakdown of (sometimes forgotten) costs, Lou!

Just adding onto the list, I think electricity used could be another (sometimes forgotten) cost. Anybody have any others?

spankthafunk · July 30th, 2008

Quote:

Originally Posted by Rodney


	Great breakdown of (sometimes forgotten) costs, Lou! Just adding onto the list, I think electricity used could be another (sometimes forgotten) cost. Anybody have any others?

haha thanks for the thanks Rodney, but you replied with one I had on my list. You'll have to try a little harder!

badalou · July 30th, 2008

Quote:

Originally Posted by Rodney


	Great breakdown of (sometimes forgotten) costs, Lou! Just adding onto the list, I think electricity used could be another (sometimes forgotten) cost. Anybody have any others?

You guys are nailing it. I asked about his home office use and the cost associated there as well. But I thought I would let the forum members play with it some more.

martinwoods · July 30th, 2008

Lou thanks for the great post.
Did he deliver the shirts ( almost $4.00 a gallon for gas) electricity, rent and others have been mentioned.

I myself would never do $5.00 a shirt.

badalou · July 30th, 2008

Quote:

Originally Posted by martinwoods


	Lou thanks for the great post. Did he deliver the shirts ( almost $4.00 a gallon for gas) electricity, rent and others have been mentioned. I myself would never do $5.00 a shirt.

he was new to the biz. that is why he called ( I get about 20 a week) But then you have to realize we have so many new people in this biz. Lot of lessons to learn.

COEDS · July 30th, 2008

Lou,I will use your numbers to figure my price.If the cost was $4.95 per shirt, the retail should be twice that. I would charge $9.90 per shirt retail, but since 100 shirts were ordered at one time a discount for that size order could be applied.I would most likely add a 50% markup to the cost( $5 x 50%=saleing price).I would sale the shirts for $7.50 ea. I want to remind everyone that "PROFIT IS NOT A DIRTY WORD".We are in business to make money ( we use this to pay our bills,buy our equipment and to help us to save for a rainy day) . I used your numbers to make my price, but if shipping or delivery are required that would be a extra cost too. .... JB

spankthafunk · July 30th, 2008

I myself am still pretty green in the apparel business, but it's threads like these that really help everyone out. Not only does undercutting your own self hurt you, but it hurts the rest of us if customers are driven to these cheaper prices.

Thanks Lou!

Rodney · July 30th, 2008

Quote:

Originally Posted by spankthafunk


	haha thanks for the thanks Rodney, but you replied with one I had on my list. You'll have to try a little harder!

Yes, we were typing at the same time

I was saying thanks for adding some new items to the list that I didn't think of right away.

reginammp62 · July 30th, 2008

Quote:

Originally Posted by badalou


	Got a call the other day and in my discussion with the person he told me what he was selling his shirts for. My response was.. You are losing money. He said no he was making a profit. I said no you are making some cost but not all. I asked where his profit was. So he told me.. can you figure out what is missing? Heat transfers, his cost 75 cents each Tee shirt His cost $1.50 each His cost was $2.25 He sold his 100 shirts at $5.00 each. he said he made a profit of $2.75 per shirt. OK.. here is the test.. did he lose money? When I told him how much he lost he realized he had. So let's go through this list.. You are welcome to add to this list. Transfers, his cost was 75 cents a sheet.. Then I asked did you pay shipping he said yes almost $20.00 and he bought 100 sheet. so I said then you your cost was 95 cents not 75. Shirt cost $1.50 each. I asked same question Shipping $35.00. He did not include in his cost. he bought 125 shirts. So we added we added another 30 cents (rounded it off) So the shirts were $1.85. OK.. I said you printed those transfers right. Of course his answer was yes. And I asked.. Cartridge or CIS system. he said cartridge and he went through almost all his ink.. So we figured his cost of ink at $60.00 and added another 60 cents to his cost sheet. (Could have saved a lot with a CIS) Then I wanted to know did he have to cut each transfer? He said yes, no big deal.. I said wait. That is called labor. But I work for myself, he said. I said not for long... I said I get $40.00 and hour and I build that into my price. Wow, really.. was his response.. so lets use that as figure. He said it took about an hour. So we added another 40 cents into out cost sheet. OK, I asked.. how long did it take you to press the shirts. He said 3 hours.. And of course I asked if he was using my tool.. he gave the right answer on that one.. 3 hours. So he spent about 2 minutes pressing each shirt. he said he noted in one of my videos that I like to press the whole shirt for the customers. So he followed my lead. But still the labor cost was 3@$40.00 per hour or $120. or $1.20 per shirt. Lets see what we have now. transfer .90 Shirt $1.85 Ink .60 Cutting labor .40 Pressing labor $1.20 So I said right there we have $4.95 cents which means he made 5 cents a shirt. I think I heard him crying on the other end of the phone. Then I added.. John, (not his real name as he is a member and I do know your equipment will be used long term but it also has a cost associated with it. I mean when it breaks down you need to replace it right? Where do you think the money comes from?. OK I said.. lets add another 50 cents per shirt. $5.45 was his cost.. OK gang.. here is where you come in to play.. what should John have sold his shirts for? I gave him my figure. But this is kind of a test and maybe help a lot of you realize the hidden cost in doing this business. I can add at least 3 other cost involved in doing each job, maybe more. But like I said your turn. Lou.

excellent post as always Lou! You hit the nail on the head here. I'd reiterate what others have said regarding fixed assets, equipment, marketing expenses, other general expenses it takes to run the business, overhead, rental space or home office space for tax purposes. Delivery either via shipping or personal.

For my custom designs, I'm planning to sell them between $12.00 to $18.00 average. If a customer supplied the artwork, I'd charge $10 to $11.00.

Professional work should be charged accordingly. Never shortchange yourself. It's much harder to continually justify increasing prices (if you haven't figured out your expenses yet) than to maintain a relatively reasonable fixed price and only do increases periodically as the market demands dictate. JMHO.
-regina

spankthafunk · July 30th, 2008

oh yea, my bad Rodney. I forget about the whole typing at the same time thing. lol.

theflowerboxx · July 30th, 2008

Using your numbers I would of came in at $7.49 just to low ball JB

J/K I actually would have had to know what the design looked like and would of had to considered plastisol or heatpress vinyl. But going from your numbers and everything I'd been at around $7.00 or so. But also I have no rent as I am upstairs of a building I already own and use as another business (flower shop) so my rent is CHEAP.

COEDS · July 30th, 2008

Hey Dave the rent is cheap, but the utilities andthe upkeep are not cheap. I 'm just kidding you, I made my prices from Lou's data alone. If I was doing vinylor plastisolthe price would have been a little higher. I now have a new expense( gifts fro the Grand daughter). This will have to be added in somewhere too. ..... JB

RAMESH · July 30th, 2008

Sometimes the market is soo competitive and it forces you lower your sellinp price just to around cost just to gain market share and recognisition. Hoping to gerenrate future businesss and then make decent profit.

I recently sold 100 unit at $6.50 each ( was not happy do so) and the customer still think it is too expensive.

I somtime wonder how the guys at the fleas markets can sell 3 for 10???

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