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:confused:We have been in business now for just over 2 years. We have not made a profit yet. We have put all the money made along with our savings back into the business . We have leased a six head emb machine and a 1 head emb machine.
We have built a shop, bought a Roland GX-24 and a Roland Versacamm, all are paid off. We are crazy busy but we feel like we aren't seeing any profits i.e. putting money back into our savings. Is this typical and are we just being nuts or what? Are we charging too little? Someone explain it in simple terms.
 

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:confused:We have been in business now for just over 2 years. We have not made a profit yet. We have put all the money made along with our savings back into the business . We have leased a six head emb machine and a 1 head emb machine.
We have built a shop, bought a Roland GX-24 and a Roland Versacamm, all are paid off. We are crazy busy but we feel like we aren't seeing any profits i.e. putting money back into our savings. Is this typical and are we just being nuts or what? Are we charging too little? Someone explain it in simple terms.
If you have built a shop, paid for a Versacamm & GX24 all in two years IMHO sounds like your doing very well, as to your pricing that not really a question anyone can answer but yourself.

It does sound like your on the down-hill side, not knowing your business I'd expect to make a profit in 2-4 years going into any business venture, but then again in some cases it could take 5 years depending on your ROI.

What's your accountant say?

Hope this helps.
 

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Rhino,
I'd refer back to your business plan to see where things may have shifted. If you don't have one, I strongly suggest you put one together. It's a great tool to have and can help you stay focused and see where and what your gains and losses are amongst other things.

On a side note...I wish I had a versacamm that was PIF!
 

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Crazy busy on a 6 head should mean $75 to $120 an hour at the bottom end doing contract work. At that rate, paying off the investments you've made should be something you can plot on paper and know when to expect to see the light at the end of the tunnel. I would average 4-6 runs an hour, 24-36 pieces X $2.65 to $3.50 for a average left chest or cap = $63.60 - $84.00 to $95.40 - $126.00 per hour at the absolute bottom end. Xs 8 Xs 5 or 6 per week. Thats $2,544 to $6,048 per week. Or $132 K to 337 K annually. :)
 

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You must know what your cost to produce an item is in order to give a price, but most don't in this industry. They try to beat the guy down the street in order to get the business. If you are doing it for free, or worse losing money then that is not good.
 

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How are you tracking your books? PM me if you would like...I would happily look through them if you are not sure what you are looking at. Troy
 

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No we have not taken any salary to date
Then I would argue that you are not charging enough or your expenses are too high... You have a pricing model that is based on exploiting your free labor. It is unsustainable. You are busy, but can't afford to hire anyone to help because you do not have the profit margin. A business based on zero labor costs is doomed to fail, especially one where (despite having zero labor costs) you are still not making a profit!

What is the point? Being "crazy busy" is not the same thing as "making money". You may have cash flow from sales but all you are really doing is working for free and keeping your suppliers and landlord in business (barely). You will not be be able to sell your business because the books are whacked (no labor costs). If you add in labor costs for the last two years you will see that you have LOST MONEY since day1. A business that loses money every day is worthless. You can only sell your assets for 50¢ on the dollar, pay off your credit card debt (I'll bet you have some!) and go get a job.

Harsh, I know, but it starts in your business plan. Maybe you made one when you started, but it is time to look at it again. You now have 2 years of sales data to help.

#1. Budget into the overhead labor costs that you would expect to have to pay someone to do your job. This is VITAL beause later in the plan you need to calculate your sales prices & profit margin using the REAL overhead costs.

What jobs have been profitable, which jobs are not? Find a way to get MORE profitable work and turn down unprofitable jobs. Yes, to make more money you need to turn away some jobs because they gobble up time you can use to do more profitable work.

Who are your most profitable customers? Where do they come from. How can you improve marketing that targets these profitable jobs?

What customers are the least profitable... the time wasters, the time consuming free graphics work, the small onsie twosie jobs that you do at the 32 piece price. Fire the bottom 20% of your customers. Take that new free time and focus it on getting more top-20% customers.

Look at each one of your products, and each one of your processes (embroidery, cut vinyl, printing, heat press, DTG, sublimation, screen printing, etc..) and determine what process is making money. You do not have to be a jack of all trades, find out what makes you money and do more of that and less of the other.

To making money in business you have to understand, inside and out, the REAL costs of producing your goods and services... which means understanding the REAL overhead costs.... NOT just the cost of the raw materials in the job (a shirt and x-number of stitches). THEN when you know you costs you can set your prices to acheive the desired profit margin.

If you do that but then get no sales, maybe your price is too high... this means your expenses or profit margin is too high. Then you can look at purchasing decisions, rent, shipping, etc to try and lower expenses. Thsi is what the whole business plan is all about... analyzing data to determine how to sell & market a product or a service so that you make a profit.

The trick is to find the sweet spot.... the balance between expenses, labor, profit, price and sales volume. It is a fine edge.
 

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:confused:We have been in business now for just over 2 years. We have not made a profit yet. We have put all the money made along with our savings back into the business . We have leased a six head emb machine and a 1 head emb machine.
We have built a shop, bought a Roland GX-24 and a Roland Versacamm, all are paid off. We are crazy busy but we feel like we aren't seeing any profits i.e. putting money back into our savings. Is this typical and are we just being nuts or what? Are we charging too little? Someone explain it in simple terms.
I found myself in the same boat, but have cut off some of the "FAT" of the business, focused on what made my business successful and tweaked my pricing. If you have paid off your equipment the profits will begin to start adding up. Give it time, it will come trust me. You are on the right track.
 

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I agree with Jiardy. Though new to T-shirts, I have had my own business for almost 25 years. I had faced the same problem when I started. Definitely go back over your business plan. If you don't have one, make one. It doesn't have to be too detailed. It's a tool for you to stay on track, but keep in mind that things change and you should be flexible with that. Once you put it on paper, you'll be able to see where the money is going. Maybe you could negotiate on rent space, or maybe that overstuffed chair was an unnecessary expense. Little things add up before you know it! Also look into what you're charging. Perhaps a small percentage increase is a good idea. Give your clients plenty of notice, but even a few pennies can make a big difference on your profit margin. In your plan be sure to write down how the extra funds will be spent -- insurance, salary, part-time help, advertising???. Be realistic. Crazy busy doesn't mean crazy profit. Also, Jiardy is right about dropping small (nuisance) clients. We did that a few years ago and I thought, "Oh my god, I have no business!" Not true. I was able to concentrate on the bigger jobs and narrowed our services so now we are not only profitable, but I am able to take some time off during the week!! Anyways, good luck to you. Don't jump ship. Make the time to go over your business plan no matter how "crazy busy" you are!!!
 

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We have put all the money made along with our savings back into the business . We have leased a six head emb machine and a 1 head emb machine.
We have built a shop, bought a Roland GX-24 and a Roland Versacamm, all are paid off.
Because you have already done all these, I'd say you made money (and profit) already, and are doing well. When you finished paying for all those machines, you'll see that you'll start to have savings again. Click that "profit and loss" report on your Quickbooks and you will be inspired again!!!! :)
 

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Pretty typical. Most business plans state what year you plan on turning a profit. I started my business in November 2007 and spent money at the end of the year so I wouldn't have a profit. The loss reduces my taxable income since I still work full time. The first few years of any business will be spent building up inventory, equipment, samples, etc. As long as you are making enough to pay the bills, and making a profit on each order, you will begin to see a profit as your spending decreases.
 

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Because you have already done all these, I'd say you made money (and profit) already, and are doing well.
I do not agree with this... what does a versacamm and a GX24 cost?? Maybe 20k...or so. Divided across 2 years that is $800/mo. That is still not enough money to claim that they are profitable. Especially since they are not getting paid either. Paying off equipment is fine but the numbers are not substantial enough to say thay if they had that money in their pocket then they would be fine. $800 a month is $200 a week, and divided into how many people? two? The receipt checker at WalMart makes more.

If they are making sales, which they are, then the prices are too low, or there are some other expenses lurking somewhere.

Raise prices, lose 50% of your customers, make 100% more profit from the ones you keep and do half the work! Then as you rebuild sales (at the correct prices) you have available work capacity and can also take on help if you need it. This model is scaleable. A customer that you do not make a profit on is worse than none at all. Send them to your competition and soon THEY will be out of business instead of you!
 

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If they are making sales, which they are, then the prices are too low, or there are some other expenses lurking somewhere.
I'm assuming that the OP's business is single proprietorship, or maybe they are a husband and wife team, and that they get all of their daily living expenses from their business; maybe even all of their "entertainment" expenses. (Please tell me I'm right, Alex rhino09) :D

They were able to pay their bills and live a considerably comfortable life, although not indulging (yet) on some luxurious vacations, and buying expensive cars (which I expect they could do when savings starts coming in). They are in fact paying themselves first by doing so. As a beginner, it's better not to be picky with customers because although time is gold and money, that time would be of no value if you are not doing anything and just laying around waiting for the "perfect customer".
 

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Here is my advice... (This is coming from more of a sign shop slant, but it applies to any service business)

You need to analyze your entire financial structure. You need to know your bottom line so that you know what to charge.

The easiest way to do that is with software.

Here is what I use, and it makes life easier...

EstiMate Software

Sign Pricing Software | Sign Business Management Software | EstiMate

This software was originally designed for the vinyl sign business. It is an easy to use quoting system.

They have pricing plugins that you can buy (they are cheap) that include:

Vinyl Signs
Thermal Printing
Embroidered Items
Wide Format Inkjet
Screen Printed Signs
Screen Printed Garments
Flatbed Digital Printing
and the list goes on...

There are several ways to buy the software, outright, monthly and installments. One way or another it will fit your budget.

Back to my point... This software will help you determine at what rate, or how much to charge to make a profit.

When you first install the software it will interview you, and ask you all your costs, including rent, utilities and etc.. It goes into great depth.

Before installing the software make sure you have all your bills and costs in front of you, it will make the interview go quicker.

It will also ask what you want to bring home, and then it will compute everything you gave it and will give you a basic shop rate that you must go by to make a profit. That might not mean much at the moment, but then you install your Screen printing plugin/s.

When you install the plugin/s it will interview you again and it specific to the plugin industry (screen printing) to determine what to charge to make a profit.

Once all the configuring, the hard part is done, then the easy part starts...

You get a call to quote a shirt (providing you have the software running already) you just input the specifics into Estimate software, colors, shirts, sizes, materials, and in seconds it will give you a live quote to give your customer.

Built into that quote is your overhead, plus what you told it you wanted to bring home. This will help you make consistent profits, deal after deal.

Just to clarify, I am a customer of Estimate and in no way affiliated with them outside of that.

I have said it in other posts, I do not like accounting and book keeping, I try to keep it automated, and this software allows me to quote in seconds and know I am not violating my profit margins.

I do both vinyl signs and screen printing, so this software has helped me out tremendously.

If you don't have an accountant or a book keeper at least, I recommend you get one, don't spend your time doing something that will sap your creative energies, or take you away from the thing you do best, making money.

I would also recommend Quickbooks, Estimate software will export your quote into Quickbooks allowing you to bill directly from the quote, saving time and money.

I hope this helps...

DZ
 

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If you aren't paying yourself, how did you pay to live for 2 years? Sometimes profit is mistaken for savings. When I don't save much I feel like I'm not profiting. But the truth is, my profits from my business end up being money I use to pay my personal bills,mortgage, entertainment etc. But once I do that and I don't have much left to put into savings, it makes it seem I didn't make any profit.

I just had a discussion with my fiancé about it yesterday. Although we take home enough to pay for things, it's not preparing us for the future in savings. We decided to look over prices again and raised it slightly. We also planned ways to reduce our business cost down a little. And although were crazy busy right now working non stop, we can't afford to pay a full time employee. So were also trying to figure out how much more we need to make to be able to afford help so I can concentrate on bringing more sales in. I had a loose business plan when i started 3 years ago, but i end up tweaking it almost every half year. I also adjust prices accordingly after each tax time once i know my final numbers. You have to be flexible and change with the times. Maybe that 2 story house and luxury car wasn't such a good idea LOL. Jk, I do this so we can live comfortably.
 

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I'm going to refine my price list this weekend, and hopefully I have time doing it. It's be nice to see other peoples math so that everyone can see how others calculate what they want to take home, including myself.

Let's pick some fantasy numbers to use and use them to plug into your equation.
Rent: $2000 month
Electricity: $300 month
Other expenses such as Internet, office supplies: $200 month.
Phone: $150 month
Insurance: $100 month
Equipment lease: $1000 month
 
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