Pricing 101 - Understanding the Basics of Sign Pricing
One of the biggest reasons sign shops fail, or don’t make as much profit as they should, is because they don’t know how to properly price out their goods and services. If your products and services are priced correctly, there’s no reason your sign shop can’t become profitable.
That’s why, if you are a sign shop business owner, it’s important for you to make yourself intimately familiar with the cost of each and every line item in your income statement or profit-and-loss statement. It’s also important to be able to forecast to the best of your abilities any future additions or changes to those expenses.
Of course, you probably didn’t get into the sign shop business because of your passion for accounting. If you find that this kind of thing doesn’t come naturally to you, or even if it does, shopVOX is here to help. Our print shop software comes with a number of special features designed to make pricing a breeze.
Below, we’ll run through some of the most crucial elements of pricing for any sign shop, and also how shopVOX can be used to help you maximize your profits while minimizing costs.
Factors to Consider When Pricing
A common mistake many sign shop owners make is to look at how their competitors price their products and then price simply imitate that. If you don’t get your pricing right, though, you’ll always be trying to market more or cut costs to make your numbers.
There are two key factors you should consider determining your pricing:
Your Costs
Understanding your costs is made a whole lot easier with shopVOX’s shop rate calculator tool. This will give you a baseline of what your operation costs and fixed costs are, as well as what your variable costs are going to be.
Once your costs are entered into the shop rate calculator, you’ll be able to see what your hourly operating costs really are, which can then be used to set a baseline in the price book inside of shopVOX.
The Market
Though it’s important not to base your business decisions solely on what your competition is doing, you still need to know what your competition is doing and how to differentiate yourself. You don't want to position yourself as simply “the cheap alternative” to your competitors. Price isn’t what sells you here; value is what sells you.
Do some market research to investigate your competition, starting with a feasibility study. Consider talking to friends and family members who may have employed other sign shops in the past, and also review other sign shops’ advertising materials.
How to Build Out Your Price Book
Now that you have a solid picture of the two above-described factors, you’re ready to begin the process of building out your price book, another helpful feature that shopVOX has built right in.
Here are two of the most important areas to focus on during pricing:
Hourly Services
Hourly services include such things as design charges, vinyl production charges, fabrication charges, installation charges, and delivery charges. The cost of labor is sometimes easy to overlook and hard to gauge, but it’s instrumental to ensuring you turn a profit.
As noted earlier, you can use the shopVOX shop rate calculator to determine your hourly operational costs. Knowing this, a good rule of thumb is to double that number to come up with your price for those services.
Material Markup
In the sign shop business, it is customary for owners to markup the cost of materials inside their price book. The tricky part is figuring out how much that markup should be so that you can avoid charging too little or too much.
Every sign shop does markup differently. Some markup their materials 2x or 5x, while others only markup 20%. That’s why you need to know how often you use your materials and what your percentage of failure is, such as if the materials were to be damaged during the production process. The more often you use a material and the more comfortable you are with it, the lower your markup needs to be.
Price Your Way to Profitability with shopVOX
Having a good understanding of how you should be pricing your goods and services is one of the first and most important steps on the path to success for any sign shop. It doesn’t end there, however.
At shopVOX, we know that running a business takes a lot of hard work. We created our business management software specifically to cater to the unique needs of sign shops, screen-printers, and the like. If you would like to learn more about how shopVOX sign software can help take your business to the next level, don’t hesitate; contact us today.
We’re confident that once you try shopVOX for yourself, you’ll never want to be without it!