Charge the Right Price on Installations with the Shop Rate Calculator
As a sign shop owner, are you pricing your sign installations properly? You probably do all kinds of installations, from vinyls to wraps and beyond.
If you’ve been in operations for only a short time or even for many years, and you’re not sure if you’ve been pricing your installations correctly, we here at shopVOX have some tips for you.
Making it as a sign shop requires you to do lots of things, not the least of which is to price your jobs fairly. You want to provide quality work and products to your customers, but you also need to make a profit.
shopVOX’s software for sign and print shops can help you keep track of everything in your shop and ultimately make those profits you need. You can request your free trial from us today!
In the meantime, let’s learn how to charge the right price for your sign installations with a great tool called the Burden Rate Calculator.
Determining Sign Install Times
The first point here is a crucial one: determining how long it will take you to install this or that sign for a customer.
Think about this: if you’re a fairly new sign shop owner, you don’t have the business history to know how long a certain type of installation would typically take you.
In fact, there are probably no two installations that take the same amount of time to complete. Even two of the same sign going on the same building could take two installers different amounts of time, depending on a lot of factors.
As the shop owner, you really can’t know how to price this kind of thing in advance until you’ve built up many years of experience doing it.
The trouble is that newer sign shop owners have nothing to go off of when trying to predict installation times, and so they end up guessing. Now, your guesswork can be correct as often as it is incorrect, and that presents a problem for customers who want to know a job price up front.
One piece of advice we can offer here at shopVOX is to break the installation part of the job down into increments.
For instance, ask yourself how long it would take a technician to travel to the job site and how long that person would need to get set up with equipment and then prepare for the installation.
Calculate these estimated times as if you were doing them yourself. When you add them all up, you will have the total amount of time that the installation will take, according to your best estimation.
Finally, it’s never a bad idea to add in some leeway for yourself. Problems can arise at any time, and you will want to allow for them in your estimate for the installation.
Using Your Time Estimation for Pricing
Now it’s time to move on to pricing your installations based on the time you estimated.
In the shopVOX print shop software, there’s a feature called the Burden Rate Calculator (formerly known as the Shop Rate Calculator). This tool will help you determine your business’s shop rate.
Burden Rate Calculator
The Burden Rate Calculator will ask you a number of pertinent questions to figure this out. It will ask what your monthly bills are, how many days a week you work, how many hours you work each week, and what your profitability goals are.
Ultimately, the calculator will tell you two things: your shop rate cost, and your shop rate itself.
Now, your shop rate cost is the number you need to charge to break even on the installation. The shop rate is the number you’d have to charge to reach the profitability goal that you entered into the calculator.
Take the following example. Say that you used the Burden Rate Calculator and got a shop rate cost of $40. That means you need to charge $40 per hour to break even on the installation job.
However, there are travel costs and other expenses that you need to tack onto the job to recoup what you’ll actually spend. There’s the fuel cost for your company vehicle, the miles you’ll be putting on that vehicle, the cost of sending an assistant along with the primary installer, and anything else that you expend to do this job.
So, to calculate the installation cost, add your shop rate cost to your travel expenses. That $40 from earlier could now be $55 per hour. That is your hourly cost so far for this installation.
Then, you’ll need to determine how much you want to profit for the job. Do you want to make 30%? 40%? Divide this number by the remaining amount to 100.
If you want to make 40%, divide $55 by 60, and you will get $91 per hour. You can round that number up to $95 or even $100, but once you determine that number, stick to it. That is what you will charge per hour every time you have a technician working out in the field.
The Cost-and-Overhead Method
There is another, more detailed way to price your installations. You take your indirect costs--basically, your overhead costs--and break those down by hour. Then, you take those costs into account with the burden rate of the employee doing the installation.
Let’s look at an example. Take the burden rate of a $25/hour employee and a $40/hour employee. Sometimes, those two employees will go on a job together.
If you are using this method of calculating the right installation price, then you as the sign shop owner will have to charge different installation rates depending on those variable factors of employee burdens plus overhead costs.
When you add all this together, you should then take the profit percentage you want to make and divide that by the whole amount.
Say, for example, that you have $90 in true costs for those employees plus the other burdens of employing them. Then, assume you broke down your hourly overhead costs into $20 an hour. That is $110 an hour to cover all your costs alone.
But that is just cost! You still have not made a single profit dollar. You can factor that in by dividing $110 by the percentage you want to make. If that number is 50%, divide $110 by 50.
That means the figure you arrive at is $220; that is the cost of those two employees going on a job for one hour.
Calculate Your Install Costs with shopVOX
Whichever way you want to find these costs, know that the decision is yours. You decide what you want to make per hour or what percentage you want to profit. If you have a large sign shop with lots of technicians, the second method might work better for you.
The shopVOX Burden Rate Calculator is there to help you determine these costs and price your installations accurately so you can make the profit you want and succeed as a sign shop.
Request your free trial of the shopVOX software today!