Maximizing Minimums

Avoid losing money on small orders by charging for the entire length of the job.

How many times has someone come into your shop wanting just one or two pieces to be embroidered? What did you charge them - your standard rate? Hopefully, you had a minimum charge that guaranteed you were making money on the deal. If not, then you probably ended up losing money on the job.

I’m not a fan of stitch count pricing, as it doesn’t take into account how much time it takes to produce something. Certainly more stitches means more time to sew, but that doesn’t cover all the other stuff like setup time and cleanup time (at the end of the job). In fact, with small orders the setup time can easily exceed the sewing time. Thus, I prefer using a method that takes into account the entire length of the job, from beginning to end. It’s more accurate, and when done correctly can really open your eyes to the true cost of production. You will begin the process by calculating your hourly cost of operation, something that I have covered many times before. For the purposes of this article, we are going to assume an hourly overhead of $30.00, which equates to $0.50 per minute. (This is not a standard figure - rather, it’s an assumed figure for the purposes of discussion). It should be noted that when I calculate hourly overhead, it also includes your salary, which ensures you are getting paid!

Suppose someone came into your shop with one polo shirt in his hand, wanting to get a stock design and a business name sewn on it. You spend time with him finding the right image, and determining the best font and layout. This is the sales process, which can range from five minutes to an hour. (Hopefully you are adept at keeping it at the lower end of the scale.) To make a long story short, the design comes out to 5000 stitches and six colors. If you were to charge $1.50/1000, the price would be $7.50.

Now you enter the production phase of the job. The first step is to set up the design on your computer. Assuming you already have the stock design and don’t have to download it from the internet, you will still need to open it, possibly resize it, possibly change the colors, and then add in the text. By the time you are done setting it up, ten minutes has passed. Hooping now takes center stage. Assume at least three minutes to prepare backing, mark the placement of the design and hoop the shirt (maybe longer).

The next step is to set up the design to run on the machine. That entails transferring it either by disk, flash, or network, printing out a copy of the color change sequence, installing the proper threads, setting up the color sequence at the control panel, centering the design, tracing it, etc. This will probably run a good three minutes. Finally you are ready to sew, after spending at least fifteen minutes getting the job set up. Once you hit the start button, it will take at least 6.25 minutes to run the job at a constant speed of 800spm. But since the design has six colors, the machine will have to stop at least six times to perform a color change, which can easily add another minute to the total run time. Factor in speed changes, since machines never run at a constant speed, thread trims and maybe even a thread break or two, and you have a more realistic production time of 8 minutes, not 6.25 minutes.

Once the embroidery process comes to an end, you have to unhoop the garment, remove excess backing, trim extra threads, inspect the design, possibly remove topping, and fold. Another three minutes for final cleanup. So how much time do you have wrapped up in this job? Not including the time spent working with the customer, your investment looks like this: Job Setup Design Setup: 10 minutes Hooping: 3 minutes Machine Setup: 3 minutes Total =16 minutes Sewing Time One Run: 8 minutes Cleanup Time Trimming, Folding: 3 minutes Grand Total= 27 minutes If your hourly overhead was $30.00, which is $0.50/minute, then this job cost you $13.50 to produce. But if you had used a stitch count charge of $1.50/1000 based on 5000 stitches, you would have only charged the customer $7.50, which means you lost $6.00 on this job. On the other hand, if the customer brought five shirts that got the same design, you would have spent 16 minutes setting up the job, then 8 minutes for each of the five runs. In the course of one hour, you would have produced five shirts at $7.50 each, which equals $37.50. This exceeds your hourly overhead, meaning you made a profit on the job. (When doing multiple runs, you would be expected to hoop and trim while the runs were in progress.) The fact of the matter is, you will always have an extensive amount of setup time, that in the case of small jobs will most likely exceed the sewing time, whereas, with larger jobs the setup time becomes a much smaller percentage of the overall production process. To ensure that you make a profit on small jobs, you should establish a minimum charge for doing anything. A good rule of thumb is to charge at least 50% of your hourly cost of operation as your minimum charge. In this case it would have been $15.00. It may sound steep, but in this business, time is money. Sure, if sales are slow, you are probably happy to get anything at all, but you must establish policies that ensure you are making a reasonable amount of money on small jobs, rather than settling for less just because things are slow. Minimum charges are the key to avoiding this common business error. Establish them, stick with them and reap the benefits. Or lose money routinely. The choice is yours. By: James M. (Jimmy) Lamb Published: January 2007