How do we price in the digital printing and sign industry?

[The following ideas may be too simple, or they may not be terribly helpful to many of you, but it is to help the new sign shop on the path to profitable pricing. Take what works. Ignore what you find unusable.]

So, we get asked quite a bit how to price jobs for the “durable graphics industry.” There has never been an easy answer and this business has changed a lot from the days of hand lettering. Years ago, SignCraft Magazine offered a printed pricing guide that surveyed sign companies on typical sign jobs and printed a yearly edition. While not a perfect solution, it did offer a starting point and since they published yearly editions, it got updated and offered a way to compare your pricing to other shops. Currently they offer an online version, but I have no experience with this.

At one sign shop I was tasked with making a shop pricing guide that we printed in book form and handed out to customers. It categorized signs as simple, medium, or complicated. This was the days of cut vinyl, so the distinctions mattered. Today we print almost everything – so this pricing guide would not work.

At another sign shop I worked at we used software called EstiMate. This was a sign pricing and shop management solution. While not only providing estimating, it also offered proofing, project management, and I believe they also had an invoicing plug-in.

A few other software solutions have entered the marketplace as well – Ordant, JobScope. Most of these companies offer a free trial, but be aware that in order to even start using the trial you will need to do some work to personalize the pricing for your business. This will involve filling out pages of data with material costs, labor and overhead costs,  in order to lock in a shop rate. This can be worth the time, but you really need to commit to the software. This makes the “Trial” a bit silly. By the time you have done all the work – you are less likely NOT to buy into it – whether it works for you or not. I’d suggest that these packages work well for larger operations where pricing will be done by many employees and consistency is important, the initial work is offset by the consistency and time saved over all..

If you have worked out a shop rate (a complicated task in itself – $85/hr? $125/hr?) you can do a time and materials calculation. We have $200 in materials and it takes 4 hours at $100/hr – $600. After the job is completed – reassess if you calculated correctly and update your shop rate accordingly.

One back of the envelope approach used in manufacturing is often a “cost of goods sold” approach. Starting by using “4x cost of goods sold” you can get a good idea of the price of something. As an example, if the materials cost you $200 – the price is $800. The problem with this approach is the variability of the time spent on design, or those small but profitable decal jobs that have low material cost, but very high labor/time costs. A good example is 200 decals that you are designing that only take $10 worth of materials. Forty dollars for 200 decals means you are losing money. These jobs need to be priced as mostly labor jobs. This technique of cost of goods sold works best for traditional signage – Two posts and a 4’x6’ sign type of job. Also consider a $100 or $200 job cost minimum in order to help keep small pesky jobs profitable

Vehicle lettering can often be priced as a range that you can tweak over time based on what feedback you get when you share the price with a customer. You may tell a customer, “Two pickup doors is $350-$450. We can add a tailgate for $200. If you want lettered stripes on the bed we can add that for $300 more.” This allows the customer to align the project with a budget. It often works better that asking, “How much do ya wanna spend?”

As jobs become material intensive – like box trucks – with less finesse on installation – you might go back to the 4x cost of goods sold. Wraps are often priced by the vehicle and type (Small SUV or Full Size Van – Full or Partial.) A simple Google search for “Vehicle Wrap Pricing” popped up a national wrap company with a pull down of vehicles that priced it out. You can use that as a starting point.

Design can often be a loss leader in this business. Good design brings customers to your shop, but the vagueness, and fickle and subjective nature of design can be a profit loss. Customers bringing “files” can often mean more work – not less.

We often used the following approach: Have a design rate per hour. Estimate the hours it will take for the design – X number of hours at $Y per hour. Inform them that if they ask for more than a standard design – more ideas to be generated – inform them you will need to add that design rate on to the overall job cost. Collect the money as a deposit to get to work on their design. For most jobs we just asked for a $200 deposit to cover our initial time.

Often this design/deposit approach works hand in hand with your quote. “So, you want two doors and a tailgate for a $600 total. We need to put together a logo for you and I estimate the time to create this is a few hours. I will need $200 in hand before I get to work.” While at first this seems like it will kill the sale, but my experience is it draws a line in the sand. Is this customer committed to your shop and the work you have demonstrated? Often you will get the “I need to talk with my wife/committee/business partner” response. Great! Either they will be back with that deposit or they will not. The trick is to get the money on the barrel or get them out of your shop so you can start doing the work that you will get real money for. Remember, there are people who will get you to do work for free and shop the design to multiple shops.

Notes on Design: Unless they are repeat customers, we never designed without money in hand! Many a design that you email out (only JPEGs not PDFs!!) will get redone by someone else and you will get paid nothing. It can be much easier and cheaper to take your worked out design and just reinput into  design software then it is to come up with an original idea. I’ve had many designs stolen – and many deposits collected, designs sent out where the business idea never got off the ground. Either way, I got paid the deposit for my design time.

On the other side – don’t be that shop that gets a design from another shop and uses it. Instead tell the customer that someone else did the design and you’d rather do your own design. Also, unless you are a marketing/design/ad agency company billing for design you may want to protect your design work from poaching. We often told customers that we design “on spec” which means we build the design into the job cost (and future jobs with that design) as a bit of a loss leader. In essence you are eating a bit of profit to get the design worked out for the customer.

You will often get customers asking for the files you created for a vehicle so they can order embroidered hats, t-shirts, etc. – we would answer a few ways – “We can make those business cards for you.” or “We have a trusted screen printer/embroidery company we work with.” This way your hard work doesn’t get poached by another sign shop who doesn’t need to design anything. Inform the customer in advance that the files are your property. We would offer to sell them the files for $500 and they could use them as they pleased. Most often they would keep using us for the work. And – they get the files – Not my job to teach them what an EPS file is. In short, your $500 design being used as a company logo – already in hand and proven – is much cheaper than hiring a design firm – and often much better than the son/niece/friend/wife making an unprofessional design for them.

Final Notes: You should know you cost of materials and update pricing regularly. Typical 54”x 150’ rolls of media is 675 square feet. Divide out your cost per roll by that 450. Don’t forget to add laminate costs. Ink cost at around $0.30 per square foot. Add that on as well. At the time I wrote this wrap film was around $2.60/sq ft. Intermediate Vinyl clocked in at about $1.15/sq ft. Less expensive promotional vinyl is about $0.90. Banner material is the most economical at about $0.55/sq ft.

Most of what sign shops do rely heavily on time/labor. Your customer interaction and design takes a great deal of time. Construction and application takes time. While material costs seem like a huge costs for a sign shop, I suggest doing a simple calculation – write down your overall material purchases over a year or month. Write down your gross sales numbers over that same time period. I’d be curious what the percentage of material cost over gross is. Compare that number to your labor costs – or how much you pay yourself. While these calculations will not give you exact numbers and profit – I’m going to suggest your labor costs will outstrip your material costs – unless you aren’t paying yourself. My regular comment about profitability is “Sign shops make money on jobs they turn away.” While this is clearly not true, the longer you are in business the better your options are for turning away the projects you lose money on. Those are the best jobs to send to the new guy the next town over.