4-Color Hourly Rates...

[kdw75]

In our small city, which only has two other print shops with 4-color presses, I am wondering if one of the other printers is undercharging for their offset work.They could be losing millions for years, and not go out of business, so I am wanting to get your take on their pricing, and whether or not it sounds like I am overcharging, or can't compete because of equipment differences and volumes, or they are aren't covering their costs.

We recently had the opportunity to see what they charged on two projects, that were virtually identical, to two different clients, and they were several hundred dollars less than we are, and the whole job was only around $1,100. The job was 8,000 8 1/2" x 11" 4/4 flyers on 80# Gloss Cover. I figured to put them on a 14x20 inch press with one set of plates, and bill the press and operator at $120/hr. In order to match their pricing, I have to set my hourly rate down around $50/hr. When your operator makes $20/hr, you can see that in an 8 hour day, you aren't making any money.

They have a 23"x29" Speedmaster.

While I realize that their press is going to be about 4 times faster producing the job, I had thought that the cost of the machine, and the cost of larger plates and setup, would even things out. Especially when your talking about 8,000 impressions, as they are 2-up.

Thoughts?

 

[davarino]

Back of an envelope costs, assuming this is only one piece: (and you'd have to add a markup) (These figures are illustrative, like a "downtown retail space printer", and probably don't indicate what you or your competitor really have for costs)

On a 14x20 Lithrone L-420 running at about 7500 IPH, running as a 2-up work and turn form on a 12.5x19 sheet:
Setup time, prepress, plates: $150
Paper: 2200 sh 19x25 80 GC: $242
Cut to run: $20
Cutting and boxing: 2 hrs @ $50: $100
Press time: 2.5 hr. @ $175: $438
Total: $950
(If you're running a different press, it would have different costs.)

On a 23x29 running about 9000 IPH, running as 4-up w/turn (though a 6-up could be practical if you can get the paper):
Setup time, prepress, plates: $225
Paper: 2300 sh 19x25 80 GC: $253
Cut and box: 2 hrs: $100
Press time: 0.5 hr. @ $250: $125
Total: $703
Your competitor probably has even lower costs: he is probably getting his paper cheaper than you are (volume gets noticed by paper merchants, if you make the right noises).

So, your competitor can make 55% markup on costs (or a $390 margin). Depending on his overhead, $1100 could be extremely profitable. If he's able to gang this with other work, this can be even more profitable.

You, on the other hand, will have less than a 16% markup ($150 margin). This is usually not enough for the average printer who has a nice retail location, a relatively high staffing-to-monthly-sales ratio, and possibly a sales commission to pay. (It's even worse if somebody in your shop decides that the job is to be run sheetwise or as a 1-up, 1-on.)

From my biased point of view, a "for the trade" press shop would give you better leverage on a job like this.

For example, if you were to ask my trade shop to print this job, we could do it for about $730 plus shipping. We have very low overhead (low rent district, etc.), no salespeople, and we keep our machines busy... so our hourly costs are pretty low.

Trade shops can take the time-soaker-uppers off your hands. Using a trade shop will let you hold on to the customer, produce the job, and opens up your machinery for money-making work.

So how do you make money running a 20" press?

You have to specialize in short, rush runs. If you consider the rush 1000 to 4000 20"-impression-per-job market to be your wheelhouse, you'll hit the ball out of the park every time with a 20". And of course you have to impose your plates as full as you can!

 

[AP90]

Ok I'll give a little input on this since I'm in a different situation that most here, but someone might find my info of value.

Some background, I run an in-plant print shop for my family business. We have recently made the leap to totally in house, so it's a big undertaking. But with our application, we are able to cover all over-head associated with the press (lease, electricity, operator, ect.). We needed no extra software and very little equipment to go with printing (cutter, folder, packaging). We also have no rent, so our overhead is low to begin with.

With this low overhead, we are adding profit to the business by taking on other jobs like this. We are offering simple print jobs to keep our equipment cost low. We don't do UV, perfect binding, or complex jobs. We follow the KISS model with this right now.

So while your asking about pricing, I can tell you that I could throw that job on our digital press (I know offset would be better for it, but we don't do offset) and with the +/- 3.5 hours of run time and then cutting time, I could do that job for $1100, and come out with a very nice hourly profit for myself. If I manage to get 4 of those jobs a week, I'll have no complaints about my yearly income.

I'm not trying to brag about being able to do the job cheap or making money, but to let everyone know that their competition might have a business structure that allows them price our certain jobs at a rate you might think is absurd, but in their company they might be making more per hour on the job than you would at a higher price.

I hope this information is helpful to you and others, as I have learned so much from PP so far.

 

[dabob]

Given the information that we have it would be tough to figure out whose pricing is the most accurate . . It involves things like how many shifts are the other printers running . . . if their equipment is paid for or not - hourly rates - overhead costs. We are in an area where there are now three printers with 4+ color capabilities . . . one much larger than us has 3 6 color presses two 40's and one 28 inch one of the 40's is brand new with all the bells and whistles a wide format division, boost die cutters etc. . . (they run 2-3 shifts a day) - we determined that we can't compete with them in most instances - the other guy is more like us but has a 40" 4 color . . we can compete on the shorter runs with him . . . we have a 4/c 28 inch - we have found a niche that we fit into pretty well and are making a go of it.

What it boils down to is you have to make a profit, otherwise in a while you will run out of money and be on the street. If your competition is selling product below your cost consistently either they are lowballing the market and hoping to have enough money to tide them over until the market thins out. Or they have efficiencies in their operation that you don't.

Without knowing more about your market area, sales force, etc. it is very difficult to make many assumptions that could help you.

You need to look at what you can do more efficiently than your competition and then go out and sell those products. We changed our target market over the last 10 years in 2001 we were primarily a collateral printer, i.e.: Sales Sheets for conventions, Direct Mail, Business needs stationary and internal forms etc. - we looked at what we could do well and shifted our focus to point of sale and marketing solutions for the Wine industry and it has completely changed our business and we are still making a profit . . .

Just remember in order to be here next year, maybe even next month you need to make a profit on every job (well there are exceptions that prove that rule) so either find something you can do better than anybody else or find efficiencies that you are unaware of.

Wishing you the best in your endeavor.

 

[kdw75]

Well, we found out that the printer in town that was so cheap, has been closed. Their parent company announced that their presence in the sheetfed market no longer made financial sense, so now they are exiting that market to focus on other parts of their business. It only took them 15 years, to figure out, or care, that they weren't covering their costs.

 

[kdw75]

Back of an envelope costs, assuming this is only one piece: (and you'd have to add a markup) (These figures are illustrative, like a "downtown retail space printer", and probably don't indicate what you or your competitor really have for costs)

On a 14x20 Lithrone L-420 running at about 7500 IPH, running as a 2-up work and turn form on a 12.5x19 sheet:
Setup time, prepress, plates: $150
Paper: 2200 sh 19x25 80 GC: $242
Cut to run: $20
Cutting and boxing: 2 hrs @ $50: $100
Press time: 2.5 hr. @ $175: $438
Total: $950
(If you're running a different press, it would have different costs.)

On a 23x29 running about 9000 IPH, running as 4-up w/turn (though a 6-up could be practical if you can get the paper):
Setup time, prepress, plates: $225
Paper: 2300 sh 19x25 80 GC: $253
Cut and box: 2 hrs: $100
Press time: 0.5 hr. @ $250: $125
Total: $703
Your competitor probably has even lower costs: he is probably getting his paper cheaper than you are (volume gets noticed by paper merchants, if you make the right noises).

So, your competitor can make 55% markup on costs (or a $390 margin). Depending on his overhead, $1100 could be extremely profitable. If he's able to gang this with other work, this can be even more profitable.

You, on the other hand, will have less than a 16% markup ($150 margin). This is usually not enough for the average printer who has a nice retail location, a relatively high staffing-to-monthly-sales ratio, and possibly a sales commission to pay. (It's even worse if somebody in your shop decides that the job is to be run sheetwise or as a 1-up, 1-on.)

From my biased point of view, a "for the trade" press shop would give you better leverage on a job like this.

For example, if you were to ask my shop (a trade shop) to print this job, we could do it for about $730 plus shipping. We have very low overhead (low rent district, etc.), no salespeople, and we keep our machines busy... so our hourly costs are pretty low.

Trade shops can take the time-soaker-uppers off your hands. Using a trade shop will let you hold on to the customer, produce the job, and opens up your machinery for money-making work.

So how do you make money running a 20" press?

You have to specialize in short, rush runs. If you consider the rush 1000 to 4000 20"-impression-per-job market to be your wheelhouse, you'll hit the ball out of the park every time with a 20". And of course you have to impose your plates as full as you can!

We have used trade shops for runs that are larger. While they are great for some jobs, our regular clients, which are keeping us in business would never wait more than 5 days from ordering, to job in hand. About half the time they need it in 2-3 days. I notice that trade shops get pretty pricey when you demand 1-2 day turn around and fast shipping. For less demanding clients though, they are a no-brainer.

 

[JustinB]

Well, we found out that the printer in town that was so cheap, has been closed. Their parent company announced that their presence in the sheetfed market no longer made financial sense, so now they are exiting that market to focus on other parts of their business. It only took them 15 years, to figure out, or care, that they weren't covering their costs.

Wisdom proves itself to be right by what results from it.

The race to the bottom mentality in printing seems to grow old for everyone who tries to do it.

 

[davarino]

We have used trade shops for runs that are larger. While they are great for some jobs, our regular clients, which are keeping us in business would never wait more than 5 days from ordering, to job in hand. About half the time they need it in 2-3 days. I notice that trade shops get pretty pricey when you demand 1-2 day turn around and fast shipping. For less demanding clients though, they are a no-brainer.

We have at least three "tricks of the trade" that help our trade business.

Our third "trick of the trade" is that we market only to our local area. We have a 1-hour radius population of about 800,000, which is certainly enough to support a trade shop.

We turn many jobs in two days, with proper planning and warning, of course. Usually with no added costs. This is then multiplied in value by us being local... our customers don't have to wait a day or two extra and pay huge shipping bills. They just come on by, pick up the job, and make their customers happy.

A local trade printer (or bindery or letterpress shop) is a valuable resource.

The national and regional trade shops have their place, but the local shop is the one that will serve you best on a regular basis on the higher value work that can make you money, without you having to make large capital investments and hiring specialized workers.

If you have a local trade printer, you should look at what they have to offer you.

The obvious first thing they should offer you is that they will not walk off with your accounts. That's our "first trick of the trade": always be above board. We have never "stolen" a job. We keep our retail operation at an arm's length from the trade shop... and every one of our salespeople know that the owner would not hesitate a moment to fire a salesperson who steals a job from a trade customer. And I would probably lose my job, too, for letting it happen.

(Our second trick of the trade, incidentally, is "always price the job low enough that it can be sold with a further markup".)

I have gone on much longer than I planned with this reply, but it's because I am enthusiastic about our trade printing business. We offer the other print shops in our area a service that they often could not afford to capitalize and maintain... let's face it, there's only so much demand in the average small shop for work that would run economically on a 40" press and bind on an automated saddlestitcher.

 

[craiglpress]

Price, Quality, Service - Pick 2?
Lowering your hourly rate is not the best practice for pricing. Your hourly rates should reflect your OOP (out of pocket) cost. Once you've determined your OOP using budgeted hourly cost rates software such as http://costratesadvisor.com/ than add your desired or acceptable markup to arrive at a price. Or sell it at cost if you just need to keep the cylinders turning. If your OOP is higher than your competition, perhaps you need to improve your efficiency and reduce costs and waste.