Pricing - digital printing

[avaleks]

Hi to all. I am new here, so dont be mad on me for some mistake

I have small printing company. We bought a new one Ricoh pro c5100s production printer. Also we have Ricoh mp c2200w for CAD printing and Roland VS-640i for large print.

We are new in this business, and we have problem with pricing ours work. Can someone tell us, is there some formula for calculate competitive price for digital printing (business cards, flyers, posters...)

Thanks a lot!

 

[Stephen Marsh]

How does the saying go, what the market will bear? It is of course not that easy, it also depends on where/how you are positioning yourself in the market with your services and what clients will pay for the goods and services. Different clients have different expectations and different rates for the “same” work, so you may need different pricing levels.

Every business will have different overheads to produce the “same” work.

Find your true costs to produce the job, then find the market sell price the same work, what customers are actually paying.

There is no point in doing the job if you will lose money on it because it costs more to produce than you can sell it for.


Stephen Marsh

 

[gordo]

If you offer what others offer then your sell price is determined by your competition. Then it is up to you to figure out how to reduce your costs enough so that you enjoy some profit.

 

[davarino]

Find your true costs to produce the job, then find the market sell price for the same work, what customers are actually paying.

There is no point in doing the job if you will lose money on it because it costs more to produce than you can sell it for.

Stephen Marsh

One of the more difficult things to do, though, is to determine your "true costs".

There are formulas, but they are based on some "difficult to determine" assumptions: how much a month do you expect to pay for labour, shop rental, machine rental, your own pay, supplies, etc. Divide that total by the amount of production units (for example, "clicks") you expect to make in a month and you have a very rough idea of your costs per production unit.

The problems, though, are that you must allow for spoilage and stupidity among other things. There will be times when you will have electrical failures, etc.

And this tells you something only about your costs. It tells you nothing about what you can or should charge to the customer (the "price").

The only reasonable way to figure prices is to see what your customers are willing to pay. There is no real formula for pricing... because if there were a formula, someone would cut below the "formula price" to be competitive and capture the work. That's the nature of competitive marketplace capitalism.

Some items will require very low margins (the difference between cost and price) and some items will allow very high margins. Most items produced by a small shop will bear a 30% markup, a slightly smaller number a 40% markup, and a very few a 100% markup... but this tells you nothing, really. You could always mark up 25% and get almost any job you bid on... and go broke. I assume that going broke is not your plan.

The margin can often be very different on exactly the same product being sold in a different context. (Over the years I have seen things like business cards, costing about $15 wholesale, being sold for under cost at $13 and for as much as $250... in very different sales contexts. Both were "fair prices" at the time, at least as far as I see it and as far as the customer saw it at the time of purchasing.)

So it comes back to what Stephen said: "Find the market sell price"... and then twist and turn and run and jump and do whatever it takes to make money at that price... or don't sell that item except as a "loss leader".

I'm sorry that the answer to your question is that "there is no easy answer"... but that is the plain, unvarnished truth.

Otherwise my employer would have replaced me years ago and saved a lot of money.

 

[cosmo]

One way if you just starting out for digital printers is to work our your true click rate, that means rent + machine repayments + power + staff overhead, so a 6 cent click might actually cost you 12 cents, and that all depends on your volume, then you need to set a minumum charge, ie, $50, then after that use a percentage markup, small jobs 70% larger jobs 20%, just examples. You need to know your cost and never go below it, ever.

Also, as mentioned early in this thread, check out what your local competition are charging, see what sort of markups you think they are using, the key is not to be the cheapest or the most expensive, just the most reliable.

Another thought with digital is the more volume you do the lower the machine repayment gets, ie, if you are paying $2000 repayment per month on a machine and click cost is 12 cents and you are putting an average 50% margin (18 cents per click) you need to do around 11,000 clicks just to pay for the machine itself, anything after that is profit, so the more clicks you can pump through the more money you can make.

With wide format, the most common rule is the SQm or foot rate, and thats all over the place, you see some people charge $15 sqm or $30 sqm, that one depends on the media used, check this site:

POSTERS - Bannershop AU

Your VS is awesome for custom work, windows, decals, outdoors, we have one as well, you need to charge more for that service as well if you are installing it on site.

Good Luck.

 

[avaleks]

Thanks a lot guys...
Market in my country is very small, and we can not find some rule for pricing. We must experiment with price and listen to advice of davarino, see what your customers are willing to pay

Thanks again

 

[cosmo]

Thats a risky business plan, you should be thinking about what will be profitable now, not see what happens with your competitors.

 

[davarino]

Thanks a lot guys...
Market in my country is very small, and we can not find some rule for pricing. We must experiment with price and listen to advice of davarino, see what your customers are willing to pay

Thanks again

A word of caution, prompted by Cosmo's remark: "MAKE SURE YOU'RE MAKING MONEY WITH YOUR PRICE, NO MATTER WHAT PRICE YOU CHARGE."

You are trying to make a profit on each job (or at least on each customer), and the most possible profit without endangering your future profits. You may need to turn down work that your competitors price too low... but make sure that their price is truly "too low".

This is all difficult to do, especially in a developing market. But that is what you must do to survive in business.

 

[Stephen Marsh]

One of the more difficult things to do, though, is to determine your "true costs".

There are formulas, but they are based on some “difficult to determine” assumptions…

Apologies for the late reply, I had forgotten about this thread.

davarino, I don’t know if is that difficult. Most costs are known, there are direct production costs related to each machine/dept. Then there are direct and indirect costs related to running the business. There is productive floor space allocated to each machine dept and then there is and non productive space left over. There are also productive hours estimated against machines/departments (both estimated on initial setup and refined after 6 months to 1 year). There may also be costs that are being spread over each department.

Our Accura MIS customer’s receive a spreadsheet that has all the formulas in place. This is being successfully used by over 600 printing companies, both upon initial setup and at regular review periods. This spreadsheet helps these companies to set hourly cost rates, which is the first step in working out the sell rate.


Stephen Marsh