Discussion

By Cheryl Kahanec on Aug 30, 2023

Well said Warren.

 

By Robert Lindgren on Aug 30, 2023

Warren's assumption is that your cost of producing the work is the determinate of your price. If that's so, why don't you have sign up in our back shop saying "work slow" sign that will enable you to charge even more?

The reality is that the upper limit on your price is the value of the job to the customer and their perception of what they would have to spend with anothr firm that they know of and trust. The lower limit of your price is the amount you'll spend to produce it (materials, production wages, commision).

Profit is maximized by maximizing total dollars of contriution to overhead--sales minus out-of-pocket cost of production. Really high proit printers achieve this by moving closer to multi-shift operation--24/5 or 24/6. They build the necessry sales volume by charging as much as the customer will pay but also getting the order. This results in multiple price levels for the same mehanical specs depending on the circumstances and the customer relatonship. The prime measure of this is their hit ratio--the percentage of quotes that turn into orders.

 

By Warren Werbitt on Aug 30, 2023

Robert,
I think you got my assumption wrong. My assumption is that print owners don't fully understand their overall costs. (not just the project) and are to quick to drop the price when competing for work.
If they knew their real costs they might not drop so fast.

I don't necessarily agree with your thought on how profit is maximized. I know plenty of people who run 1 or 2 shifts and make plenty of money. It called find your space & provide the services and solutions that benefit the client and they will pay for.

If one choses to be in the commodity business' then I would agree with you on having to run 24/5 or 24/6.

 

By Warren Werbitt on Aug 30, 2023

Hi Cheryl,

Thank you, I appreciate your comment ????

 

By Robert Lindgren on Aug 30, 2023

Warren...

All of the really high profit printers I've known, who are high profit not in percents but in dollars are multi-shift operators. It's dollars in profit at the end of the month or year that count.

M current hero is one has managed to run his business to 24/7 using four crews working 3/12. The people in th shop love the four day weekends and he loves the money.

 

By Warren Werbitt on Aug 30, 2023

Robert,

Then I would say this, the printers you are talking about know what they are doing as do the ones I refer to. They don't make up the biggest percentage of our industry. They are not the ones I'm referring to. I am talking about the rest you who could probably use some help in running their business'.
My top 10 was just a reminder that we have big costs and we shouldn't sell ourselves short. ??

 

By Robert Lindgren on Aug 31, 2023

Warren...
I agree that every printer should have a better understanding of their business. Obviously, their pricing policy is at the heart of it. The reality is that the price is really determined by the cusomer and the competitors that your customer knows and trusts.

The key to knowing this number is the hit ratio. if it's low, less than 60%, the printer is walking away from contribution dollars. If it's high, 95%+, the printer is leaving contribution dollars on the table.

It's key to focus on contribution dollars which are what's left after the materials, production wage and commission is covered. Those dollars pay for the overhead and when its paid for are pure profit.

 

By Gordon Pritchard on Aug 31, 2023

RE: "My assumption is that print owners don't fully understand their overall costs." No need to assume - that's reality for most print companies.

Unless there are chargeable customer alterations, the maximum potential profit the printer will ever see on a specific project will be at the quote stage. Once the customer awards the project to the printer, based on that quote, the printer begins the manufacturing process and also begins eroding that potential profit with inefficient workflows, duplication of effort, mistakes, errors in communication, etc.
Profits are not what the printer is able to make, they are what the printer manages not to lose.

 

By Robert Lindgren on Aug 31, 2023

Gordon...

You're right on! That is why the printr must focus on getting the most that the will customer will pay while also getting the order.

 

By Warren Werbitt on Aug 31, 2023

Robert,

I completely disagree with you now "The reality is that the price is really determined by the customer and the competitors that your customer knows and trusts."

That's only if you are in commodity printing. If the printer is offering idea & solutions, they should be charging accordingly. Otherwise they're making the decision to work for less.

 

By Robert Lindgren on Aug 31, 2023

Warren...

If the printer is offering ideas and solutions, isn't the result of this is the elimiation of competitors from the customer's decision process? That just leaves the customer's perception of the value of the project to them. Thus, a higher price is avaiable, but it's still the customer's decision.

 

By Warren Werbitt on Aug 31, 2023

Robert,

Why are you making the point so complicated? It is very simple.
1. Know your costs / Make money
2. Sell to the right customer (Printer's Choice)
3. Charge for their changes (Be sure to advise when making changes and what the charge is)
4. Stand for what you believe in. (it's your company)
5. There is no reason to give it away.

In my world, I'm not racing to the bottom line, and I'm not working for free for any reason.
Nor should any print company.

 

By Robert Lindgren on Aug 31, 2023

Warren...

My thoughts on your points:

1. Know the relevant part of your costs (materials, factory wages, commissions). All others are irrelevent to the prcing process.

2. The right customer is someone you know and are famliar with.

3. Completely agree!

4. Right on.

5. It depends on what you mean. There is no rational reason why you should reject a job that will produce a positive onntribution to overhead and you can produce.

P.S. These idea exchanges are fun and useful!

 

By Warren Werbitt on Aug 31, 2023

Robert,

1. All other costs are not irrelevant

2. Not always. It can be a new client that understood the value of the offering in the pitch.
Which is the beginning of a relationship

3. I agree ??

4. ??

5. I mean don't drop your price where there isn't enough profit.
I leaned that I want profit, I don't care for just contribution. ??

P.S All conversation is good when ideas pass back and forth and everyone is open minded.
We don't stop learning.

thanks

 

By Robert Lindgren on Aug 31, 2023

Warren...

Some points of clarification:

1. By irrelevant, I meant that overhead costs ae not impacted by the presense or absence of a particular job.

5. Contribtion is the sole source of profit. If contribution at the end of the month is less than overhead, there's a loss. When contribution exceeds overhead at the end of the month it's all profit.

Let's keep talking!

 

By Warren Werbitt on Aug 31, 2023

Robert,

1. correct

5. Said that way I agree in principle.
I still don't agree with taking jobs at little profit as a "contribution" to the bottom line.
It's never that simple. There is always some sort of fallout from that way of thinking.

 

By Gordon Pritchard on Sep 01, 2023

On a related note, this might be of interest:
Andy Paparozzi will present the results of the current PRINTING United Alliance State of the Industry Survey, giving attendees the first look at trends in print sales, cost inflation, prices, and profitability during the first half of 2023. He will explore this data and discuss his expectations for the remainder of the year.

https://lndnm.napco.com/20230907_IPI_PI_WBNR_ELITE_6887_IPI-LP.html?partnerref=004PI