Maximizing Profitability in Sign & Graphics Shops
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Maximizing Profitability in Sign & Graphics Shops

Controlling costs, pricing strategies, up-selling & more

By David King

Business is not that difficult; what is difficult is being consistent and applying a methodical approach to running your business.

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  • Do not try to complicate processes or plans - the best plans are always the easiest to implement. This article focuses on two rules in business that you must follow. The only way to make money in business is to cut your costs, or sell more. This assumes that you know how to make, deliver and install your products.

    Controlling Costs
    The first step in controlling your costs starts with your employees. You must have the right people in business or you are doomed from the start. Many businesses put people in positions that they clearly are not best suited for or are just plain not cut out for the specific type of work. Stop what you are doing and write down all the steps in your business that are needed to make a perfect product. Your list should look something like this:

    1. Answer the phones - Be professional, answer questions properly, provide the right product for the client, and give them an accurate price quote for delivering such products and services.
    2. Open client files - Ensure the file is in the correct format for the job. If no files are provided, be able to find the right images, set up the files for the client and send over a set of proofs for approval. This requires knowledge in Photoshop, Illustrator, InDesign and other computer applications.
    3. Set up the files for the printer - Open the files on the printer software (RIP) and manage them properly for correct output. This requires some knowledge of media, color profiles, and overall printing and paneling techniques.
    4. Load the printer with the correct media - Check the printer to make sure it is printing correctly and the colors are right. Keep the printer clean and well maintained. Start the job and set up the media for proper collection (take up reel).
    5. Finish the prints - This includes laminating, mounting, trimming and finishing the graphics. This involves using a laminator, cutter, panel saw, blades, cleaners, etc.
    6. Install graphics - If you offer installation services then you will need the skill to install what you say you can install. This could range from simple cut vinyl all the way to full-on truck wraps.
    7. Be financially responsible - Pay attention to purchase orders, billing, vendors payments, client invoices, payroll, etc.
    8. Pave the road for sales with marketing - From business cards to the Web site, you need a skill to handle your marketing.
    9. Focus on the sales department - Many people believe that "sales" is a zero entry position, meaning that you do not need to get a degree to sell. But this is not the case. You must have the ability and talent to sell. Sales involve cold calling (over the phone and in person), presenting a product or service, recognizing an opportunity, understanding how to overcome objections and closing the sale. It's one of the more difficult jobs in a company.

    Depending on the company, this list may be longer, but it's a good foundation to help you start fitting your employees into certain positions. What will hurt at this point is that you will have a few holes where you either have people that just do not fit anymore, or you have no one with the skills to fill the position. The basic rule for hiring people is that each person in your company should be worth $110,000 in sales, meaning if you have 10 people then you better be doing $1.1 million in sales. If you have 14 people for $1 million in sales, then you need to remove four people, possibly five.

    This is your most difficult task to do, and you will hate it. If you fail at this task, just about anything else you do from this point forward will not return you the financial success you deserve. My father always said to me, "charity begins at home," so stop giving away your money to people that are not making you successful.

    The next biggest expense is cost of goods sold (COGS). This is where every one of my clients has failed, but it was not their fault. The problem within the specialty imaging industry is that virtually none of the distributors/dealers have people on staff that have done the work you need them to do. In most cases you are being sold what they have, not what you need.

    This following statement is always true: "Customers buy what they are sold, salespeople sell what they know." So if you have salespeople calling on you or you are calling on them (this is the case most of the time these days) and they have never run a printer, laminated jobs, mounted graphics or wrapped walls and cars, then how can you expect them to sell you what you need?

    Let's break it down even further. Think about what you do every day in your business, and apply some very simple rules:

    1. I want to use as few products as possible for as many jobs as possible.
    2. I want these products to function the way I need them to.
    3. I want these products to work best with my equipment.
    4. I want these products to work best in the field.
    5. I want these products to be priced so that I can make money.
    6. I want my local dealer/distributor to carry these products so I do not have to pay for overnight or long-distance shipping.

    Today I find that I have to do business with more than seven sources to get what I need, and five of the seven sources are good for almost nothing when it comes to good information. The basic rule I follow is when all factors are the same, go for the lowest price. This means that my local distributors do not like me that much because I shop them.

    What's important to remember is that there are two types of distributors, master and sub. Many distributors/dealers can be both depending on the product. For example: If you like to purchase a certain brand of PVC sheets but you call two sources and you get a price of $29 for a four feet by eight feet, three millimeter white sheet, and then you call another distributor and you get $24.50 a sheet, you just found out that the first call was to a sub-distributor for the specific company and the second call was to a master. Subs purchase their products from masters. Now you can make the same call again to these same two distributors for vehicle graphics vinyl and get better prices from the first distributor than the second. So what this all means is that you need a good purchasing (accounting) system so you can enter in the vendor to call for the different inventory products and keep track of your last purchase cost. In most cases, the difference between a master and sub is 30 percent. If you spend $50,000 a year in material costs, 30 percent could be $15,000. Wouldn't you like to have an extra $15,000 each year?

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    Simplify The Process
    To simplify the process, the following list is what I use in my shop for about 90 percent of the work.

    1. Calendered vinyl for all my boards, wall wraps, floor wraps, table wraps, temporary vehicle wraps and most short-term adhesive backed applications. Yes, I only use one vinyl for all these apps. This is more than 60 percent of all my printing.
    2. Cast vinyl for all long-term graphics (that is more than two years), and all vehicle wraps. This would include all mounted graphics for outdoor use longer than two years.
    3. Banner. I use only one and it is 18-ounce gloss on one side, Matte on the other. About 90 percent of the jobs I print do not have hems, as the 18-ounce is strong enough for 90 percent of the jobs. I only use a certain type of grommets so they will not tear out of the banner. I also have a sewing machine and special double-sided tape that works on vinyl and fabric.
    4. Banner mesh. I have the banner mesh that is 75/25 and I love it. I always hem banner mesh as it is not strong enough for outside apps without hems.
    5. Banner smooth. I do not use this often, just on special applications.
    6. Window vinyl. There are six ways to put graphics on glass and you need to understand all six of them to maximize your window graphics sales. I have three types of vinyl to produce all six solutions:
      • Window Perf: 60/40 as it works best for building and vehicles
      • Window Translucent: For most other window applications
      • Clear: For double layer window and backlit graphics
    7. Paper. I have a wonderful paper stock that I use for indoor paper banners, posters and short-term graphics.
    8. Laminate. I have five but I use two of them most of the time:
      • Crystal calendered: Texturized-vinyl laminate for all floor graphics, trade show signage, most retail signs and most short-term jobs.
      • Luster calendered: For some outdoor jobs as the luster helps to keep the graphics cleaner than the crystal, plus the odd indoor graphic when they want a shine to the graphic.
      • Matte calendered: I never use this. I send crystal as the matte choice.
      • Dry erase calendared lam: For very special applications.
      • Gloss cast: Only for cast vinyl.

    Now for the jobs I cannot do in house, I have a number of great vendors that provide products like offset printing, labels, routing, special fabrication, unique printing jobs, etc.

    Pricing Strategies
    I would love to say that pricing graphics is logical but that would be misleading. For a number of reasons, soft goods (graphics not mounted to a board) sell for much less and are more of a labor burden. I use three factors for pricing large-format graphics, and you could use the same factors for pricing just about anything:

    1. Cost of goods.
    2. Labor involved in making the product.
    3. Perceived value in the market.

    In your business, you should determine your own prices based on your materials and labor costs, and the prices that your local market can handle. Do not undervalue your services, and work to get the best price you can.

    In your pricing efforts, remember that price and profitability are widely variable based on your cost of materials, cost of labor and efficiency in getting the job done. Strong profits are not a given and downward pressure on prices is an ongoing concern.

    Up Selling and Adding Value
    This is a very easy part of the sell, but you must know what you are talking about to be successful. First and foremost: "Your customers are always wrong, and you are always right." Now this is not always true, but more times than not, it is. When your customer asks you for foam board, you should never give them a price. Instead, ask them the following question: "Where are these graphics being used, and how many times are you planning on using them?" If the graphics are going to be used more than once or longer than a few days, then foam board is not the answer.

    Most clients ask for what they know, or what is the lowest price - be assured if you sell them poor quality, even if they asked for it, you will be thrown under the bus when the graphics do not perform as needed. Sell the customers quality products, and unless the graphics are dated for next week, stay away from foam board, as it will fail faster than you can imagine. By selling a better product to the clients, you will give them a better-looking image, the graphics will not fail, and you will look good for the next sale.

    Next, look at the goal, not the graphic. Ask them about the event. Where are they on the show floor, is there a competitor at the event and what are they saying as a message? Once you have a better understanding of the client's goal, you should be able to give them a better solution to the goal. Do not lose site of one major point - no one was ever fired for spending more on quality graphics, and no one gets a better raise at review time because they saved the company money on their show graphics, but many get a better review because they were more successful at the events. In all cases the customers want results; they want a return on investment (ROI). If the client believes you will make them more successful at their event because of your ideas, they will spend more money with you rather than your competition. My ROI statement is simple: If you sell a client 10 foam boards at $12 per square foot or 10 gator boards at $18 per square foot, at the end of the day your salesperson has more money, and you have more money on the bottom line. Do the math and you will see that you make a lot more money selling quality graphics.

    Clients today have much fewer opportunities to be successful due to the economy, so they need to do it right each and every time. You need to up-sell them on the fact that you understand their business and you will deliver more successful graphics for their event.

    Anyone can sell banners and posters, but not everyone can sell solutions that help the client achieve their goals. This is your road to success.

    Dave King is Commander of Results at MarketKING, a printing and graphics company offering the "Print Shop Makeover." This program is designed to teach business owners how to be successful with large-format digital graphics. david@themarketking.com

    This article appeared in the SGIA Journal, July/August 2011 Issue and is reprinted with permission. Copyright 2011 Specialty Graphic Imaging Association (www.sgia.org). All Rights Reserved.

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