Impressions - Digital Decorator - Fall 2015 - 31

Digital printing comes in many forms and formats.

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efficiency in terms of setup and post-production time
by 50% (based on the scenario above) it would save $5 in
production costs. The end result is more pieces per hour
and a lower cost per piece.
It also should be noted for sublimation, that with
smaller pieces, such as coasters, name badges, dog
tags, etc., you can print and press multiple pieces at the
same time, which further increases your efficiency. And
because of the smaller image size, your ink costs may
drop well below 15 cents per piece.
There are many angles you can take here, but my
point is that the cost to produce something is based on
how many units you can produce in a given time period
against the operational costs assigned to that same
period of time. The material cost (not the cost of the
blank) is just a percentage of all of your operational costs,
which have to be accounted for in your production numbers. In reality, material costs may be irrelevant when
you look at the big picture.
Understanding what things cost is one thing, figuring
out how to calculate your operational costs and then creating a price structure that makes sense is another thing.

DEVELOPING A STRATEGY
The fi rst element of a profitable price strategy is the
most important: cost. If you don't know what it costs
to operate your business, then it's highly unlikely that
you can create a pricing system that works. There are
many costs to running a business in addition to ink,
and these expenses must be factored into your pricing
system in order to recoup them and make a profit. Thus,
you must start the process of pricing with a focused
cost analysis strategy.

STEP 1: Determine
Operational Costs
First, identify and add up all of the projected costs for
operating your business for one year. Keep in mind that
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some costs are fi xed, while others
may change as your business grows.
(You should put everything in a spreadsheet so that you can constantly update as
your business changes.) Also, costs such as merchandise for resale will be recovered in the sales process; so
don't include them here, unless you are entering into a
payment plan for purchasing such merchandise.
In addition, be sure to include your desired paycheck. The final result will be the total estimated dollars
that you need to pay all of your yearly bills plus your
paycheck. Always keep in mind that there will be
fluctuations and unexpected costs, so don't assume this
number is carved in stone, but it is a reasonable starting
point for your cost analysis.

STEP 2: Break Down the Costs
Into Usable Increments
Taking the information gathered in the initial assessment phase, you should now have an approximate figure
for the annual cost of operation. Suppose that number
was $60,000. What does that tell you? Pretty much nothing at all, so you need to break this number down into
something that is easier to deal with.
Decide how many weeks you plan to operate your
business per year. Most people go with 48 initially, as
this equals two weeks of vacation and 10 business holidays. Divide $60,000 by 48 and you come up with $1,250,
which is your weekly cost of operation. Said another way,
you need to bring in at least this amount of money in net
dollars each week, 48 weeks per year, in order to reach
your yearly number. Divide this number by five to see
what the daily figure is ($250) and by 40 to determine the
hourly figure ($31.25).
You now can see quite realistically what it costs to
run your business on a daily basis. Th is information
will make it easier to track the performance as well,
because you essentially have a series of production
FALL 2015  31

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Impressions - Digital Decorator - Fall 2015

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