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How to Maximize Your Shop’s Profit: When to Contract Your Work Banner

How to Maximize Your Shop’s Profit: When to Contract Your Work

By Jimmy Lamb

Most of us want to believe that by doing every order in-house we are generating the greatest margins, but that’s simply not true because production comes with a cost.

Several years ago, I got the chance to bid on a 15,000-piece order. At the time, I considered myself to be both a seller and fulfiller, but this job was way beyond my means. Just for fun, I calculated that in my shop it would take just under 1 year to produce the order. Thus, I had to locate a fulfiller who could knock this out quickly and cheaply, but also with the quality that I demanded. In the end, I made over $8,000 in pure profit. That may not sound like a lot for 15,000 pieces, but remember, I didn’t do any work aside from a bit of coordinating.

To better understand who you are as a business, think about what generates the most revenue.

Let’s say that your hourly cost of operation was $30.00 (for easy math). That means you have to generate $30.00 every hour, forty hours per week just to cover your overhead. Remember that business costs go far beyond ink and paper. (Note: Ink is typically 7% of the overall cost to produce an order.)

So, if you produced three mugs in one hour, they cost $10.00 each and then you would add in a markup. On the other hand, what if you spent that same hour engaged in making sales and took an order for twelve mugs? That is more revenue derived in one hour than you got from one hour of production. You would then spend the next couple of hours producing those mugs at a lower income rate per hour than you earned while selling.

But what if you contracted out the order? Sure, you would be sharing your margins with someone else, but in the meantime, you could keep on selling and bringing in more dollars per hour.

How to Define Your Business Type

Typically, your business will fall into one of these three categories: designer, fulfiller or designer/fulfiller.

Generating Profit by Sales Alone

A “designer” is someone who provides products and services to an “end-user,” or customer. Thus, sales and marketing will be your number one concern. Certainly, you have to produce top-notch sublimation, but sales and marketing is what brings in the money. Therefore, your primary focus is getting in front of the right audience on a daily basis.

As a designer In today’s consumer marketplace you must create a presence so you can get the attention of potential clients. That usually means websites and social media. Other formats can include mobile operations and store fronts, but typically it’s the online presence that is going to generate the most action for you. Bottom line, if you want sales, you have to reach out to the consumer marketplace in a format that works for them.

Generating Profit by Producing the Orders of Other Designers

In comparison, the second category of sublimators is the producer. A producer generates their income by producing orders for other companies. For example, when a designer has an order that they don’t want to handle in-house, they will send it to a producer who has the resources to handle the job in a reasonable amount of time and at a lower price than what the designer can do it for. Then the designer marks-up the order and delivers it to their customer.

A producer will generate orders by making connections with multiple designers. In fact, most producers see designers as their “sales reps” since they generate the business that the producer needs to keep their equipment busy. Typically, they will not focus on sales and marketing, but rather on production as that is the core of their business. That’s not to say that producers don’t end up with direct sales, but it’s typically not the direction that most pursue.

It should also be noted that being a producer is not just about larger volume orders. In many cases it’s also about producing orders that others cannot deliver due to equipment limitations. For example, if a designer did not have a mug press or oven, they might choose to “contract it out” to a producer. Or, perhaps they just had an SG500 and needed to produce larger items such as flags, floor mats, apparel, etc. Then they would have to find someone with an SG1000 or VJ628 to get the job done.

Generating Profit by Designing and Producing Orders

The third category is the designer/producer This type of operation targets end-users as their primary customer, but is also diverse enough to handle a wide variety of orders and order sizes so that they can produce jobs for other sellers.

An example is a growing sublimation operation that has gone past one printer and heat press into multiple pieces of equipment. They started as a designer and through their business success have simply grown into an operation that looks and works differently than how they started out.

Do What You Do Best

You might think you don’t need any equipment at all to design sublimated products. But in the grand scheme of things, there will be orders that you will want to produce in-house. Plus, you need to be able to create samples of your produces for sales and marketing purposes.

The goal for you is to determine where it makes sense to produce something in house and where it makes sense to send it to a fulfiller. This will allow you to maximize your revenues on an hourly basis, which in turn will earn more dollars with less effort, a key thing I have learned in over 30 years of being a business owner.

Just remember this simple phrase and use it as a guiding light – “Do what you do best and contract the rest.” It has been one of my mantras for many years and trust me – it works!

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