At times, online print shops or stores include embroidery to manufacture products. They buy a few embroidery heads and start, but don’t know about the complexity in pricing embroidery work. As a result, they keep facing problems while charging the right price for their embroidery work.
This blog is all about the challenges, methods, factors, and tips you should consider before pricing embroidery work you offer.
So, let’s start…
Challenges while Pricing Embroidery Work
A few concerns you may have while pricing embroidery work are as follows:
- What if I charge too much and fail to attract customers due to high costs?
- What if I charge too much that my competitors take away my customers?
- What if I charge too low that my profit margin goes very low?
- Will I ever be able to raise the prices of embroidery products later as there is tough competition in the industry?
When you calculate how much to charge for embroidery, you must remember the few challenges you may face. The first one is the costs of embroidery works. You should understand your unique costs which may not be the same as others’. Various costs are associated with running the embroidery heads. While some costs like utility, labor, etc. are generally fixed costs, some others are variable. Even the fixed costs may vary from one business to the other depending on the size of the business. If you want to formulate smart pricing strategies, calculate the “Minimum Revenue Required” for your shop. In short, you must calculate how much capital you must have at any time to keep your business running.
Though not completely accurate, the basic calculation looks something like this:
Minimum Revenue = (Overhead Cost + Labor Cost ) / Time
This basic calculation is sufficient enough to help you get an insight into your embroidery business. And how much to charge for embroidery per hour too.
To think of it in another way, consider this. If you can sew 60 hats or caps in an hour, but fail to sell them for a minimum price of your shop’s overhead and labor costs, a contract-based embroidery business might be more suitable for you.
The second challenge while pricing embroidery is the complexity. If you spend time creating embroidery products, you must be knowing embroidery is more complex than any other customization method.
Issues like thread breaks, sew outs, bad digitization, and several others may hamper your speed. Besides, embroidery often uses more expensive materials than plain t-shirts. It implies that pricing embroidery work always includes that anticipation and artistry too. Even if you face an order return or rejection, you have already put in your best efforts and spent on materials. Calculating these costs to get the right price still remains a challenge.
In simple words: Embroidery often turns out to be lengthier and costlier than you expect.
There are some designer tools with built-in support for element-based pricing that you can integrate to simplify your work. See how you can take care of element-based pricing with ease with our tool.
Methods for Pricing Embroidery Work
Cost Plus Pricing Method
One of the most basic concepts of a business is that the selling price is equal to the addition of the cost price and profit margin. However, this rule implies that you must know the cost of doing business first to set a selling price. Pricing your embroidery work is not as tough as it seems. To calculate this cost, sum up all your Business expenses. A few of them are rent, machine lease payments, labor costs (including workmen’s compensation, insurance contributions, etc.), raw material costs, store maintenance, phone, postage, office supplies, and other run-time miscellaneous expenses.
Remember to not include garment costs in this sum total. This is because you can markup garment costs separately and add them to the calculated selling prices.
After this, divide this total cost figure (except garments) by the number of work-hours in the time period you considered to calculate costs.
For example, if you calculated costs on an annual basis, divide the sum total by yearly work hours.
In case you run a small startup and handle all the production by yourself, including a direct labor cost even then. Building this into your operating cost is important so as to reflect your labor expense in the selling price. As your business grows and more employees come, your labor cost will also increase. It will help add revenue to cover extra outlays while still sustaining a profitable margin in pricing embroidery work.
After all this calculation, you will get the hourly cost of doing business per hour.
Consider it with an example.
if your annual operating cost is $43,680 and your working days per week are 5, your annual work-hours will be 40×52 = 2080. Dividing $43,680 by 2080 gives you $21 – your cost per hour. In the next step, translate this calculated figure into a cost per unit. For that, choose a unit of measure to represent your cost and efforts the best. As a rule of thumb, stitch count is one of the simplest and most common units. It is because stitches help measure the accurate output.
If you use a single head embroidery machine, it generally produces stitches ranging between 18000 and 30000 per hour. Which means the output is 300-500 stitches per minute? When you sew at 30,000 stitches an hour, you get units at $0.67 per hour. When your sewing output is 18,000 stitches per hour, you get units at $1.11 per hour. Considering the above cost figure, the cost per thousand stitches may range somewhere between $0.67 and $1.11 based on your unique stitching output. Hence the range – $0.67 – $1.11.
Now you would add this cost to the operating cost of $21 per hour you calculated above. The final figure is the actual cost per unit.
There is a variation to this Cost Plus Pricing Model which is as below.
Cost Plus Embroidery Business Pricing Model
To calculate the amount of profit you add to the cost base, you can set an annual target amount you wish to earn first. Divide that figure by the capacity of your equipment and write off the profit over your production target.
Consider a real example. Let’s say, you set $60,000 as your target using a single head machine. Divide this amount by annual working hours (2080) first. Divide the figure you get by your machine’s average stitch capacity to get the margin per unit you should add to your selling price.
In this case, if you consider your machine’s stitching capacity to be 18000, you will get (60000/2080)/18000 = $1.60. As we know that our cost per unit at 18000 stitches per hour is $1.11, you can add $1.60 to that. In return, you will get the average price per unit of $2.70.
This can be your selling price. Some embroiderers mark up the garment too to keep the price per stitch low and gain a reasonable margin off the final product. You can mark up your garment by 25%-30% of your profit or markup on your full project based on its size.
Market Down Embroidery Pricing
In this approach, you project your profit and how much to charge for embroidery by estimating the market price in opposition to your cost.
Customers don’t buy your thread, machine time, or any other costs involved. They buy your final product and don’t know about the efforts you put. If the buyer finds the design, color, or quality or the embroidery good, they buy it. Whether a customer makes a purchase instantly or after thinking, they don’t know how much it cost you.
In the market-down approach, you can base your pricing of embroidery work on this phenomenon. You can develop a range of beautiful and engaging designs appealing to a particular market and demand a higher price owing to their popularity. The customers always look for new, innovative, and creative designs for their products. And you can tap into their search for creativity. By producing quality work, fulfilling their orders speedily, or giving them a reason to buy from you; you can benefit your business.
Perceiving the value of embroidery work is quite a debatable issue. Customers often think about whether embroiderers price garments separately or price them alongside pricing embroidery work only. Looking from the perspective of profitability, how you price the product doesn’t matter much. The only thing you need is to include a suitable profit for both the garment and your embroidery. You can sell the apparel with a higher markup and not charge anything for sewing. Or you can charge a low markup price for the garment but a suitable charge for embroidery work. Both ways, your customer will pay the same final price and you can earn the same profit.
So, is there any difference? Yes, there is. And it lies in the perception of value. In simple words, embroidery enhances the value of a garment. While selling a plain blanket, you can’t go beyond a reasonable price you may charge. The same blanket, if embellished, can sell at double or triple the original price for the blank blanket. The reason – the addition of embroidery charges, digitizing software, and of course your creativity.
The fun part is that the cost of embellishment may be lower than that of the garment itself. Yet it sells at a price higher than that of both combined. By including the cost of digitizing and sewing in the end product, you make customers feel you are not charging for designing and digitizing. This way, your customers think that you are charging a nominal price for your final ‘embellished’ garment.
Once you have established your prices, you can use technology to streamline pricing embroidery work. Using an embroidery pricing calculator may come in handy for the calculation of your embroidery costs in no time. And help you let your customers know the cost of the product instantly.
Related: Top Custom Embroidery Tips for Your Embroidery Business
General Tips to Consider while Pricing Embroidery Work
Pricing embroidery work is not complex if you follow some general tips as below.
- Build a proper price sheet to increase credibility in your pricing. A published price sheet on your website will help build trust in customers. They won’t feel that the prices are appearing on the spot and their doubts go down.
- If you have a physical store where customers visit in person, be confident about your pricing. Maintain eye contact with your customer to assure them of the fairness in the prices you are charging.
- Set your digitizing and setup fees depending on the complexity of your project. You can categorize this work into Easy, Medium, and Hard and charge accordingly.
- Increasing prices in proportion to stitch count is recommendable.
- Don’t go for offering too many quantities and price break discounts. This is because it may lead to you failing to earn a good profit margin.
- Include Costs of Goods Sold (COGS) and raw good cost in your pricing. Mark up your garments and products suitably. It would be good to have a higher markup (>50 or above) so markup your garments and products appropriately. Use a higher markup (50% or more) than that for screen printing.
- If you are offering premium products, don’t shy away from charging premium prices. Customers will be happy to pay more if you can convince them that you are offering them something premium.
- Be competitive and keep track of prices your competitors are charging. Tracking competitors doesn’t mean you start emulating their prices. It just means evaluating their products, comparing them and their prices with yours, and reaching the best pricing for your products. To reach the best suitable pricing, consider your unique expenses, and include them in your pricing. Only with pricing embroidery work the right way, you can fare well.
- Pricing embroidery work shouldn’t solely depend on the count of stitches but also several other complexities. One of the complexities is the number of times machines stopped to cut the thread or change the color of the thread. You may also need to trim threads hanging out after finishing embroidery. In the same way, embroidery on a hat may be much more difficult on simpler garments like t-shirts, jackets, or bags, etc.
The price for these all complexities should count while pricing embroidery work. Though there is no fixed method to calculate these complexities, you can’t afford to ignore them completely.
You should figure out a way to accommodate these costs anyhow. Or else, your products may not get the right cost!
Over to You
If you consider all the situations properly, you’ll understand that embroidery pricing is not as easy as screen printing. However, if you wish to start an embroidery business, you can make pricing embroidery work easy and speedy. There are some cutting-edge embroidery pricing tools that you can integrate into your store.
Our PrintXpand offers the next-gen online product design software with a built-in online embroidery pricing calculator. Hence, with customization products, this pricing calculator lets you manage element-based pricing in real-time. Read some more features you can avail of by using this product designer.
- Text Features including Custom Font Manager, Quotes, Name and Number printing, and customizable text and messages.
- Image Features including Image Editing and Effects, Personal Image Upload, Design Watermarking, and Image Resolution Warnings.
- Clipart Manager including Free Clipart Library, Smart Search, Clipart Customization, and SVG Support.
- Object Handling including object handlers, clear objects, layer management, and object grouping and positioning.
It also has inherent design-element based pricing that calculates prices in real-time. Click the link below to know more details.
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