Printwear

Recognized Supplier Guide ‘18

For the Business of Apparel Decorating

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12 || P RI N T W E A R O C T O B E R 2 01 8 Vince DiCecco is a dyna mic and sought-after se minar speaker and author with a unique perspective on busi- ness develop ment and manage ment subjects, pri marily in the decorated and pro motional apparel industries. With over 20 years of experience in sales, marketing, and training, he is presently an independent consultant to various apparel decorating businesses looking to i m- prove pro tability and sharpen their co mpetitive edge. Visit his new website at www.ypbt.co m, and send e mail to vince @ypbt.co m. Y O U R P E R S O N AL B USI NESS T R AI N E R B Y VI N C E DI C E C C O F ro m ti me to ti me, public service announce ments suggest we should all get annual physical exa minations to detect proble ms sooner rather than later. Have your blood pres- sure and blood sugar checked often, get a cholesterol test annually, etc. Yet, many people don't nd the ti me to make it to the doc- tor because of the "I feel just ne, ho w can anything be wrong?" mentality. Isn't it ironic that so many business o wners subscribe to a si milar "ignorance is bliss" philosophy? Sales are brisk, so ho w can there be a serious proble m, right? The trouble with trying to keep an enterprise thriving without doing any diagnosis as to the health and well-being of "the patient" is akin to medical malpractice —call it "co m mercial quackery." For a business, though, the art of diagnosis needn't re- quire a decade of education and an MB A degree. Let's discover ho w easy it really is, shall we? A R E Y O U I N C O N T R OL? Regardless whether you sense that your business is sick or healthy, locate your Consolidate Inco me State ments (aka the Pro t and Loss State ment) for the past 24 months. Typically, your accountant or accounting soft ware will provide this nancial state ment to you on a monthly or quarterly basis. For each docu ment, nd the dollar a mount on the line labeled " Gross Pro t" and divide that nu mber by the top-line a mount, ei- ther the" Total Business Inco me" or " Gross Sales Revenues" (these ter ms are synony mous). That percentage will yield your overall Gross Margin. Next, create a spreadsheet and enter the percentages into one ro w under each colu mn labeled "Period Ending _______" (the last date for the reporting period). For exa mple, your spreadsheet might look like this: Most spreadsheet progra ms will per mit you to graph the data points to see trends. In our exa mple, the mathe matical average for the eight data points is 55.375 percent with a high point of 56.80 percent and a lo w of 54.25. No w, whether you realize it or not, you've created a "control chart," co m monly used in quality i m- prove ment progra ms, such as Six Sig ma. Six Sig ma generally refers to a measure of quality that strives for perfection or near perfec- tion. It is a data-driven approach for eli minating defects — moving to ward six standard deviations bet ween the mean and the nearest speci cation li mit —in many processes, fro m manufacturing to service. The control chart for our spreadsheet exa mple would look like this: The purpose of creating a control chart is to look at variations in any process, predict when a particular process will beco me "out of control," and track co m mon causes for variability. Above, we can see that at no ti me did our gross margin percentage dip belo w 54 percent or exceed 57 percent. If you think your business could tol- erate a gross margin range of three percentage points in any given quarter, you might consider making 54 and 57 percent your lo wer and upper control li mits. If you prefer maintaining tighter control of variability, then you may set the lo wer and upper li mits to, say, 54.5 and 56.5. Control li mits are arbitrary, and you can use your prerogative in setting the m, but re me mber, the tighter the li mits, the tougher it will be to control. So what, you might ask, caused the varia- tion in the above graph? Since our exa mple business last had a price increase on April 1, 2017, that would explain the 2.5 percent ju mp in gross margin fro m the previous quarter. Ho wever, the ef- fect of the price increase was not sustained since the gross margin at the end of the third quarter in 2018 has deteriorated to where it was when prices were last raised —54.25 percent. Still, this is a process in control because none of the "red- ag warn- ing signals have presented the mselves. At least, not yet. Special causes can be proactively detected when: The key to a healthy shop begins with a thorough diagnosis How to Doctor Your Business Q U A R T E R E N DI N G: 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 G R O S S M A R GI N 55.45 % 54.25 % 56.75 % 56.80 % 55.95 % 55.05 % 54.50 % 54.25 % 57.0 56.5 56.0 55.5 55.0 54.5 54.0 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018

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