Awards & Engraving

November '19

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A&E NOVEMBER 2019 • 9 PROJECTED COSTS The first step is to identify and calcu- late all of the projected costs for operating your business for one year. Keep in mind that some costs are fixed, while others may change as your business grows. Thus, you should put everything in a spreadsheet that can be easily updated as your business changes. Also, costs such as merchandise for resale will be recovered in the sales process, so don't include those here. In addition, include your desired paycheck. The final result will be the total esti- mated amount that you need to pay all of your yearly bills plus your paycheck. Always keep in mind that there will be some unexpected costs and fluctuations in some of your costs, so don't assume this number is carved in stone. This initial assessment phase will give you an approximate figure for the annual cost of operation. Suppose that number was $57,600. 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 holi- days. Divide $57,600 by 48 and you come up with $1,200, 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 ($240) and by 40 to determine the hourly figure ($30). The cost per minute works out to $0.50. You can now see realistically what it costs to run your business on a daily basis. This information will make it easier to track the performance as well, because you essentially have a series of production goals that must be met in order to generate the required amount of annual revenue needed to pay the bills and yourself. PRODUCTION PROCESSES Once you have usable operating cost fig- ures, it's time to compare them against your "logical" production capabilities in order to see what it really costs to generate sublimated images. For simplicity, assume that it takes 30 seconds to print, 30 seconds to prepare the substrate for pressing, and 60 seconds to press the item. That works out to two minutes. In theory, you have a maximum output potential of 30 pieces per hour. If your hourly cost of operation is $30 and your potential maximum production is 30 pieces per hour, then a quick bit of math reveals your production cost per item is $1. That includes ink, paper, labor, insur- Any time you personalize a product, whether it's a monogram or names, it ups the perceived value, allowing you to price the item higher.

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