Price Your Embroidery to Keep Clients and Still Make Money

Being smart about digitizing costs, labor and perceived value will make your work profitable.
May 1, 2008

Reducing stitch counts where possible can save production costs by minimizing the time spent sewing out a job. The design on the left contains 14,995 stitches. When the satin stitch used for the border is converted to a bean stitch in the design on the right, the stitch count drops to 13,966.

By Deborah Jones

Do any of your customers complain that your prices are too high? If not, you probably don't charge enough for your embroidery. Many embroiderers think that if people say their prices are too high, it must be true. That's the equivalent of letting your customers set your prices, which is almost as strange as letting your competitors set your prices.

While it may sound absurd, some embroiderers set their prices according to what their competitors charge. When a customer claims she can buy a certain job for less at XYZ Embroidery, many embroiderers tend to match or beat the price to get the order. The reason that many embroiderers aren't profitable isn't because they aren't busy or don't get enough orders — it's because they don't charge enough for the work they do.

Your customers decide if a price for a product or service is too high based on their perception of its value. It's our job to create a perception of high value for our products and services. Even if we are successful, there will occasionally be customers who say the price seems high, but that's normal. Remember, consumers have no frame of reference for the value of embroidery. We must educate them and provide some perspective.

Apparel Options
In your selling process, are you a price matcher or a consultant who educates the customer about the reasons Garment A costs more than Garment B?

There are times when budget constraints require that you recommend a promotional quality shirt (translation: low-end). Yet many business customers would prefer a higher quality garment, particularly if you can explain why it will last longer, represent their company better by wrinkling less, is stain resistant and so on. Sure, it may seem more appealing to pitch on a low price and get an order, but this can be a dangerous route to take. For one thing, you will attract mostly price-conscious customers who will leave you for the first deal that is cheaper than yours. And your customers may be stolen by a savvy embroiderer who shows them nicer garments.

Think about how you shop. Are you always looking for just the cheapest price? It's more likely that you buy something that's not the most expensive or the least expensive. Rather, you look for a quality item at a good value. Your customers aren't that different, and most will select the mid-range product if you create a good-, better-, best-product offering.

Setting Your Price
Some pricing philosophies are based on calculating overhead to run your shop and determining the cost to produce each 1,000 stitches, and using these to determine a percentage markup — much as you would for a retail garment. This formula is best used to assure that you are charging above your cost, but it's probably not the best way to formulate your prices.

Among the things that should be factored into pricing is market research. For example, find out how much your competitors charge for a similar product or service, and how a comparable garment is priced at retail.

Let's say your customer likes a poplin jacket that sells for $44.95 at the local department store and you can buy a similar style from a distributor for $25. If you add a markup and embroidery charge for a total of $54.95 each for an order of 12 (set-up charge is separate), that's more than a $350 gross profit on a relatively small order. And your customer will congratulate himself on the great bargain he found on a fully custom jacket.

At this quantity, keystone markup (doubling your cost) is neither unreasonable nor uncommon. The margin percentage typically drops for larger quantities or more expensive goods.

Set Your Standards
It pays to have well-thought-out policies that relate to pricing, rather than making them up as you go along. You may modify them, or even enforce them selectively, but they help when dealing with volume discounts, rush orders and other special pricing situations. Without clear policies, these can become black holes that swallow profits.

You are justified in asking for a higher price for delivering an order ahead of your regular production schedule. It's commonplace in other service businesses to charge rush fees of 50% or more for same- or next-day service. Yet when I ask an embroiderer how much she charges for a rush fee, she often says 10% or 15%. Let's look at it in practical terms. If a customer asks for same- or next-day service on a monogram that would normally cost $20, a 50% rush charge would make it $30.

On the other hand, a 15% rush fee would bring just $23. The $30 price is more in line with the level of extra service you are providing. It's your choice whether you enforce this charge on a sale to a regular customer, but a sign or note on your price list informing your customers of this policy will deter customers from asking for rush service when they don't really need it.

It also is reasonable to charge more for your embroidery services when the customer brings in his own garments. It's good business to encourage customers to purchase their garments from you whenever practical. One way to do this is to quote "embroidery-only" prices at a higher rate than when you bundle your garment and embroidery price together.

For example, if you provide shirts that you buy for $10, you might quote a turnkey price of $29.95 per shirt, including up to 8,000 stitches of embroidery (set-up quoted separately). That would give you 50% margin on the shirt plus $9.95 for the embroidery. If a customer brings in his own shirts that require 8,000 stitches of embroidery, you might quote $15 for the embroidery. If he paid $15 each for his bargain shirts, the price is effectively the same for the customer. You would be selling yourself short at a lower embroidery price and the customer probably will have bought a lower quality shirt for $15 than the garment you would include in the $29.95 shirt-and-sew piece.

Additional Policies
Requiring a firm minimum order is a simple policy that is frequently overlooked, yet it can make a huge difference in profitability. Here's a real-life example of a minimum order policy in action: A customer brings in a shirt for a cuff monogram, for which you charge $7.50. Do you take the order? It is worth your time to write the order, program the monogram, hoop it, run it and then wait on the customer again to deliver it. If your minimum order is $12.50, that would be the price for this monogram. Suggest to the customer that he bring in another shirt, making the order amount $15.

Set-Up Fees
When considering what to charge for artwork, it is important to refer to it as a set-up fee on your order form and invoice. Calling it a disk charge would imply ownership of a disk.

Most set-up fees are time based. If you need to earn $60 per hour, and a setup takes 15 minutes, the cost for the setup should be at least $15. If you send out your digitizing, you are entitled to mark up what the digitizer charges you. Why? Your expertise is required to interpret design details to place the order, and you can charge for that.

It also is possible (and positive) to have a published price guide. This guide can list common jobs such as towel monograms, as well as your minimum price per order and minimum price per item. It's also a good place to publish any other price-related policies such as rush charges and set-up fees.

For embroidered apparel items, consider bundling a predetermined stitch count with each garment. I have successfully used 8,000 stitches as an average for a price list. Your price guide might show a popular shirt brand and style with prices for orders of six, 12, 24 and so on. These prices would include a logo requiring up to 8,000 stitches, with additional stitches charged at $1 per 1,000 stitches, or whatever your rate may be. If the logo has fewer than 8,000 stitches, the job is simply more profitable for you.

Perception Is Key
Many profitable embroiderers spend a lot of effort in sales presentations building the perception of value. They talk about features that make a customized garment more comfortable and fashionable, longer-lasting and so on. When on a sales call, they pull their samples out of an embroidered garment bag.

These small things build the perception of quality and professionalism. Just as you expect to pay more for a meal by an accomplished chef than at a fast food restaurant, your prospects expect more from a professional embroiderer, and expect to pay more.

When delivering products, think about how you can add to the presentation. You can have a menu of optional services for which you can charge, such as re-bagging, or you could just charge enough to cover this type of value-added service.

Regardless of how you decide to price, remember that for most embroiderers, pricing structure remains a work in progress. But with experience, you will gain confidence in quoting jobs at a fair price — for you and your customers.

Deborah Jones is a commercial and home embroiderer with more than 30 years experience in the computerized embroidery field. For more information or comment on this article, e-mail Deborah at djones@greatnotions.com.

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