Sergio DeSoto Explains Why Printers Must Stay Busy

In my early 20s, I was the marketing manager for Arizona Block, a large, concrete-block company. The owner, Max, was a very intelligent, older man who built his business from the ground up. On my first day, he walked me through the yard and provided background and history about the company. I stood in the dirt, surrounded by stacks and stacks of concrete blocks – hundreds of them.

Know your business
With a bird’s-eye view of the massive equipment in front of us, Max asked me a question: “Sergio, what business are we in?” I thought about it for a second and asked if this was a trick question. He said it wasn’t. I replied, shyly, “The block business?” He laughed and said, “No, we’re not in the block business. We are in the machine-time business.” This meant that it was our job to bring in and retain business to keep our machinery working as close to maximum capacity as possible.

Fast forward to 2007, and I’m standing at the ISA Sign Expo in the Fellers booth (I was Fellers’ CMO at the time) with approximately 100 people, and I asked the same question. The crowd’s responses were what I expected – the banner business, the wrap business, the sign business and so on. I have asked this question to owners of more than 2,000 shops across the country, and I always get the same replies.

To be honest, it was years later before I recalled my long-ago conversation with the concrete-company owner. I was watching a news segment about a conflict in the concrete industry. I looked at my wife and said, “We are not in the wrap business, we are in the machine-time business!” Remembering this changed my perspective. This was also the message I delivered to the crowd in the booth.

Do the math
I have a passion for design; it brought me into this business. Coupling that with my love of cars, SNA Graphics was born. It wasn’t until I started to look at the business, and began to create efficiency-oriented systems (read The E-myth Revisited, a book by Michael Gerber, for more in-depth ideas related to this concept), that my operation harnessed its potential. After these steps, my shop became much more profitable.

Let’s start with some wrap-shop math. Often, when I ask wrappers about their price, they respond that it’s around $2.50 per sq. ft. Well, it’s not until you cover your business costs. Let me break it down for you.
Look at the chart (see Table 1) as a sample of your baseline expenses. Studying this requires some heavy thinking. If you sell 1 sq. ft. per week, your cost per square foot is around $8,000. If you sell 1 sq. ft. per month, your cost is more than $32,500. Make sense? Good; now, let me share an industry secret.

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Remember, another metric measures your success as a wrap shop. The number of square feet of
vinyl that leaves your shop matters, but the quality and consistency of these prints, and gaining return business as a result, is what really matters.

Table 1: Sample Monthly Expenses
Fixed Expenses (materials, overhead, insurance, taxes) $20,000
Payroll $10,000
Miscellaneous or Variable Expenses $2,500
Total Expenses $32,500

You need the right tools to produce successful work. Only buy quality equipment. Everything in our shop is certified by the Professional Graphic Installation Technicians of America (PGITA). This independent organization tests equipment and gives unbiased opinions about equipment, media and tools in the wrap market.

How do you rate?

Regarding this breakdown, you first need to measure you per-hour rate on the printer. On our Mutoh 1620, we can print 140 sq. ft./hr. You must be honest about your shop’s print capacity. Most shops I’ve visited operate at approximately 20% of their production potential. You probably think I’m crazy, but it’s the truth. If you can produce 140 sq. ft. per hr., you have the potential to produce 5,600 sq. ft. Yet, if you’re only producing 1,120 sq. ft. of wraps, that’s only 20% of your potential.

Now let’s look at your per-square-foot price. At 4,760 sq. ft. produced monthly, your cost per square foot is $6.83. Add in cost of goods sold, and this amounts to $9.03 per sq. ft. This creates a challenge for small shops, which are competing with larger or more productive shops that manage a lower cost per sq. ft. If you produce 1,120 sq. ft. per week, that amounts to roughly three wraps per week. Many shops struggle to put out that many wraps, and they can’t sell for below market price and hope to turn a profit.

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To run a successful shop, you must account for your costs, your production capacity and your production efficiency to determine true costs. Then, you’ll better understand you’re in the business of filling that capacity. Once you reach your monthly square-footage goal, your cost for the square footage you produce will drop considerably (see Table 2 for more details).

Table 2: Cost per sq. ft. Calculations (Maximum monthly production is 23,800 sq. ft.)

Capacity Sq. Ft.
20% Capacity 4,760
60% Capacity 14,280
$32,500/4,760 = $6.83/sq. ft. @ 20% capacity $32,500/14,280 = $2.28/sq. ft. @ 60% capacity
Add $2.20/sq. ft. Cost of goods sold
20% capacity: $6.83 + $2.20 = $9.03/sq. ft.

60% capacity: $2.28 + $2.20 = $4.48/sq. ft.

If your shop is in operation for 170 hrs. per month, and your printer capacity is 140 sq. ft./hr., your monthly capacity is 23,800 sq. ft. Internalize that number, and do what you can to push your actual production towards full capacity.

Managing your printer and creating a more efficient schedule will benefit your shop. You may be a bit upset when read actual square-footage costs; get over it, adjust your price and move forward. Once you have more efficient processes in place, you’ll find the sooner you reach your monthly goals and cover costs, the more flexibility you’ll have to cut prices and offer deals to new or preferred customers. Best of luck!
 

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