Issue link: https://docs.hic.us/i/403552
Know Your Costs It's amazing how many business people don't have a firm grasp on the costs of running their business. They tend to see large bills such as rent and bank loans as being the cost of running their business. But it's really much more than that. And this cost factors have to be used as a basis for creating a pricing structure that ensures a reasonable profit is being generated. One of the toughest things for the new embroidery business owner is determining what to charge for their products and services. Unfortunately, too many people try and base their prices on what the competition charges, rather than what it really costs for them to do business. In order to be successful, you must know what your operating costs are and then set your prices accordingly! No matter how much work you have, if you aren't charging correctly, you won't last long. Maintaining your prices, especially if they are the highest in the area, can be difficult. Its awfully tempting to drop your prices when times are slow, or a customer says that he can get cheaper somewhere else. But remember this, you are in business to make a profit, and if you can't do that, then you need to try something else. To determine the correct pricing structure for your sewing, you need to first calculate your monthly operating costs. List every conceivable, but legitimate, expense. Then break them down into one of two categories: fixed or variable. The fixed costs are the easiest to work with since they don't change. Such things as rent, insurance, machine payments and salaries fall under this heading. Variable expenses, on the other hand, are more difficult to deal with since they are constantly changing. They include such costs as thread, backing, utilities, taxes, etc. Since these costs don't stay the same from month to month, you must try to estimate what they will actually be. This is best accomplished by establishing a monthly budget for each item in the variable list. Each month compare the actual cost to the budgeted costs and make adjustments to your costing system. Eventually, you will be able to set-up your budget with a fair degree of accuracy. (By the way, if you supply the garments to your customers, it is not necessary to include their costs here. That will be addressed separately.) After you determine the nature of your monthly expenses, multiply each one by 12, in order to convert it to a yearly value and then total them up. Once you have established the yearly total of your monthly expenses, it is time to add in any annual or semi-annual expenses such as dues, subscriptions, property taxes, etc. At this point you should also include an amount that you wish to set aside for future improvements. (After all, nothing lasts forever.) Also, make sure www.hsi.us care@hsi.us 72