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Lose money or break even?

Discussion in 'Picture Framing Business Issues' started by Rob Markoff, Dec 6, 2016.

  1. Rob Markoff

    Rob Markoff PFG, Picture Framing God

    Price increases are coming in January.

    Assuming that a matboard now costs $3.00 more per sheet and you are too busy to adjust your prices.

    You increase your selling price for the mat on a job by $3.00 (because the job uses a full sheet of matboard).

    Have you lost money or broken even?
     
  2. graysalchemy

    graysalchemy CGF, Certified Grumble Framer

    YOu have lost the potential profit on the increase.
     
  3. DVieau2

    DVieau2 SGF, Supreme Grumble Framer

    I would hope that everyone knows that to keep your cost of goods at 33% (or less) they would have to raise the price by more than $3.00.

    BTW I've always priced mats so I get my 33% even if I use a fraction of the sheet.

    Doug
     
  4. Rob Markoff

    Rob Markoff PFG, Picture Framing God

    Sadly, Doug I think that there are a large number of framers who don't even know what you mean, let alone have their COM at 33%. Even with items we keystoned (i.e. posters and some photoframes (meaning we took a greaTER THAN 50% MARKUP ON MANY), our COM was running at 26%.

    I advocate using the term, COST OF MATERIALS when discussing the things we buy to make a finished framing project as there is little we buy that does not have a "conversion" cost and it is important to differentiate between what we buy and the cost of conversion. In my bookkeeping, we actually use a portion of our labor costs in determining COG because it isn't possible to sell a sheet of matboard or a stick of moulding in a finished framing job.
     
    Rick Granick likes this.
  5. RoboFramer

    RoboFramer PFG, Picture Framing God

    So, if a sheet of board cost $10 and you charged, for argument's sake, $50 for a mat that required a full sheet .. then you get a $3 increase and only charge $53?

    Who would do that FHS!

    .
     
  6. tedh

    tedh PFG, Picture Framing God

    That $3 price increase translates to $10 at the retail end.

    Or more, but certainly not less.
     
  7. RoboFramer

    RoboFramer PFG, Picture Framing God

    With (good) pricing programmes this is not an issue, or at least should not be one. New supplier pricelists come out with a fair bit of notice and are loaded in to the programme in seconds and it is usually the case that if you do that as soon as you receive the file, the next couple or more orders you make with the supplier will not be at the new prices anyway as the prices have to take effect accounting for those that had to have hard copies mailed to them.
     
    David Waldmann and IFGL like this.
  8. Rob Markoff

    Rob Markoff PFG, Picture Framing God

    More framers than are willing to admit..........
     
  9. Cliff Wilson

    Cliff Wilson SGF, Supreme Grumble Framer

    Rob, when I got in the industry 15 years ago I was amazed at how true this was. I don't believe it today. Classes, the Internet, and the "business death" of the ignorant seems to have changed this significantly. I think the ignorant in this regard is rare today.

    P.S. If my COM gets near 22% (i.e. I target LESS than that) I start remedial action!
     
  10. cvm

    cvm SGF, Supreme Grumble Framer

    What kind of margins are you getting on premium glass?
     
  11. artfolio

    artfolio SGF, Supreme Grumble Framer

    I used to use a manual matrix chart for pricing at the counter and if I was faced with this problem and did not have time to amend my whole chart I would simply recalculate my prices for a couple of common sizes to get a percentage increase and apply that with a bit of mental arithmetic.
     
  12. Grey Owl

    Grey Owl SGF, Supreme Grumble Framer

    First, you take dollars to the bank, not percentages.

    But you certainly should look at aggregate percentages to see how trends of good or bad might be happening.

    When I came back into framing about 10 years ago, I was told a good target of COM was 25%, but the person who told me this target he consistently ran at 30%.

    For me, if my COM was as high as 25%, I would certainly need to take a second look at what was going on. I do a lot of labor intensive activities, and as your labor costs go up, your COM must come down, if you are to make a profit. Generally, because of my mat decoration, I expect my COM to be less than 20%. I sell quite a few mat packages without framing, and I expect them to be in the 8 to 12% range, unless there has been quite a bit of corporate work, or quite a bit larger than 20 x 32.

    Back to Rob's basic question about a matboard going up $3.00. First if I had not added it to my POS, I would go up a minimum of $7.00. After that it would depend on whether it was part of my package pricing or not.
     
    IFGL likes this.
  13. cjmst3k

    cjmst3k SGF, Supreme Grumble Framer

    On a similar line of thought.

    Who out there charges a lower mark up on more expensive mouldings?

    I mean, if moulding "A" costs $2 pf and you charge $6 pf, if moulding "B" costs $5 pf, who would charge $15 pf and who wouldn't... and why or why not?

    This is tied to the matboard question above.
     
  14. Pat Murphey

    Pat Murphey SPFG, Supreme Picture Framing God

    I sell a fair amount of $18 to $50 Ft. wholesale. I would sell much of it at the same markup as the cheap stuff.
     
  15. CB Art & Framing

    CB Art & Framing SGF, Supreme Grumble Framer

    On more expensive moulding the waste costs more and labor could be more for larger, detailed or ornate finishes.
     
  16. Bob Carter

    Bob Carter PFG, Picture Framing God

    may I suggest another approach?

    the smarter retailer looks at components rather than aggregate COGs. For examples should behigher on items requiring a little more labor or a little or 'waste'. Glass is a great example

    A more sophisticated approach (meaning no one will do it LOL) is to chart individual tickets. Can be done on random audit basis or every ticket (takes bout a minute) but really does highlight problems like a laser. A great example is mldg. Most folks use static mulltiplier. Let's say you use 25% target or 4x. You order 'once in a blue moon' mldg at $4/ft. POS says you need 11ft. Your retail is $176. But yu order 11ft get 15ft cost is $60. N longer 25%. Bt we found one supplier always sent a larger bundle, say 16 or 17ft. Now your cost is $68, where POS 'thought' $44. With that analysis would point out a higher COG for that vendor. And, that 5-6ft nd cut wil probably still be there a year later

    if aggregate invoicing were used you would never know that. We dropped line because of that 'over-bundling'.

    it's real money
     
    Last edited: Dec 9, 2016
    cjmst3k likes this.
  17. Pat Murphey

    Pat Murphey SPFG, Supreme Picture Framing God

    Chops from a very reliable source...
     
  18. i-FRAMER

    i-FRAMER MGF, Master Grumble Framer

    We scale our markups based on cost. WE also set individual markups for those mouldings we don't like, difficult to use, hard to sell etc.

    We also have a report which breaks every job down by size, so we apply extra markups to the most common sizes, sometimes decrease the markup if the quotes are out number by orders at certain sizes.

    We have tags on certain customers to increase their job amounts. This might be because we know they are going to 2 hours for a consult, just plain rude, too wealthy, or their culture(some people just have to bargain, so we have a 10% on their record, then when they start bargaining, we give them a 10% discount, they think they a got deal, we got what we would have charged)

    There is certainly no simple rule we follow, we try to maximise our profits from all different angles.
     
  19. David Waldmann

    David Waldmann SGF, Supreme Grumble Framer

    A little bit of devil's advocate here.

    If your cost goes up $3 and your price goes up $3 you haven't either lost or broken even; assuming your original pricing was right you will have made the same profit as you always did.

    The above statement is based on the assumption that all the necessary information was provided to make the decision. In other words, there is no discussion of the cost of rent going up, or copy paper, or wages, or, etc. So if the only thing that changed is that the cost of matboard went up $3, and you raised your price on that board by $3, at the end of the year, doing exactly the same jobs all over again, you will pay the same amount of taxes and put the same amount in your personal bank account.

    To contradict myself, if matboard went up $3, probably some other things did too. Including rent, copy paper wages, etc.

    Bottom line, there is no simple/easy answer. To be profitable you need to constantly be aware of how your business is performing and make changes as necessary to keep the $$ flowing in the right direction.
     
  20. tedh

    tedh PFG, Picture Framing God

    Following on your last sentence, David, about keeping the $$ flowing in the right direction, the right direction for me is due south.

    I can fight rising costs by buying American. I'm blown away by the price differences, even considering the dollar difference of 30%. There are exceptions: Peterboro matboards, of course, (saved $150 this week) and some Canadian moldings. But, on the whole, big savings.
     
  21. Paul Cascio

    Paul Cascio SGF, Supreme Grumble Framer

    I understand Rob's point, but no job ever uses an entire matboard, because there's always a dropout. It them becomes the mat for another job.

    In fact, selling mats is a lot like selling doughnuts -- first you sell the doughnut; then you sell the doughnut hole. Except with mats, it can theoretically happen again, and again.
     
  22. Joe B

    Joe B SGF, Supreme Grumble Framer

    I'm sure glad we are discussing prices and mark ups here in the open so that the public has a great idea about how much money we are losing - and please don't say were are only talking about make pretend mark-ups. Doesn't this thread belong in Warped?
     
    Last edited: Dec 9, 2016
    cjmst3k likes this.
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