Markup on materials

[Mark Gee]

Hi Folks

I'm just tinkering around with markup prices on my framing materials - mainly moulding, mountboard, glass and board. I have read a bit about standard markups for our industry but obviously a set markup for one business might not work for another, depending on location etc.

So I was just wandering how other framers worked out their markups on their materials . Any thoughts or ideas would be appreciated

Thanks, Mark

[Gesso&Bole]

I would suggest that you don't work out your price based on a mark-up. (Although I would concede, that once you have worked your prices out in a logical manner, you may find it useful to work backwards to find out what the mark-up is, as this can be a quick way of getting to an approximate price).

Anyway, if you want to know how to calculate your prices, here's one I prepared earlier. It's a long post, but it is important to get your pricing right.

http://theframersforum.com/viewtopic.ph ... ing#p40741

[Mark Gee]

Thanks for that Jim it was very informative

I work out my prices as you suggest by working out a shop hourly rate which includes all my annual overheads and my salary, divided by the hours I actually spend making frames in a year.
Frame prices are worked out by Materials (cost + waste + mark up) plus hourly rate for the amount of time it takes to produce the frame.

Example
Materials = (cost/waste/markup) = £25
Labour = 1 hour at £45/hour = £45
Frame price = £70.00

You don't mention a mark-up on materials in your post, I am assuming we all add mark-up to the materials we buy ? or do we ?

Thanks, Mark

[Gesso&Bole]

Assuming that your 'basic wage' and all of your overheads are covered in your hourly rate, then most folks use a mark-up on materials to add the profit. How much to add? - I guess the answer is as much as the market will stand.

[Mark Gee]

Thanks for that Jim, I appreciate your thoughts and opinions

Pricing, and all the elements of it is a funny old thing, isn't it. But like you say, its one we all need to get right if we are to stay in business

[prospero]

I have always thought that basing your profits on materials mark-up is not really the thing to do. You aren't selling materials - at least not in the form you bought them. There are lots of cost factors involved in producing a frame. Do you mark up the electricity used while you were making the frame? Or mark up the carriage costs in getting the moulding? The main profit should be built into the hourly rate.

[Graysalchemy]

Doe it matter where the profit comes from as long as you make a profit. When I look at my accounts at the year end, I look at my turnover, my costs and my gross profit. If I think I have made enough out of my investment in costs then I leave my multiplier alone, if the %GP has dropped I up it a bit. Works fine for me.

[kev@frames]

same here, (ROI based pricing). Cost-plus pricing doesn't really work well. Which isn't surprising, seeing as we are not reselling materials, we are making them into the product, and they become just another general overhead involved in production.
Labour costs are usually the biggest factor in a framing business. And tend to get overlooked when you are working by yourself or with just one or two of you. Such as when you are starting out. The more staff you have, and the busier you get, the less sense cost-plus pricing makes.
Besides, if you price on a cost plus basis, its quite likely that more than some of what you do will be too cheap, so you are committing number one pricing/marketing/business error: leaving money on the table.
If you do shift from cost-plus, make a plan, and do it in stages. But don't drag it out either.
Best to start with high pricing at the top end and shave it down if necessary, rather than start low and nudge it up.
But you can always lower the prices again, that's easy.
Introduce price rises at the same time as you introduce new mouldings, for example. It make them less noticeable. And run a "sale" at the same time, getting rid of your crap, and taking regular customers eyes off the price rises.
Its called Decoy pricing, or something. Jim will know.

Always price new mouldings higher than existing similar ones, then raise the older ones prices later - use "new" mouldings experimentally to test the prices you customers will pay.

Then the leap of faith:
Delete your downloaded mouldings tables, because that is forcing you into cost-plus pricing, and split your mouldings into ten to fifteen price bands, A, B, C etc. for basic frames. Each band based not on what it cost you, but on how much you can sell it for.
And that will sort out the wheat from the chaff as well, eliminating your least profitable lines and making room for higher profit ones. Killing two birds with one stone

when you get a new moulding, ignore the trade price, just make it into a 20x16 and a 40x30 frame, and look at it, ask youself how much could I really charge for this?
Then put it into the applicable price band in your pricing programme which now simply works prices out for anything an band A, Band B, band C. And on your chevrons have A,B, C etc so that at a glance you can see which are which. Saves a lot of time at the counter.
I'd bet you anything that if you did this excercise right now, you would find 4x markup moulings that you should be getting 5x or 6x for if you were using cost-plus pricing, thats the money you have been leaving on the table every time you sold a frame in one of those mouldings.

Might not work for everyone. But worth thinking about?

[Graysalchemy]

Interesting concept Kev. Funnily enough some of my most profitable lines are commercial ones because of perceived value, sometimes I can get away with a higher markup and because they are production runs labour is a lot less so making it even more profitable.

[Mark Gee]

Thanks for that concept Kev, its something I hadn't thought about. Its more of what you perseive the price to be, as a mathmatical equation most of us use - mmmm interesting !

How many more pricing concepts are there out there !

[Steve N]

I like it Kev

Mark Gee asked
How many more pricing concepts are there out there !

Answer
How many framers are there?


By the way I still don't have a quote button

[strokebloke]

A great thread. Thank you all - particularly Jim & Kev
I've loaded it into my Business Plan file

[Not your average framer]

It is a common mind set with smaller independant framers to worry about being too expensive, rather than to worry about being too cheap.

I don't know where this came from, but some American businessman from the 1920's / 1930's found that by increasing his prices by enough to lose 20% of his customers, resulted in an increase in profit of 50%. This is because less than 20% of the population are motivated by getting the lowest price.

With this thought in mind there is often potential for a higher mark up on some budget priced mouldings, as long as the quality of finish and perceived value will permit this.

[prospero]

Working rigidly on materials mark results in this:

Say you work on 6x markup. In simple terms......

10x8" frame in moulding 001 @ cost 30p ft. = 1.80ft x 3ft - £5.40. You would probably use 4ft so gross profit = £4.20 less fixed overheads, say £2.00 - net profit £2.20.

same frame in moulding 002 @ cost 3.00 ft = £54.00. gross profit = £42.00. less £2.00 o/h = £40.00 net profit.

It took the same amount of time to make the frames. Now as long as you can sell expensive moulding you are quids in. But at that price someone could undercut you drastically and still make a decent living. Sell only cheap stuff and you'll be down the river pronto.

Go figure.

[Amrit]

Hi Guys, I am totally new to this but thought I should add that I spoke with Daljit at Lions Hayes (the guy is a legend and very helpful). He told me a simple rule. He said whatever you buy, triple it. That's what you charge. Note he said whatever you buy, not whatever you sell. So if you're buying a 3 metre length charge teh full 3 metres. Same goes with mounts.
For smaller frames you've got to factor in your labour too. Although I get the impression we should really be quadrupling it.
My sister told me a framer down by Winchester charges 1000% profit. He also has 2 months of orders so there goes that theory of start cheap.

[misterdiy]

I think I shall relocate our business to Winchester then.

[Keadyart]

Hope you dont charge too much Amrit.

http://www.wetcanvas.com/forums/showthr ... id=1156402

small world this interweb.

Brian

[Framerpicture]

Interesting thread on above link-

With the aid of the internet, this forum and wholesalers who are willing to open trade accounts with just £30.00 orders its now so easy to get both information and supplies to start framing.

It wasn't that long ago that all we had was quarterly picture framing magazines and an annual trade show

I think I might follow your to Winchester misterdiy

[John Ranes II, CPF, GCF]

...Sell only cheap stuff and you'll be down the river pronto...

I do agree....And in tight economic times, more framers fall into this mentality as consumers pull back (middle class) as framing becomes even more of a discresenary purchase.

...My sister told me a framer down by Winchester charges 1000% profit. He also has 2 months of orders so there goes that theory of start cheap.

I have heard that philosopy verbalized a million times as newbies who are entering the framing business... "starting low with pricing and slowly raising the prices so that their customers get accustomed to it." This is WRONG on so many levels!

I think I shall relocate our business to Winchester then.

You can save on the petrol and moving expense, by keeping your current location and by just relocating your logic/thinking. In most cases, not all, it has less to do with geography and more to do with design, image, passion, attitude.

We're not selling bread or milk...a consummable that everyone uses everyday and is familar with the price. Instead we are selling a high end, home decor product that is bespoke and has a personal and emotional value to the owner. Let that statement guide you in your pricing markups...

John


John