best way to pricing stock?

[Maihen]

Hi all,
I am new here and finding this forum so useful
I have been framing for a few years and now setting up on my own. However I have never had much to do with pricing side of things and would really apprieciate some advice on the best way to price up mounts, glass, moulding etc? what system works best? I have considered a computer programme but cant justify the extra cost of it just yet!
Thanks

[Graysalchemy]

Everyone has their own way to fit their business model but most people will work on a markup on materials used and a wastage factor. Some also add in a time element. I work on a percentage mark up on materials used with wastage at 15%. Wastage is subject to a number of factors, bespoke work your wastage will be a lot higher than mine as a contract framer. Also things like how much of a range you are offering. If you end up offering mouldings from a catalogue then you will end up ordering more moulding than you need and possible never use again.

[Gus]

Hi, there is a lot of information on the forum about pricing - have a look at this to start with:
http://theframersforum.com/viewtopic.ph ... ing#p40741
it should get you going in the right direction.

Best of luck

[Gesso&Bole]

You beat me to it Gus!

I think there is a very big danger of losing control of your business if you base prices on a multiple of the cost of materials alone. Your time, and overheads MUST be a component (IMHO the most important component).

Imagine if your car broke down, and all that needed replacing at the garage was a rubber seal with a trade price of £1. So, like the local picture framer, the garage multiplies the materials x 5 = repair cost £5. In this instance, the seal that needs replacement requires that the engine, and the gearbox are removed to access the seal, and then need to be re-fitted. Obviously £5 would be nonsense for the price, and I can't imagine that the garage owner would be as daft as the picture framer!

This is the problem with multiplying the cost of materials to come up with a price. Big pictures will end up expensive, and small ones will be too cheap. Get loads of small jobs in, and you are losing money.

So check out the post that Gus has highlighted above.

[Graysalchemy]

I take your point jim but I have managed to run a very profitable business for 8 yrs now using a multiplier. If I was to effectively increase my prices with a labour element I would lose business. But I do agree some jobs are a PITA and end up being less profitable but I find this is is balanced out with jobs which are quick and easy and more profitable. I look at my gross profit each year and adjust my multiplier accordingly so that I get my % GP that I want. As long as my buying is efficient then it works for me.

[prospero]

What Jim said.

Work out your fixed overheads for a year. Rent/Rates/Power/Phone/Coffee/Tea/Bickies/Loo Rolls...... Omit nothing. Divide this figure by the number of hours you would like to work in a year. Not the hours you do work . That is your hourly running cost of your business. You may be staggered at the result. Add to this what you want to earn per hour. That is your hourly labour charge.

Moulding/Glass/Mountboard/etc isn't 'stock' in the sense that you aren't selling it in the same form that you bought it. Of course you need to work out the cost of the materials used in a job, but calculate this cost on the basis of what you have used. NOT what ends up in the job and goes out the door. Of course there are times when you will be able to do a job with minimal wastage. Other times you end up with lots of bits that are not quite long enough to be useful. You can either cost each job individually, or apply a general scrap allowance across the board. I find 30% is a reasonable figure.

[Graysalchemy]

It is all well a good working your over heads wastage etc and deriving a price at which are prepared to sell for, but you also need to have a fair idea what your competition is charging or what someone is prepared to pay. If your prices are too expensive then perhaps you need to look at your overheads, or if you are considerably cheaper then look at increasing to gain more profitability. But at the end of the day your buying public will ultimately determin what you charge.

It is a fine line something which constantly needs evaluating.

[Gesso&Bole]

But at the end of the day your buying public will ultimately determin what you charge.

It is a fine line something which constantly needs evaluating.

Well, yes and no.

The "buying public" will determine what they will pay, BUT that is not the same as what you should charge.

This is why a small one man band with a foot operated underpinner and a Morso shouldn't even try to compete on price with Chinese factory made frames.

As an individual business, you must know the price you need to charge to earn a living making whatever you make, and then see if customers will pay that. If they won't then you need to change the structure of your business, or look at a different product.

Many bespoke framers suffer this dilemma when, short of business, they are offered the opportunity to do a 'large' job at factory prices. It may seem a good idea, but the fact that AG (post above) can make money doing hotel frames at £13 each, is because his business is set up for that sort of work. Many other framers would lose money, or at least end up working for £2 per hour in order to compete with those prices.

So, back to my mantra. Work out your own prices, don't try to copy other people's!

[Graysalchemy]

Many bespoke framers suffer this dilemma when, short of business, they are offered the opportunity to do a 'large' job at factory prices. It may seem a good idea, but the fact that AG (post above) can make money doing hotel frames at £13 each, is because his business is set up for that sort of work. Many other framers would lose money, or at least end up working for £2 per hour in order to compete with those prices.

I agree totally in what you are saying and you have obviously read my other post regarding 56 frames which you will see that I do need to complete a certain value of framing each day in order to make it profitable.

But if you are a high street framer in not the most affluent area of the country then you cannot expect to charge the prices that a framer in a more affluent area charge (and he will charge that probably because of higher rents rates labour costs etc as well as what the public can afford).

So if your business model can't be supported by your buying public then you are on a hiding to nothing and have to as Jim said re think your strategy. However this may be to late if you have signed a lease bought all your equipment etc. Unfortunately this is what happens with all to many start up business people don't have a realistic idea of what the public are prepared to pay.

[stcstc]

this isnt quite true in business, its not market value

ITs percived market value that matters

look at apple, their prices are way above any of their competitors but sell more phones than anyopne, have thelargest share of the personal computer market, and the music market too

so its about marketing

if you have a run down shop, in the middle of no where compared to a plush well designed shop, there is already a perception of price walking in the door

[Graysalchemy]

Yes but people do have an upper ceiling on what they will spend and what they perceive they should spend and that is difficult to break. At the end of the day if something is too expensive then they won't pay it or if they have to then they will go with a less expensive option and not feel that they are getting value for money and not come back.

What I am trying to say is if you have x amount in overheads and cost and you want to make Y profit then your market may not pay £x+y especially if the framer down the road has lower exceptions of what he would like to earn and can do the job £x+y - 10. So really you need to consider both elements and not just one which is what I was saying originally.

[stcstc]

yes ag i agree about the maths

i disagree about the upper limit though. its all about creating a demand, thats why the gursky photo recently sold for 4.3M, its a demand and perception thing

same with framing

i charge more than most printers around me, and massively more than online or ds colourlabs etc, BUT i still am flat out busy with work.

its a perception that my prints are better than the bloke down the road. people come in and will pay for it

[Graysalchemy]

I would hope that it is more than a perception.

[Gesso&Bole]

You are both right.

A customer has an upper limit on what they will pay.

But that limit can change from customer to customer, and it will change for the same customer in different situation. For example you are likely to buy a more expensive bottle of wine to celebrate an important anniversary than you will on a normal Tuesday night.

So if your customers dont want to pay what you want to charge, then maybe you need to find new customers who do, or offer the existing customers more (real or perceived) to change their mind.

The important thing, when you are running a business, is that YOU are in control of the pricing/demand matrix, and find the point on the curve that suits you, rather than have the customer controlling you. Tail wagging dog comes to mind.

[Trinity]

Are there a couple of other dimensions to these discussions?
One might be outputs. Grays can charge less but because of outputs may make more. In one sense you can do all of the calculations on overheads, what you want to earn etc but if you cannot output enough, your either not going to make the return, or price your self out of the box. For instance you cannot expect to load all your fixed overhead and profit onto a low number of frames as you may price yourself out of the market - unless your offer is really unique with no local competition.
Second is marketing / market share - you can be quick and efficient but if you've ran out of customers by noon you may lose.
Starting out your going to be slower and probably have less customers - helpful to have some fall back cash / job.
So for me, what you charge might be influenced by output, market, overhead and profit, and getting this mix right is important. Another oblique thought is that the time to lower prices is when you can afford to and are in control of the situation.

[Graysalchemy]

I agree you cannot load all your overheads on a low output. Each of us have set running costs which have to be accounted for, and so there will be a break point of what turnover you have to achieve to be profitable. Now you could sell one frame and reach your break point very unlikely or sell a million frames making next to nothing on each, very inefficient and dangerous. You have to find a balance between what turnover you need, how much you can expect for a frame and what level of business you expect.

However there is always two sides to making a profit.

End Price
Your over heads

The bit in the middle is your profit (well before Knutsfords finest gets his hands on it)

So if you cannot charge more then you have to look at your overheads, this is why a lot on here who are starting out are operating from home not ideal but at least the overheads are kept to a minimum. The second saving to be made, which I have discussed before, is your buying and efficient use of what you buy. If you offer all of Arqadia's and Simons and Lions catalogues before you know it you will have a lot of half lengths of moulding, same with offering every colour in a range. Dead stock reduces profit margins.

[countrystudio]

Look at FramR pricing software.
At a licence fee of £298.00 per year which equates to £24.83 per month.
It probably costs less per month than could potentially be lost in mis-pricing a job.
Think about it.

[stcstc]

or estlite at 450 one off forever ))

[Maihen]

Seems it has opened up quite a debate!!
Thanks you for all your advice...much apprieciated and has been very helpful.
Very valid point about the software though...something to consider!

[FrameOn]

Seems it has opened up quite a debate!!
Thanks you for all your advice...much apprieciated and has been very helpful.
Very valid point about the software though...something to consider!

I am currently working on a pricing software to run on the iPad, iPhone. I am hoping to offer this for free to forum members.

Watch out in the members section for details of the app you need and how to download and install the software - hopefully before Christmas.

Richard