A compass with a red arrow that's pointing "north" to the word "strategy"

4 aspects of pricing that every decorator must understand

You might be a shop that boasts incredible quality, fast turnarounds, and a creative powerhouse of a design team. You may bring a wealth of knowledge to the process or maintain the cleanest facility that would make even the most discerning customer nod in approval. Yet, creeping in the distance is a make-or-break factor that can overshadow all these achievements.

As a shop owner, you didn’t start your company to be in “survival-mode” on a daily basis. You envisioned growth, success, and a sense of freedom. But there’s one critical component that can keep you up at night if not clearly understood: an effective pricing strategy.

"How much should I charge?"

It's the million-dollar question blasting through print shop and decorator groups online. While seeking advice from peers might offer a comforting pat on the back, it doesn’t always provide the unique solution your business demands. Why? Because no one else understands the intricate details of your specific operation except for — you guessed it — you.

The good news is that you don't have to navigate this alone or rely on guesswork. There are concrete steps you can take to gain the knowledge and have the confidence needed to calculate profit margins accurately. By doing so, you'll have visibility into your cash flow and set your company up for sustainable growth.

We’ll dive into four aspects of pricing and profitability that every decorator shop needs to grasp. By the end, the only question you’ll be asking yourself is, “How can I maximize the value I provide and capture?"

Choose the Right Pricing Strategy: Cost-Plus vs. Value-Based Pricing

One of the first decisions you’ll need to make is selecting an appropriate pricing strategy that makes sense for your company. Two of the common approaches are cost-plus pricing and value-based pricing, each with its own merits and considerations.

Cost-plus pricing is straightforward: You calculate the total cost of producing an item and add a predetermined percentage as your markup. This method ensures that all costs are covered and a consistent profit margin is maintained. However, it may not always reflect the true value of the work you’re bringing to the table for your customer.

On the other hand, value-based pricing focuses on the perceived value of your products or services to the customer. This strategy allows for potentially higher profit margins, especially when your offerings provide unique benefits or solve specific problems for your clients. It requires a deep understanding of your target market and the ability to communicate the value you bring effectively.

As a business strategist and systems consultant, I often work with clients in phase 1 to determine which pricing strategy best suits their business model. One of my clients, a decorator shop, primarily serves breweries. We identified that their value prop included:

  • In-house creative team that can offer designs for bottle labeling and cans
  • Knowledge of the beverage industry and the ability to anticipate seasonal products
  • Quick turnaround times to meet seasonal and event-driven demands
  • Ability to handle small, customized batches for craft brew releases

By recognizing these unique strengths, the shop was able to implement a value-based pricing model. They weren't just taking and printing orders — they were offering a comprehensive solution tailored to the specific needs of breweries.

The choice between cost-plus and value-based strategies isn't always black and white. Some successful apparel decorators use a hybrid approach, considering both costs and perceived value when setting prices. Again, this will be different for a shop of four people versus a shop with 80 employees.

Where some may say to stay obsessed with your competitors in order to always come out on top, this is where I disagree. The key is knowing what you need to make, what reflects the quality of your work, and the value you bring to your customer. Obsess over the customer, not the competition.

Puzzle pieces fit together with "Value" written on the left piece and "Price" written on the right with a hand drawing the image.

Calculating Profit Margins: Beyond the Guesswork and Into the Depths

Let me be clear: Profit margins are not a guessing game. They are calculations that provide significant insights into the health of your business. Understanding the difference between gross profit and net profit is fundamental to making informed decisions about pricing and overall business strategy.

Gross profit is the difference between your revenue and the direct costs associated with producing your goods or services. It's a useful metric for evaluating the profitability of individual products or services. Net profit, on the other hand, considers all business expenses, including overhead costs like rent, utilities, and salaries. This figure gives you a more comprehensive view of your business's financial performance.

To calculate your profit margins effectively:

  1. Track all costs meticulously, including materials, labor, and overhead.
  2. Determine your desired profit margin based on industry standards and your business goals.
  3. Build a system to regularly review and adjust your prices to maintain healthy margins.

One of my shop owner clients thought this seemed too in-depth, and didn’t take the time needed to understand their costs associated with running their company. In turn, I was able to deliver data showing that they wouldn’t be a company in six months if they didn’t start making drastic changes immediately.

Remember, knowing what you need to make to cover costs, what you want to make to achieve your financial goals, and the value you bring to your customers are all critical factors in setting profitable margins. This knowledge empowers you to make data-driven decisions that support the long-term viability of your business.

The Value Proposition and Differentiating Your Business: Communicating Worth to Your Customers

A hand writing the words "Create Value" in sidewalk chalk on a gray concrete

In a market where customers have countless options, communicating your unique value proposition is crucial. This goes beyond simply listing your capabilities, posting your work on socials, or having a moving “About Us” section. Articulate how your services solve problems or fulfill needs in ways that your competitors can't.

Your value proposition should consider things like:

  • Free PMS matching + no screen fees
  • Eco-friendly practices
  • On-demand print/pack/ship
  • Specialized printing techniques (i.e., wood, glassware printing)
  • Merch brand consultation

By clearly defining and effectively communicating your value prop, you can justify higher prices and attract customers who appreciate these benefits you offer. You can’t simply rely on having unique capabilities that no one else offers in a hundred-mile radius and call it a day. You must consistently deliver on your promises and continually refine your offerings based on customer feedback and changes in the market.

Consider conducting regular email surveys and having one-on-one conversations with your clients to understand which aspects of your service they value most. This feedback will help you fine-tune and identify areas for improvement. Things move quickly in this industry, so what sets you apart today may become industry standard tomorrow. Stay ahead by continuously evolving your value proposition.

Consistently delivering on the value you’ve created can lead to stronger customer relationships and increased loyalty. It attracts clients who appreciate and are willing to pay for those unique benefits you offer. It’s those customers who become brand advocates and spread the word without hesitation. This, in turn, reinforces your market position and justifies your pricing strategy, allowing you to invest further in broadening your capabilities and delivering even greater value.

By mastering this cycle, you transform your shop from a mere service provider into an indispensable partner in your clients' success stories.

Financial Systems and Cash Flow Management: The Lifeblood of Your Business

Understanding and managing cash flow is critical for the success of any company. Even profitable businesses can fail if they run out of cash to cover day-to-day operations.

Implementing strong financial systems helps you monitor cash flow, predict future needs, and

make informed decisions about pricing and investments. Key components of effective financial management include:

I worked with a print shop who was mistaking busy as productive. Because they had endless stacks of shirt boxes on the dock, everyone was working overtime, owners were bringing in temporary help, and customers were the happiest they’d ever been, they thought they were on top of the world. Here’s the thing: Movement doesn’t always mean progress.

You can run in place and go nowhere. This is exactly what was going on internally with this shop, and after a deep dive into the financials, it was clear to see there was a major cash flow problem. They didn’t have a system in place for their money and were still working off a pricing model they implemented almost two years prior.

By implementing real financial systems, you gain a clear picture of your financial health at any given moment. This visibility allows you to:

A green chalkboard featuring a drawing of a pie chart with labels "Expenses," "Tax," "Profit," and "Income."
  • Identify seasonal trends and plan accordingly
  • Spot potential cash flow issues before they become critical
  • Make detailed decisions based around data about pricing, expenses, and investments
  • Ensure you have the resources to take on new opportunities or weather unexpected challenges

Effective cash flow management always involves making strategic decisions about pricing. Treat your financial systems with the same care and attention you give to your print and design work, because at the end of the day, that is what will define whether you have a business or a hobby.

Pricing is not a set-it-and-forget-it decision. It requires ongoing attention, analysis, and adjustment as your business grows and market conditions change. Stay updated about the industry, keep a close eye on your numbers, and don't be afraid to adjust your strategies as needed.

Ultimately, the goal is to create a business that not only produces high-quality products to meet a need, but also generates the profits necessary to grow and sustain long-term.