How to Calculate Your Embroidery Cost?
The thumb rule is you convert the design into stitches and calculate the number of stitches. What is a stitch you ask? A stitch is considered when the needle penetrates once into the material. The finished design is produced in a file called the “tape.” The tape file will tell the embroidery machine where and how many times the needle has to go into the material to get the image.
The standard industry practice for embroidery pricing is of two types i.e. ‘Pre stitch pricing’ and ‘fixed unit pricing.’
Per Stitch Pricing – For most of the time, an embroidery will price its work based on each stitch. He will breach the tape into the cost per every 1,000 stitches. The cost is typically set depending on the quantity or orders.
- Order – 50 caps
- Tape – 9,500 stitches
- Per 1000 stitch rate -$1 per thousand stitches.
- Per product cost – 9,500/1,000 = 9.5 X $1 = $9.5/product
- Product cost for 50 caps = $9.5 X 50 = $475
Fixed Unit Pricing – A fixed pricing is set per “tape” design irrespective of the number of stitches. Depending on the design it could be both cost-effective or expensive for embroiders. On the other hand, customers get lured into this and the embroiders would print a design fewer number of stitches to save money, thereby giving it an incomplete appearance.
Running an embroidery shop is not easy and definitely not cheap. It does manage to put some panic and fear into the hearts of small business owners. For the most part, business owners fail to price their services right for the following conundrums.
- Do I charge too much so my customers will go to my competitors
- If I don’t charge enough I will lose my business
- There’s too much competition in the embroidery market, so I should charge less.
- It’s embarrassing to ask for more money
- I am confused, because I don’t have much experience in the industry
Apart from above mentioned reasons, there are other factors that make product pricing a difficult task and could give you anxiety. However, if you follow a simple set of rules and do some simple math, you should be able to price your embroidery work right.
Pricing Method (Doing the Math)
Top things that go into determining your cost are:
- Actual cost of embroidery
- Profit margin
- Perceived value of the product
- Competitor’s pricing
- Selling price
First off add up all your business expenses especially the supply costs such as rent, equipment cost or equipment lease, labor cost, insurance, compensations, raw material, office supplies, phone, postage etc. Next, you divide the total cost with the number of hours of the time period. For e.g.
- Per day work hours – 8 hrs
- Work days per week – 5 days
- Number of weeks a year – 52 weeks
- Total hours for 1 year – 8 x 5 x 52 = 2080 hours
Now add up all your expenses as mentioned above; for example your total cost per year becomes $43,000. Then divide the total cost with number of hours, which is $20.67 per hour. Now you have turn this figure into cost per unit. For embroidery the best choice of unit is stitch count. For example your machine can produce from 20,000 to 30,000 stitches per hour, which means for 20,000 to 30,000 it costs $20.67; so, for 1000 stitches it cost between $0.68 to $1.03. Now this should be your standard pricing per 1000 stitches.
Next, you have to add your profit margin per 1000 stitches. Let’s say you want the profit margin per year to be $70,000 then when you divide it with the total number of hours, you get $33.65. This is the profit margin per hour. For 1000 stitches it will cost between $1.12 to $1.68.
If you do the math, your selling price per 1000 stitches should be nearly $1.8 to $2.7. So, for a product with 7000 stitches, the selling price should be $12.6 to $18.9. This is the cost per product. For a 1000 products order, the selling price should be $12,600 to $18,900.
A snapshot of our previous calculation:
- Total hours per year – 2080 hours
- Total yearly expense – $43,000
- Expense per hour – $20.67
- Number of stitches produced in an hour – 30,000
- Per 1000 stitch cost – $0.68
- Perceived profit margin per year – $70,000
- Perceived profit margin per hour – $33.65
- Perceived profit margin per 1000 stitches – $1.12
- Final selling price per 1000 stitches – $1.8
- Number of stitches in a product – 7000
- Cost per product – $12.6
- Cost for 1000 products – $12,600
Embroidery is a different type of printing process: Unlike screen printing the automatic press can’t print 400 shirts an hour. It is rather slower and demands some time to set up and give attention to details. Moreover, it’s not easy to give high price breaks for large volume embroidery prints.
Each Embroidery Job is Different: You may simply price your job based on the number of stitches, but you should also consider other complexities such as the number of time machines have to stop to cut thread and change thread color. You will have to trim a lot of threads after it’s done. Moreover, some jobs such as embroidering a hat would be difficult compared to shirts, bags and jackets. There’s no way to calculate these prices, therefore, it has to be determined by you.
It’s pretty obvious that embroidery is a rather expensive both to create and to purchase. Many high-fashion brands still use embroidery for their brand logo. Embroidery is perceived on higher value and more professional than other printing process such as DTG or Screen Printing. Next time when you decide to price your embroidery work, make sure you are making enough profit, because otherwise, you could be losing your business if your products are not priced right.