Don't Get Crushed by Razor Thin Margins | Podcast
“Automatically, the multi-head owner is given 6X the production capability SIMPLY because they have more heads. Hence, they are able to price their items lower than a single head owner could!"
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Ever wonder how some embroiderers can price their embroidered items below industry average AND still profit?
In this episode of the Apparel Academy Podcast, Henry answers a few questions from our Facebook group, Embroidery and Custom Apparel Mastery, and breaks down the economics behind making a profit in this industry, without pricing too extensively.
You can also follow along with the audio link below!
#1: Low pricing, yet still profitable
The main reason people are able to price their items high, even with razor thin margins, is because they most likely have a few multi head machines OR…
They have a setup which is conducive for them to take on bulk orders.
What is considered a high price? We’re talking about charging $10-$12 per hat and still ending up with a profit!
This is only possible with an efficient workflow that allows for the business to produce multiple products.
Let’s look at the comparison between a 6-head and a single-head for instance and what that could mean for the profit potential of each business owner.
These machine owners have the very SAME target profit amount per hour in mind.
Automatically, the multi-head owner is given 6X the production capability SIMPLY because they have more heads. Hence, they are able to price their items lower than a single head owner could!
The single head embroiderer on the other hand, will only be able to maximize profit by charging higher for their few personalized items. However, this could still end up working in their favor, depending on how often he or she is offered custom design work.
If you’ve never heard about the “the magic number,” this webinar will tell you all about it! We talk about a price structure that can help embroiderers when pricing their products. It is important to price your items correctly, while still remaining competitive.
#2: Let’s consider equipment costs and capabilities
There are a few things to consider when using the pricing method above.
When investing in a multi-head machine, there is more of an upfront, long-standing commitment because there is a longer payback time involved. The cost of a multi-head is also higher, which attributes to the longer payback time.
Single-heads give you the ability to personalize smaller, one-off orders, which are not as economical with a multi-head machine.
On the other hand, multi-heads give you an advantage and increases value when it comes to bulk orders!
#3: Personalizing items VS. Producing more
As the embroiderer, if you take the time to personalize your offerings, you improve your chances of standing out from your competitors.
This can be done with one-off orders and easily brought to life with a single head.
The more time you take to personalize, the more you are able to price your items according to the time taken to design and specifically craft each item, for your customers’ needs.
These are the little things that add more value and customers are willing to pay more just because it is customized.
However with the multi-head, you automatically get more.
Your productivity goes up and you are then able to price lower as your production increases.
When it comes to making financial decisions about your embroidery business, you have to decide what your trade off is.
If you know your business is designed to produce smaller, personalized items, you can still be profitable with a single head, as you will be able to charge accordingly for these personalized items.
However, if you know your business strictly focuses on large scale, bulk orders, then you may want to consider investing in a multi-head.
If you have a custom apparel business or are thinking of starting one, what are some of the questions you’ve been considering? Have we answered any of them here? Leave a comment below or let us know on our Facebook group, Embroidery & Custom Apparel Mastery.
For additional help, feel free to join our free Facebook group, Embroidery and Custom Apparel Mastery.
In it, over 10,000 members share their thoughts about embroidery, give insight on various embroidery related issues and provide connections to wholesale items and even jobs!