Cold, Hard Truths

HOW MANY SCREEN-PRINTING shop owners are unsatisfied, not making the kind of money they deserve? You know the ones. They got into this business because they stumbled upon the opportunity, or they wanted to monetize their creativity.

But fast forward a little bit, and there’s a lot of pressure. Payroll is due. Bills need to be paid. There is a funky morale problem, and a lot of sleepless nights.

Does it mean you’re doomed if this hits a little too close to home? No, but it could mean you need to work on correcting these problems. Let’s get to the root of some of the issues keeping you up at night and see what we can untangle.

Know Your Numbers

Let’s begin with some math. OK, maybe not a fun place to start, but totally necessary for a struggling screen-printing operation. 

I’ve encountered many shops that absolutely do not know the basic numbers for their business. You may not be the head accountant, but you should be familiar with these terms and what they mean for your shop.

• Break-Even Amount This is the dollar amount you must bring in to break even each month. How much merchandise do you need to sell to hit this number? Then, how quickly can you get to it? 
• Pricing How did you construct your shop’s pricing model? Did you use the “average of all nearby shops” method? That technique doesn’t actually work because your costs and your efficiencies are different than your competitors.
• Profit It’s good to know your top line sales numbers. It’s even better to know your bottom line profit. How much money are you actually making? Do you even know?
• Head Count As any business owner knows, labor is the largest monthly expense. Do you have too many people? A good rule-of-thumb ratio is $100,000 in sales for every employee. The closer to $200,000 per employee, the better.
• Downtime Percentage In production, this is the percentage of time spent not decorating anything. You only make money when something is being decorated. Minimizing downtime can have a profound impact.

This brings us to the first cold, hard truth: You need to measure and keep track of your numbers. When something looks off, take a closer look and make changes.

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Pricing Myths

You may not be charging enough for your work. When many of the shop owners I work with start digging into their costs, measuring their efficiency, and taking a hard look at their numbers, they’re shocked at what it really costs to be in business. 

Yet, a common refrain I hear is they “can’t charge more around here.” I’m telling you, you can. There are shops just like yours charging more money for the same type of work. 

There are a few things you need to think about. First, are you serving the correct market(s)? Are you articulating your value and why you are worth more? 

Even worse is filling up your schedule with work that isn’t making you money. Ponder this: What defines a “good” customer? Is it the total amount of sales as the top-line number, or the profitability of the work you’re doing? 

Sometimes your number-one customer may be slowly strangling your business because they’re taking up space on the schedule that could be used for more profitable orders.

Here’s the second cold, hard truth: You need to charge more for your work.

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Cash is (Still) King

Cash flow is a crucial part of any business. How healthy is yours?

Cash-flow problems generally begin when the business gets busier. More jobs are booked, more garments and supplies are purchased, and labor costs go up. If these companies are working on net 30 or worse trade credit, there could be a huge chunk of money that needs to boomerang back to the shop to meet financial obligations.

This puts a strain on the business. In fact, it’s why many shops are now adopting a “100-percent upfront payment” method instead. You’ve heard the expression “Like money in the bank?” Shouldn’t that be your goal?

With cash up front, your shop can strengthen the financial end of the business for more stability. Amazon works this way. Custom Ink works this way. You can too.

How crazy is your accounts receivable right now? Does that impact your financial decisions? What if your A/R was zero?

Here’s the third cold, hard truth: You need to be paid in full before starting the job.

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Raise Your Minimums

Right now, your schedule has some turkey jobs in the queue you know you shouldn’t have accepted. They’re too small, with too much work invested in them already.

Look at your best customers on a percentage basis: The top 20 percent account for 80 percent of your revenue. Do the math. It’s true.

This means the bottom 80 percent of your customers – the folks placing those dinky orders – only account for 20 percent of the money coming in.

Unprofitable jobs are clogging up your schedule. If that’s the case, why take it?

Here’s the fourth cold, hard truth: Want to grow your business and scale? Stop taking smaller orders and raise your minimum quantities.

Be Objective About Your Business

Many shops offer a variety of different decoration methods. Not just screen printing, but embroidery, digital printing, 
heat press, cut vinyl, dye sub, flat-stock printing, and more.

And that’s great. But have you broken down each of the methods you offer and looked at them as the percentage of your sales total year over year?

Let’s say that you offer these four decoration methods making up this total percentage of annual sales: screen printing, 63.74 percent; embroidery, 28.63 percent; heat press, 6.54 percent; DTG, 1.09 percent.

Looking at these numbers, I have to wonder if you’re selling and marketing DTG at all. 

Many shops are quick to invest in new technology, but don’t develop a corresponding sales and marketing plan. So, after the initial joy of bringing in a new offering for your customers, the sales don’t support the investment.

You could develop better marketing programs and procedures to support the idea. Or, face the music and realize that the costs just aren’t worth the 1.09 percent of sales.

This is the fifth cold, hard truth: Be objective. Are you looking at your numbers and making rational, fact-based decisions?

Adapt or Die

Maybe at one point, your shop was a powerhouse. Surging with activity, money rolling in. Life was good. But business has changed. It’s always changing. Are you changing with it?

That incredibly loyal customer may suddenly go elsewhere. The buyer you’ve spent a decade building a relationship with has retired. The new person wants to do things differently.

There’s a new generation of customers out there who is changing how business is transacted. Things are moving faster: Online. Automated. Via text message and chat bot. Voice search will be taking over soon.

Here’s the sixth cold, hard truth: How you’re conducting business now won’t work as effectively in the future. Are you spending time adapting? Learning and utilizing new tools?

Innovation Drives Sales

Want more business? You need something to help your shop stand out. What are you doing to develop some decoration 
techniques, selling mechanisms, or ideas that are difficult for your competition to emulate? Anybody can decorate a shirt. This industry has few barriers to entry. 

How are you making your business unique? This has to be an on-purpose plan. It’s not an accident when shops build a better sales mousetrap or an award-winning decoration technique. It’s a lot of sweat, discussion, failure, and effort.

For the seventh cold, hard truth: Take a careful look at your innovation effort. Are you learning and trying new things? What are you doing to drive customers to your door?

Have a Business Plan

I ask struggling shops: “Do you have a business plan?”About 60 percent of them say “no.” If they have one, it’s often outdated.

Think of a business plan as a way to aim your offerings directly at your best customers. As you build it, you’ll define exactly who those customers are, how they spend money, when they buy, and what they buy. 

There are only so many hours in the day. You shouldn’t spend them wasting your time with folks who either don’t want what you offer or don’t value what you charge.

A good business plan focuses your effort like a laser beam. It helps develop the strategy behind making money. Without one, is it any wonder why so many shops never seem to get where they want to go? It’s like trying to drive across the country without a map.

Here’s the eighth cold, hard truth: Write an actionable business plan. Set goals and plan how to achieve them.

It’s OK to Fire a Customer

Some customers are the worst. They send you unprofitable work. You waste time chasing them down. Despite discussions about change, nothing ever happens. But here’s something you might not know: It’s absolutely acceptable to fire a customer.

“I’m sorry, but this working relationship is not in alignment with our business goals. We need to move in a different 
direction. Here are some other companies you might call.”

And here’s the ninth cold, hard truth: It’s your business. You make the rules. Have your customers do it your way.

Mistakes Mean Growth

Legendary UCLA basketball coach John Wooden has a great quote: “If you’re not making mistakes, then you’re not doing anything. I’m positive that a doer makes mistakes.”

How many mistakes have you made this week? It’s all right. That’s driving your growth. Being afraid to try new things won’t get you very far.

The tenth cold, hard truth: You must be willing to fail.

Failure is acceptable, as that’s how you learn. But if you’re sitting in your office waiting for the business world to change, or orders to drop in your lap, that’s a critical mistake. There’s no growth in that.

Try something new today. Something that you will be horrible at, initially. Then, do it again and improve.