Know Your Numbers

AT ONE POINT OR another, we all have had issues with running our businesses or departments effectively. The more detours and pitfalls you experience, the more prepared you are for the next setback. However, you’ll never be fully prepared without metrics to hold yourself and your staff accountable.

Do you want to make the most of your employees and equipment and capture more margin? It’s time to put your big boy/girl pants on and get with it. Let’s start with the basics.

Set Fixed Wages

How much should a catcher earn? What about an operator or a darkroom technician? Setting wages for each position upfront is crucial if you want to operate lean and increase your bottom line. Establishing a good single number for each position will help ensure you know what payroll should look like today, tomorrow, and a week from now.

Set Per Press Dollar Amount

Once you know your daily labor costs, it’s time to set a per-press dollar amount: the revenue you expect a single press to generate during a single shift. Establishing this metric opens you up to forecasting capacity and, by extension, when to run overtime, cut shifts, or make other adjustments. Assuming five shifts per week, a $1000 per-press dollar amount translates to a single press outputting $5000 worth of revenue in one week (or $10,000 if you run two shifts on that press). The right “per press” number for you depends on your business model. If possible, operate on the rule of 25/75: 25 percent production payroll for 75 percent of daily revenue. If you can afford to work even leaner or increase prices, you can easily start to drop into the 20-percent-and-under range and start banking money.

Doing this successfully requires holding operators accountable. This is part of your company culture, and it tends to be a significant
difference between big shops and small shops. Whether by writing down jobs and dollar amounts or filling out an Excel sheet, creating operator logs is critical to establishing and maintaining per-press dollar amounts. The goal is to always print more than this amount to compensate for slower days. (Correct pricing is important for jobs that occupy presses for days at a time, but that’s another topic.)

“… creating operator logs is critical to establishing and maintaining per-press dollar amounts.”

Run Daily Cogs

Payroll COGS are the payroll portion of your overall cost of goods sold (COGS) – essentially, the costs of operating your business. Calculating payroll COGS per department is the best way to establish true, end-all KPIs. Today isn’t over, so we always look at the day before to establish whether you’re running in the green (yay) or in the red (ugh). To determine how efficient – aka, how profitably – you’re running as of yesterday, simply divide total payroll by the total revenue.

Run Monthly Rolling Payroll Cogs

Now it’s time to put that new equation to work by tracking payroll COGS every day for each department. Do the same with your revenue to create a rolling data sheet to see how efficiently you operate over time.

Let’s say yesterday’s payroll COGS was $800, and you produced $5000. You operated at 16-percent efficiency (which is phenomenal). Today, orders took longer, and you had to run overtime, resulting in payroll COGS of $950. You shipped out $3400, so you operated at 27.9 percent. A glance at your rolling data sheet reveals the two-day figures: $1750 payroll and $8400 shipped revenue for 20.8-percent efficiency.

What are you averaging per week? Per month? Try to operate at or below the 25-percent mark to ensure you make a profit. If your presses are jammed with a big order for days on end, not shipping out anything, it’s ok. Keep running your payroll COGS equations every day and show the $0 revenue. Seeing where you stand on the balance sheet at the end of the job helps plan for similar work in the future.

“Establishing key metrics is imperative for screen printers to maximize efficiency and profits by holding themselves accountable.”

Forecast Sales

With wages, per-press dollar amounts, and Payroll COGS established, you should be able to determine a reasonable growth rate for your business. Establish a sales forecast that tracks what you ship, what you sell, and what you expect to sell and ship. This should be a rolling report, as well. Update it daily by tracking what was sold the day before, and leverage yesterday’s figures in today’s production planning. At the end of the month, the figures should add up to something close to the value of your shipped revenue.

Forecast Staffing

Use your sales forecasts to determine how many staff members per department are required to achieve your goals. Establish your Weekly Revenue and run averages for what it would take to accomplish that in one day, two days, three days, five days, or seven days. As you move toward seven days, it will take much less staffing (possibly zero). Where do you want to be?

Now, you’ll be able to forecast when you may be able to let staff go home a bit early or when you’ll need overtime or two shifts per day. Do not fear overtime when it’s necessary. Sundays (double time) are the mortal enemy of most shops, unless they’re offsetting shifts to minimize actual overtime. Most contract operations survive on a six-day workweek, whereas retail printers tend to be more Monday-through-Friday shops (sometimes Monday through Thursday). The best way for you to operate depends on your clientele and sales.

Establishing key metrics is imperative for screen printers to maximize efficiency and profits by holding themselves accountable. Make sure you’re setting wages for each position and determining the right per-press dollar amount, and that operators are properly logging their work. Run daily and monthly payroll COGS to track how efficiently each department runs. In the end, you’ll make more informed decisions about when to run overtime, cut shifts, or make whatever adjustments are required to capture more margin.

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