Great Stuff To Know About Pricing
Pricing is Especially Difficult in Custom Framing
Correct pricing is perhaps THE most important part of being profitable. Unfortunately, it’s a really hard thing to do in custom framing. There are just too many variables that go into creating a custom product involving materials and labor. For years the industry used a chart created by Larson Juhl to expedite calculation of projects manually. The only problem is that this chart produced the same revenue for every gallery using it. That doesn’t work- every framing company has a different cost structure to running their business- that’s why a universal pricing structure can’t work for everyone.
In the 90’s the industry started to attract computer software companies who created point of sale programs for framers. These programs allow framers to set their own pricing and guard against mistakes. This was fantastic progress. However, because these systems still involve setting prices for the many areas that are part of designing a custom product, it is still a very difficult process to be sure about.
For the past 10 years I have broken down the cost and selling prices of custom framed projects. Three years ago I began using that experience to help other framers become more profitable.
Recently, I was able to gain much more insight into the pricing of industry products by partnering with LifeSaver to study the millions of projects stored in their database. This data is in a raw form of generic numbers compiled by those who use the system. This new insight has given me the ability to understand more about how money is made or lost in our industry than every before. Thanks to LifeSaver, we will be able to use this data to improve the pricing for industry framers!
Here are some things I have learned in recent months:
- The great majority of custom framing is for projects 16×20 and under and very little custom framing is done for projects larger than 24×30. This should tell us that pricing tables need to be set so that we mark-up smaller projects much more aggressively than is the norm and mark-up larger projects much less aggressively. The net effect is better profit and more competitive pricing.
- Cutting length moulding instead of ordering moulding chopped is costing framers money. In fact, the data shows that those who order chop make an average of $10 more per frame than those that cut their moulding! Why? Many factors contribute to this. First, waste is a much higher cost in length than we realize. The fact that you get a minimum of 10′ for every increment of length you order really adds up. If you have a frame that requires 11 feet to create it, chances are you will have to buy 20′. You have almost purchased twice what you need. In addition, the figures show that those who cut length mark-up their mouldings to a lower price than those who order chop AND they discount those moudlings much more. The result is that framers put less money in their pocket when they cut their own mouldings. Remember too that this doesn’t even consider the labor costs of cutting or the cost of mis-cuts.
- Data also shows that we have difficulty pricing premium products like museum glass. The industry tendency here is to over-price the products which have higher costs. This is a result of using the same multipliers on premium products as we do on less expensive products. The result is that premium products sell less often than they could because they are more expensive than they need to be. Understanding the income you need to operate profitably gives you the ability to price things more accurately.
These are just a few of the findings the new data is helping us understand about pricing our product. As I continue to help framers set their prices to levels which will ensure their profitability, I’ll continue to share some of the trends I am finding. If you would like to have your prices re-set to increase your profit, send me this form and I’ll give you a call to discuss it. As an industry, we face many challenges. As business owners we work very hard at something we love to do. Making money should be something every good businessperson is comfortable with. Someone once told me that the money your business collects is the applause you receive for a job well done. Make sure your applause matches the benefit you bring to others- it’s only fair.