Markup

[stephenthomas]

What is your Normal markup for this Industry ???????

[Crashoran]

Markup for what?

[iamjediknight]

The last PPA benchmark survey said COGS should around 25-30%. So 4x markup is average.

[David Whatley]

Scott, I'm not sure your understanding that correctly, but I could be wrong. Using a 4X markup, then you would be selling an 8X10 for what ptice? A 16X20 for?
If I pay $2.00 for an 8X10, I am going to sell it for a lot more than $8.00

[iamjediknight]

COGS in not just the print cost also need to factor in:
-Shipping
-Packaging
-Editing time
-Customer Service
-Etc

[iamjediknight]

I looked at 2008 Benchmark handbook and they came up with a COGS of $51.

Cost of time = $42.50 at $30.00 per hour

Acquire & backup 50 RAW+JPG images 15 min.
Import images to sales software 5 min.
Prepare 25 images for presentation 40 min
Retouch 1 image fox 8x10 10 min.
Produce hi-res image in sales software 5 min.
FTP image to lab 5 min.
Backup finished print and file order 5 min.
Total time 85 minutes

Material costs for 8x10 = $8.50

Lab cost of print = $3.00
Lab Shipping = $2.50
8x10 mount = $1.00
Digital media charge = $2.00

[David Whatley]

Agreed Scott. I "thought" you were just using a generic 4X without factoring in other costs. Or at least thats the way I read it. Thanks for the extra explanation.

[surlynkid]

you also need to recoup the depreciation on your cost of capital.

[HotHolly]

Service industries dont do the normal % mark up on product that others do. If they did, you'd be charging peanuts and going under. I work my numbers backwards from desired total monthly sales, and backtrack to figure out what I need to gross from each client, how many clients I need, and then break it down from there - subtracting ALL expenses (including time). So, I guess we dont do a flat % mark up on anything. Hope that helps a little. Good luck.

[Flores]

that was excellent info for a noob like me, scott. Thanks!

[texxter]

What Holly said. For a services business you start calculating expenses and desired income - I guess you can treat your salary as an expense for this purpose. Say that the CODB (everything you need to run a studio, from car payments, internet, paying back loans for cameras, recurring marketing expenses, office space, etc) is $2,000/month. You now add what you want to pay yourself - this should include enough to live and also some savings for retirement, and don't forget you pay taxes on this gross. Let's say you want to pay yourself $3,000 per month before taxes. Now you know that you'll need to earn AT LEAST $5,000 monthly just to keep your doors open and pay yourself. This means that if you expect to do 10 jobs per month you need to earn $500 per job to make this work.

Ok, now the cost of goods come into place. Assume the average cost of printing a job is $100. Because you must earn an average of $500 per job and the cost of printing the job is $100 you need to charge $600 for the job so that you can pay the material cost of the job and all the other expenses you have, including paying yourself.

If you're 6 months into the business and you haven't been able to bring $30,000 after paying your lab, something is not working right. Let's say that you make a total of $40,000 in six months. Your business has generated $10,000 in pure profit after paying all expenses. You'd cash it or reinvest it in the business.

As you can tell from this analysis, the cost of goods is just a small factor in answering the question of whether your business is profitable or not.

[BenE]

Originally Posted by iamjediknight

I looked at 2008 Benchmark handbook and they came up with a COGS of $51.

Cost of time = $42.50 at $30.00 per hour

Acquire & backup 50 RAW+JPG images 15 min.
Import images to sales software 5 min.
Prepare 25 images for presentation 40 min
Retouch 1 image fox 8x10 10 min.
Produce hi-res image in sales software 5 min.
FTP image to lab 5 min.
Backup finished print and file order 5 min.
Total time 85 minutes

Material costs for 8x10 = $8.50

Lab cost of print = $3.00
Lab Shipping = $2.50
8x10 mount = $1.00
Digital media charge = $2.00

Using this formula, what would be the price of a 16x20 or 11x14?

[iamjediknight]

Originally Posted by BenE

Using this formula, what would be the price of a 16x20 or 11x14?

The formula would be the same except for the price of the print and mounting. Those prices will depend on what your lab charges. Paco is right in that you should be charging based on what you need to do to make a profit.

[BenE]

Originally Posted by iamjediknight

The formula would be the same except for the price of the print and mounting. Those prices will depend on what your lab charges. Paco is right in that you should be charging based on what you need to do to make a profit.

Thanks. I wasn't sure if there would be a difference in any of the other costs, such as retouching, etc.