Your shop has survived two difficult years when so many other decorated-apparel shops have shut their doors. While celebration is in order, this is certainly not the time to rest. You must focus on your shop’s profitability now, more than ever.

Why? It’s no secret that inflation and costs of goods are going up every day. You have to stay ahead of the issues facing all of us financially. “Successful business operators always think about increasing margins and decreasing costs to ensure optimal profits,” says JP Hunt, co-founder and president of InkSoft. “Focusing efforts on both profitability and waste reduction will yield the most results.” 

Add to that, to stay open, thriving and ahead of your competitors, you must operate at peak performance, so you can be ready for the next level up. You’re either moving forward or backward, and you’ve come too far to go back now.

With this in mind, we’d like to share 11 proven ways you can increase your shop’s profitability. As a general rule of thumb, you can increase your profits by proactively working in one (or all) of these three areas: 

• Raise the prices on your decorated products.
• Reduce the amount that it costs you to produce these products.
• Increase your shop’s efficiency so you can save money on the backend or overhead.

Let’s look at each of these areas more closely to see exactly how you can apply them to your printing shop.

Raising Prices on the Merchandise You Sell

This might be the area where you can see the fastest change, but it’ll take some thought and work.

1. One of the easiest ways to increase your profit margin is to simply raise prices on the merchandise you sell.

Some business owners will tell you that raising your prices will alienate your customer base and cause you to lose business. However, that’s the furthest thing from the truth, and it can actually tank your shop’s cash flow.

First things first: Avoid the pitfalls of price adjustment reluctance. “So many decorating businesses are operating on dated profit margin strategies that don’t consider today’s economic conditions, such as supply chain challenges, inflation and labor cost increases,” Hunt says. “The reluctance to adjust and increase prices amounts to fear that customers will reject your increased pricing. However, today’s consumer is accustomed to price increases wherever they shop, so they expect to pay more for branded merchandise that you create custom for them. Print shops shouldn’t fear going out of business over losing a few customers.” 

In general, shops should increase pricing yearly. “Our industry has been squeezed for a long time on profit margins when we’re doing the heavy lifting for larger brands, agencies and companies,” says Lucas Guariglia, co-founder and CEO of Rowboat Creative. “Sure, there will always be shops out there trying to beat everyone by 10 cents, but if your quality and service are high level, your clients shouldn’t mind paying for a premium service. Contract-only shops will certainly see benefits in raising prices.”

So, look closely at your sales data. Items in your top-seller list should be prioritized for a cost increase. If the apparel styles, artwork type or imprinting method truly are such popular sellers, then your customers will be willing to pay more for them. Consider a gradual increase in your products over time. If you hold off repeatedly on raising prices and then when necessary make a huge jump in prices, that’s when your customers won’t be happy. 

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Plus, consider this: The staff at Rowboat Creative doesn’t view pricing increase as simply a profit increase. “We see this as an opportunity to better take care of our teams and staff,” Guariglia says. “If you’re a for-profit corporation, of course, you want to focus on the profit element, but there’s certainly a fine line of where profit should be spent or realized in our eyes.”

2. Get 100% upfront payment on your orders.

“Cash flow. Cash flow. Cash flow is king,” Hunt says. “The financial health of most businesses can be determined by their cash flow. Eliminating, or radically reducing, payment terms to just 100% upfront helps to drastically shrink your accounts receivable. Considering the nature of custom branded merchandise, consumers shouldn’t expect terms because you can’t put this inventory back on your shelf.”

Be honest with yourself: How many times has your shop completed an order for a client who took it away, only to wait 90 days or more to get paid, or worse, not to get paid at all? Many times, shops finish an order for customers, only to have them cancel the order or refuse to pay over some minor issue they have with the work. 

All of this means that you produced the product for free (or fronted the labor costs and supplies) and now you’re stuck with the items and lost time and money. By creating a new policy that requires full payment upfront, you can ensure you won’t lose money on any orders, ever again. In an Amazon world where people are used to paying upfront for products, you shouldn’t think twice about making this your shop’s de facto policy.

3. Determine the true price of creating a product before you set your prices.

Look at each step of the process, to figure your estimated cost for each item so you can price for profit:

• the cost of the blank and decorating supplies
• the time and creative labor costs it takes to create artwork 
• the cost of mock-ups and samples
• the cost of the actual production run 
• your overhead, such as employee salaries 
• the cost of shipping the items
• what other local shops charge for an equivalent decorated item.

“Be prepared to work a little on this, since there are multiple variables,” Guariglia says. “Also, be aware that market research is helpful to understanding where the market is for pricing. However, your shop is your shop. Don’t focus on trying to price match other printers that have 54 auto presses and need to be dirt cheap just to feed their machines. You have to know your value and your specific customer.”

4. Get creative about tweaking your profit margins.

Entrepreneurs need to identify ways to add more value to their product and service mix to increase margins. Hunt suggests these two methods:

• Upselling and cross-selling products help to monetize customer relationships fully. That way, you earn more per order, and give your happy customers a custom solution.
   
• Use the “bracketing strategy” to offer products that cater to all budgets. “Bracketing empowers customers to choose from good, better and best options that you’ve chosen for them,” Hunt says. “Most customers settle on ‘better,’ as they assume this is the perfect compromise, and alignment of quality and value.” 

Additionally, Hunt says, if you constantly reexamine your pricing and profit margins, you’ll more easily align with your current overhead and ever-evolving marketplace conditions. 

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Adjusting Your Shop Costs

When it comes to lowering your costs, there are a few strategic steps you can take that will help you increase your profits.

1. Choose the decorating processes that make the most sense for your shop and your clients’ needs.

While screen printing and embroidery are the proven, tried-and-true decorating methods of many shops, it’s key to look at what other processes you can add to be that one-stop shop for your customers. For example, direct-to-film (DTF) transfers are a more affordable way to mimic screen printing, but without color limitations, for smaller runs. Other shops quickly recoup their costs for a direct-to-garment printer, since they have frequent orders for smaller runs, custom shirts for events or special occasions. Look at all your possibilities to reduce your production costs.

At Rowboat Creative, Guariglia and his team try to be as “expansive” as they can be with their decorating offerings. “Not only does this help us keep things creative, but also allows us the flexibility to problem solve for customers who might have just been told ‘not possible’ from another company,” he says. “DTF is certainly on the rise and you can do some interesting things with it. Being aware of industry trends and also industry progress is important, period.” 

2. Your next best move is to look at the items you’re selling the most.

Determine your top sellers and remove products that aren’t moving. If you spend weeks (or months) trying to move certain decorated items, then your shop isn’t really selling these products—you’re just storing them. It’s better to make room in your shop for items that will move and bring in profits.

3. Talk to your supplier partners.

Ask them what you need to do to get their best prices for your apparel and decorating supplies. “Ask your suppliers about discounts or incentives so you can streamline your inventory and how you order from them,” Guariglia says. “Having solid relationships with vendors or partners is always in your best interest. It’s a two-way street!”

Also, look for higher-quality products (such as better-quality t-shirts from Threadfast Apparel or hoodies from new brand TriDri), for a higher profit margin on each transaction. You’ll also be charging more for quality items that will last longer. alphabroder calls this good, better, brand.

You can also try offering promo products as an add-on to your existing apparel orders. Not sure where to start? We’ll show you how to connect products with current trends, like working from home, focusing on health and wellness, and boosting morale. (And of course, our fave product recommendations.) Read Prime Line Spotlight: Pair Your Apparel Sales With Promo Products. 

4. Move to bulk orders and printing-on-demand.

The more items you print, the cheaper the cost, so bulk orders will net a lot more for each item than just printing one of those items.

Also, POD is a smart move because it means you don’t have to pay to print items that aren’t selling and then “paying” to store them. You’ll print and ship each item immediately as they’re ordered, without having to waste shop space for those items that aren’t moving. Curious about adding print on demand to your shop? Read Adding a POD Service Might Add Dollars to Your Bottom Line. We do a dive into what you need to know about adding POD, whether you’re a startup or established shop.

Many shops pair POD with online stores that they manage and fulfill for their clients. That way, they can charge more for items and help their clients out all year round. If you haven’t explored this area, there are several apparel industry-specific e-commerce vendors you can reach out to if you want to set up your own store or offer them to clients. Be sure to check out: InkSoft, Printavo, OrderMyGear, DecoNetwork, and Spirit Sale.

Increasing Efficiency in Your Shop and Buying Practices

Increasing your efficiency will be the foundation of your shop’s success. Once you achieve efficiency, you’ll see where your shop has suffered from waste (and how much) in the past. “To decrease costs, business owners and operators must seek to eliminate waste,” Hunt says. “Waste comes in many forms, and all forms cannibalize profit margin.”

The greatest sources of waste for apparel decorators and print shops, according to Hunt, are:

• Efficient processes result in higher labor costs and lower productivity 
• Mistakes resulting in misprints. 

“The goal of waste elimination is a dedication to making incremental advances,” Hunt says. “Small incremental steps are the only path.”

1. Dedicate a person (or multiple people) tasked with innovating your business.

Look closely at your current employees to determine who’d be best at taking on new responsibilities. You may potentially have to hire someone new instead of promoting from within.

“It’s also proven to just ask your team members,” Hunt says. “One of the easiest ways to find opportunities is to solicit direct and ongoing feedback. They know their job function well, and they can help identify waste and missed opportunities. Secondarily, this helps to engage your workforce and conditions them to think about how to improve. Consider creative awards and recognition programs to encourage the right attitudes and behaviors here.”

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One note of caution: Remember, employees get pulled in different directions, so it can be difficult to dedicate this element of your business to one person as their role. “Continual innovation and improvement is a very key component to lean manufacturing, which we’re very well-versed in our shop,”  Guariglia says. “However, especially now, during times of labor struggles, this might need to be a group effort.”

If you’re struggling to dedicate one person in your shop to improving your financial performance, Hunt offers these other smart ideas: 

• Join entrepreneur groups in your local community. “Here you can learn from others and rely on an objective peer group to solicit feedback and ideas from,” he says.
• Hire a professional consultant to audit your business practices. “Objective professionals will help your shop to discover waste and missed opportunities, and then develop an iterative process and plan to make a real impact,” Hunt says.

2. Change up or narrow your products and delivery model. For instance, become a one-stop shop for a specific market. 

“This is always a main focus for us at Rowboat Creative,” Guariglia says. “Stay fluid and open to potential revenue streams you can add or implement that won’t completely disrupt current business flow.”  If you’re already selling decorated apparel, become even more of a one-stop shop by adding promo products into the mix. Now’s a great time to offer these in-demand, brand-awareness builders. Read out our promotional products blog for our top tips for getting started, and of course, product recommendations. 

The way this looks for your shop will be unique, but it should be profitable. You might create products that will then be sold for you by subcontracting partners, like influencers. If you discover an untapped niche, you might service those companies or sell statement shirts to consumers in that group. You might offer every client an online store, or offer special packaging services or kitting. For example, you might create an example kit of several items that can complement each other (think beach towel, sunglasses, and t-shirt) and appeal to your client’s customers that you send out as a marketing tool.

3.  Streamline your production workflow.

A great way to do this is with a production schedule based on what’s actually happening in your shop. A schedule provides a sense of stability and order in an otherwise chaotic industry, where sometimes you face order feast or famine. Part of this is standardizing the different aspects of your workflow so it can go as smoothly as possible without any interruptions.

“Really dialing in your metrics will help your shop to plan better,” Guariglia says. “This absolutely can affect your profitability, in that a custom schedule will help reduce overtime but also help maintain a less stressful environment, which is profitable in itself. Our COO, Joe Zangrilli, and our operations team have been doing an amazing job putting huge focus on our metrics and sharpening how we operate internally for the most efficiency. These elements are just as crucial as dialing in your dryer times. It all works hand-in-hand.”

Get Ahead of Inflation and Competitor Prices By Taking Proactive Steps to Increase Your Profits

Everybody’s looking for a way to make their shops run better to improve productivity and profits. By taking a look at these three key areas of your shop, you can find what works best for you.

Above all, stay lean and flexible. “All print shops and branded merchandise businesses must be ‘lean,’ which is code for ‘unplanned,’” Hunt says. “You shouldn’t  know what your business will do in the distant future. Planning is arrogant and becomes inflexible. Instead, your goal should be to try things out and iterate. Entrepreneurship is about experimentation to find what works and drives positive impact and results.”

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