Embroidery Prices | How to Price Embroidery / Monogramming

This is a method of pricing embroidery jobs that is often used by embroidery & monogram shop owners.  It is supported across the board by many of the apparel distributors in the US.

Keystone pricing is a simple and easy to use retail pricing strategy where the end price is set at double the wholesale price.

Embroidery business owners and operators are typically entitled to wholesale pricing by the companies that they get their blank garments from.

Wholesale companies are not set up to deal with retail traffic and have a business model that focuses on Retail shops like those with a commercial embroidery or monogramming machine.

These wholesale companies often print their catalogs at keystone price (twice the price you pay) so that it provides a great starting point for the embroidery company when dealing with the end buyer.

The embroidery business owner can simply look at the price in the catalog and can show the pricing to the end customer.   They can know that there is already a fair profit built into the price to begin with. If new to the business, this method is a great starting point.

Many times shop owners will start with the keystone embroidery prices and add an extra fixed price to cover the cost of the specific embellishment. Other shops prefer to use a cost per thousand stitches approach.

Both are legitimate add-ons above the keystone price. Example:

• Polo Shirt Catalog Price =$24.50 (customer sees this price as starting point)
• Wholesale Price = $12.25 (½ catalog price – embroidery or monogramming business pays this, plus shipping)
• Retail Pricing = $29.95 (full catalog price plus a set price for embellishment -$5.45 in this case)
• Gross Profit = $29.95 – $12.25 or $17.70 per item.
• Net Profit = $17.70 per item – fixed costs % and any remaining variable costs.

Another benefit to this model is that since the entire catalog has been printed with the keystone pricing it tends to eliminate further negotiation on the part of the customer.

It’s clear to them that a great effort has been made to put the catalog together, so they figure the pricing must be accurate and non-negotiable. This works to the benefit of the embroidery business owners because they have to do little to justify their price to the end user.  This all helps when trying to figure out how to price embroidery monogramming work.

However, keep in mind that this method is only a starting point.  As the wholesale cost of the item increases (say Brand Name Polos and expensive Dress Shirts) then keystone and keystone plus pricing can get quite high.

Competitors will often use other pricing models to justify bidding larger jobs at lower prices so when using this method, it’s important to keep the pricing conversation open with the customer and get feedback on how you’re pricing is holding up against the competition.

Lastly, Keep in mind, you are not actually calculating your costs with this method so be willing to negotiate if one of your other embroidery cost methods or your competition indicates the price using this method is too high.

Time and materials billing has long been used in the commercial construction industry.

By definition, it represents an agreement between the customer or end-user and the company producing the product. In the apparel business, it’s typically used for larger custom jobs that are outside of the realm of what your business typically produces.

For instance, you might use a Time and Materials approach to price out 100 high-end leather jackets with multiple placements. However, Time and materials are perfectly appropriate for any job you choose.

If you don’t know your costs for a specific type of job, try a Time and Materials approach. As the shop owner, you negotiate with your customer for them to agree to pay for all the materials and cost of goods used in the making of the product.  In addition, they pay for the time it takes to produce the job.  This is all part of the “how to price embroidery monogramming work” process.

Sometimes there is an additional agreed upon mark-up for profit margin added in.  However more often than not all the fixed costs and the profit is included in the per hour price for the work.

For instance, if your fixed costs are $1,450 per month and your shop is open for 40 hours a week.  Then that works out to about 173 hours a month, and those embroidery expenses need to be divided by $8.38 per hour for fixed expenses.

Using this Time and Materials approach, you may decide that you intend to make $25 per hour for your work and another $7 per hour in profit. So the fixed costs get added to your pay plus your profits to add up to, in this case, $8.38+25+7 = $40.38 per hour. This figure then becomes the agreed per hour price for your work.

It also represents the use of your equipment and resources. The customer also agrees to pay the price for materials on top of this figure. This method ensures that you get the pay you deserve for your work.  In the case of a complex or a very large job, it makes sure you get paid enough.

It also ensures you don’t pay too high a price for not estimating embroidery costs correctly. But it has drawbacks in that every hour the machines are not busy effectively reduces the amount of pay per hour.  So you must balance your need to get paid what you are worth against keeping the machines busy.

If the machines aren’t busy, then you are paying for the fixed costs out of your pocket.  So it’s better to keep your machines moving.

It’s possible to win the battle by having the “highest price in town” but lose the war when the bills come in at the end of the month. Making sure you have high-profit work is the way to keep your hourly rate to a maximum.  But keeping your machines busy is the way to make sure you get to keep all those high profits you earn on the jobs you do.

Cost-plus pricing is a more complex strategy in which the selling price is determined by adding a specific profit margin or mark-up on top of the unit costs of the goods sold.

This is typically calculated on a per-job basis, and it’s important to add in the fixed costs and the variable costs. Cost breakdowns must be deliberately kept and comparisons made at regular intervals.  This method is tough for a start-up business because there is little data to base your embroidery prices.

Every business has a different set of costs, and those costs get lower and lower as a business grows.  It is only after you have produced many jobs that you begin to get a good feel for the final costs for a specific niche of your business.  Over time, you learn how to price embroidery monogramming better as you go along.

This pricing model is excellent however for any business that has been in business for a year or more.  It’s important to go back and spot check the costs of former jobs.

Doing a post-mortem analysis on larger jobs or specific jobs, you believe to be the most profitable is important. Spot checking your jobs allows you to compare the profits earned for each specific job type.  The goal is to keep doing more jobs that you enjoy and make the most profits.

Compare this method to your other embroidery prices and make sure your pricing supports your daily, weekly and monthly goals.  For instance, let’s say your machines are so busy each month that you don’t have time to make it to business meetings.

Or perhaps you can no longer pick up your kids from school because you are too busy. It may be time to raise your embroidery prices so that you can work fewer hours but still make the same amount each month. In general, you want to raise your prices every year anyway.

The more your customers learn to trust the quality of your work and service, then the more you can charge and still expect those customers to remain loyal. Customers will respect that you know how to price embroidery work properly.

It’s always recommended to know your costs and make a serious effort to add up all the costs that go into the work you are getting paid to do.

However, in the beginning, as mentioned above, it can be a daunting task, and this can often be a sticking point.  So another method that works very well is pricing to the market. There are all sorts of complicated ways to gather data, and one can spend as much time as they want to examine every possible market influence on their local embroidery or monogramming business 

The people who will be paying for your work are often already educated about what they are willing to pay for embroidery prices.

Pricing to market is simply a process of asking around and shopping, monogramming machine competitors in your local area, and asking your potential customers the going rates for various jobs.

The thinking is that if successful, the other businesses in your area are already charging a price that sustains their businesses. Using this method, it is assumed those embroidery prices will also sustain your business.

Regarding how to price embroidery monogramming: it is sometimes an uphill battle to get an existing market to agree to pay a higher price for items or jobs they have bought for many years.  So when in doubt, there is nothing wrong with using the going rates for work in your area as a starting point. However, keep your eyes open for an opportunity to add value to your monogramming machine business as you go along.

It’s important that you only compare prices with other companies in your area that offer the same level of service and product as you do.

For instance, if you consistently provide a more expensive type of t-shirt than the normal for your area, then it will be important to make sure that your price according to the extra value that you bring to the local market.

It has long been a standard in the embroidery industry to price jobs on a per thousand stitches basis.

There is an enormous amount of pressure and opinions that develop concerning the “right” price per thousand is. Industry software has even been designed to help out which will calculate literally every single meter of thread that goes into a specific job.

The theories and calculations and arguments can get quite intense.  How much-fixed costs go into each stitch anyway? Are all stitches considered equal?  Does each machine produce the same results?

What if I have a 4-head or a 6-head machine when another business only has a 1-head?  Should I then charge less?  On and on… To begin with, it is very hard, if not impossible, for even industry experts to be able to guess upfront from a picture how many thousand stitches a particular design will end up with.

It’s not unusual to be off by 15 to 20% or more from the actual count when the job is finished.  Also some jobs cause more problems than others.

Sometimes a design that looks so simple to the customer can represent a very large amount of time spent on an embroidery machine.   Sometimes a design can have a low stitch count, but be on a particular material to make it break thread 4 or 5 times more often.  All of which are hard to judge upfront.

So it can leave your customer feeling like their price is always a moving target. The important point is that the “per thousand stitches” method is essentially a “Time and Materials” method.

It is an attempt to break down the overall fixed costs and variable costs and reduce them all down to an amount you intend to get paid for every thousand stitches your machine produces. The bottom line is to keep this method in perspective of your other methods and use it to compare one model to another.

You may find that this method is most reliable for certain jobs (Typical polo left chest logos, etc.) but be very lacking in other jobs.  That’s why it’s important to keep your pricing flexible.