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Opinions Wanted Post Election Pricing

PaulSF

PFG, Picture Framing God
Paul, ask your suppliers if they carry Berkshire. They are a Crescent product that I get well below $2 a sheet. Many distributors carry it but will never tell a customer that they do because it eats into more expensive board sales.
Jeff, that may be EXACTLY what I am looking for. I do have a set of Bainbridge papermat samples for use with corporate jobs. I had a couple in today that was trying to hit a certain price point on a large poster. We could hit the price point with a Framerica bonanza wood frame, but adding mats, even a single mat, took the price up too much. So I went to the back and got my paper mat samples, which were only for commercial jobs, and it turned out the papermat was only $10 less than the rag mat, on a $275-$300 job. I was really disappointed that the paper mat from Bainbridge didn't offer a more competitive price. So I will definitely inquire into Crescent's Berkshire line.

I would love to sell nothing but fancy shmancy all day long, but even I recognize that not everything warrants that, and not all customers can afford it. I really do try hard to make it happen for my customers, no matter how much they are willing to spend. If I can find a truly lower price mat for these budget jobs, I'll be very happy.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Paul, let me know if I can help you track down any items that will help fill the gap for the newly price concious customer.

I love the fact that Grumblers are responding to the crisis quickly. In the past many have chosen to try to wait it out but this time I think we all believe it will last longer than a couple of months.

I'm with you on all of that fancy schmacy framing but the reality is we will have to tighten our belts until they can afford to go that way again.
 

Kirstie

PFG, Picture Framing God
Jeff, that may be EXACTLY what I am looking for.
Paul,
Ask Donna about Berkshire Hathaway paper mats. LJ has them, but they sure don't push them. We carry 3 colors in stock and don't sell many, but they are good to have in a price emergency.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Paul,
Ask Donna about Berkshire Hathaway paper mats. LJ has them,
Kirstie, just Berkshire, no Hathaway.

Did you see that Berkshire Hathaway had a 77% decline in earnings this quarter. They will take an absolute beating in the near future because they have insured Credit Default Swaps that will tank in the next couple of months.

Credit Default Swaps insure against the default of corporate bonds. It is a very lucrative business because the bonds rarely default and the insurance becomes very expensive when a company is in distress.

They have been insuring the worst of the worst because for example to protect against default on $10 million dollars the insurance premium costs as much as $1 million up front and a half million per year for each of the next 5 years. When you hear of companies hedging against losses this is what they buy. Normally the bonds don't default but as the situation worsens an investor can sell the swaps to another investor at the higher cost.
 

Bob Carter

SPFG, Supreme Picture Framing God
What I love most about this thread is the realization that markets do shift and wise framers are accepting (embracing?) these changes

In just a few short years back suggesting a commercial product like the Berkshire line or Bonanza Woods would have been met with scorn

I really do suggest that every framer start to track sales by category (OPP, Tonnage and Top of Line, for example). Understand that one persons Opening Price might be quite different than another's, but each can simply determine those distinctions. Simple shifts in these categories can have significant differences in marketing, advertising and inventory allocation

We all want to sell more fancy pants framing, but matters little if consumers do not agree

But, that doesn't mean that we ignore that segment but that we integrate it into a plan that resembles our clientele-Not the other way around

What a very good thread

(But, I still think framers ought to consider some "seasonal" adjustments to pricing)
 

Jeff Rodier

SPFG, Supreme Picture Framing God
(But, I still think framers ought to consider some "seasonal" adjustments to pricing)
I agree with all that you say Bob and we are just looking at it from the opposite end of the street. I know that you and many here have huge overhead and my prices would put your business model in major distress. I sure am glad that you have returned to the Grumble as a regular, it just wasn't the same without you.

Just for some perspective I was wondering if I could ask you a very personal question. I have disclosed that my break even point on the frame shop and sandwich shop combined is $4,000 with NO PERSONAL COMPENSATION.

Would you be willing to share what it costs you each month to unlock the doors EXCLUDING ANY TYPE OF COMPENSATION that you and your wife receive. If so please also exclude any insurance benefits.

I really think this will be an eye opener for many here and it will help them understand how we can be at such opposite ends of the business spectrum. I know I would not want to have your expenses but we all have to reside where we have built our businesses. I really think this will be helpful to all if you would be willing to participate.

Either way thanks for always being willing to Grumble.
 

surferbill

SGF, Supreme Grumble Framer
Just for some perspective I was wondering if I could ask you a very personal question. I have disclosed that my break even point on the frame shop and sandwich shop combined is $4,000 with NO PERSONAL COMPENSATION.

Would you be willing to share what it costs you each month to unlock the doors EXCLUDING ANY TYPE OF COMPENSATION that you and your wife receive. If so please also exclude any insurance benefits.
.
With a 50 % markup, I probably have to generate $15,000 in sales a month to break even, and keep the doors open.

At $20,000 a month, I can start paying myself a salary, and at $30,000 to $35,000 a month I make a little profit, and can put some money in savings.
 

DVieau2

PFG, Picture Framing God
Jeff,

You're right about most Grumblers not understanding the economics of a mall location.

I was a part of a franchise organization for 10 years. One franchisee lost a good location in a mall because they "only" did $750,000 a year.

Doug
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Hey Doug,

Your right most people hear the cost per square foot and run out screaming. They didn't even hear the cost of the triple net or sharing of sales with mall manegement. Mandotory hours and cost of staff alone is staggering.
 

Doug Gemmell

SGF, Supreme Grumble Framer
My break-even point is about the same as Bill's: $14/17K. Varies depending on the monthly COG's.
 

Grey Owl

SGF, Supreme Grumble Framer
As the economy is going down, there are a few things I'm doing.

1st: Negotiating better terms with suppliers. I'm small (1 person) so I carry little clout with my suppliers, but after talking with the new manager of one of my suppliers I am now getting much better pricing on mats, starting from mat 1.

2nd: I had not thought of it until reading some earlier posts, but I'm going to develop a basic low end pricing schedule, so I will know what mouldings and mats I can use for the lowest end pricing.

3rd: I'm watching my cash flow very close.

4th: If I rented, I would try to re-negotiate my rent levels; The rentees know the economy is bad, so they may be willing to give me a slightly lower rate if I was willing to extend for another year or two.

5th: I believe we can still get the accelerated depreciation for up to 5 or 10K through this year (what is it called, the 508 accelerated depreciation schedule?), so I'm going to check to verify, and then I may consider some capital expenditures before year end. This also ties in with my cash flow.
 

David N Waldmann

SGF, Supreme Grumble Framer
5th: I believe we can still get the accelerated depreciation for up to 5 or 10K through this year (what is it called, the 508 accelerated depreciation schedule?), so I'm going to check to verify, and then I may consider some capital expenditures before year end. This also ties in with my cash flow.
If you're talking about Section 179, the limit this year is $250,000 (but you can't use it to declare a loss), and the amount you can claim is reduced by the amount of qualifying equipment exceeding $800,000. So if you put $1,000,000 worth of equipment into service you could only claim $50,000. I don't think too many companies in the framing industry have to worry about the limits...
 

Bob Carter

SPFG, Supreme Picture Framing God
Hey Jeff-I am not trying to be coy, but my rental expense would send you reeling. Doug's BE slightly exceeds that number

Having said that, may I add that I no longer suggest that metropolitan regional malls are a good place to operate and that our current model is not one recommend.

And, having said that, I will probably do as much volume in the next 7 weeks as many here will do annually but with only two months worth of rent and 6 weeks worth of payroll. Obviously, we will make some serious money real quickly

And, having said that, the other 10 months can be very brutal, indeed

But, as to my suggestion as to "seasonal" pricing, it's merely a suggestion for reflection. Assume that we put no personal philosophical bent: Book a hotel in Las Vegas on New Year's Eve vs Jan 3rd. They have a finite product (rooms) an dlimited time (one night) and an exceptional demand

We have the same factors (only so many frames we can make) in a finite period (not many want it the day after) and more customers than we typically can handle

If I may, let's assume that a part of the "overload" will be clients that could not get work completed in time from competition (BB's or others-it matters little). They could not get their work done because of the first two conditions (factors favoring my position)

An optimist might suggest that this is truly a golden gift; an opportunity to capture a new client. To those I cannot argue, except that there was a reason why this client did not come to you initially and that reason may not cured. And, that client may easily simply go back to wherever she "normally" went or as is typical with a very large portion of framing clients that are "one and done" and not need our services but rarely (if ever)

Now, I could be a "devil's advocate" and suggest that we run "Sales" during the holiday period and attract even more clients. And, if I use the same argument of the "golden gift", then wouldn't it make sense to offer an even greater reason for that Holiday client to be a newfound "regular" client

I'll bet that no one will argue that position

Which leaves us with the status quo

Which is the worst place to be-it offers no compelling offer, no compelling value and no compelling reason to come back

I simply think that at a time of year when consumers are "conditioned" to pay premiums (overnight shipping, premium delivery charges, etc) a very slight increase would be hardly noticeable in a product where the clients thinks that whatever your "everyday" price is too high already.

I suspect that if your average ticket is $150, the majority of folks are any less upset if it was $160, nor any more favorable if it were $140.

That $20 might not make much of a difference in th epreception battle, but at $20 swing times the number of workorders in the next 6 weeks might make a nice difference in your stocking over the mantle

Bottom line: Recently mat board prices went up a tad. Most of us with POS systems didn't even know that we "raised" our matboard prices (if you bothered to do your updates).

Any clients blink at the new price of a 32x40 suede matboard?

Did you even notice?

BTW Thanks for the kind words

You mentioned your BE was about $4K. My wife's Amex is about that (just kidding). There are many, many framers that have wonderfully comfortable operations similar to yours. Somedays, I am wistful for that simplicity, too
 

surferbill

SGF, Supreme Grumble Framer
The analogy of higher prices for hotels and airline tickets during the holiday period is correct.
If I want to go to Costa Rica during Christmas the room and airfare will be 30 to 50 percent higher than if I go in January.

I think it's a good idea for picture framers to raise prices during the only time of year, that customers really don't care how much it costs to frame a picture.

If your customer has just come from M's, Joanne's, or HL and have been told the cutoff was December 1st, they are just going to be grateful you can do the job by Christmas, and are not going to worry if you have added 20 bucks to the price.

Of course, that's no guarantee that they will not go right back to the big boxes the next time they need something framed.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
You mentioned your BE was about $4K. My wife's Amex is about that (just kidding). There are many, many framers that have wonderfully comfortable operations similar to yours. Somedays, I am wistful for that simplicity, too
I feel you Bob. Christmas only comes once a year and for many, these 2 months pay the bills. I will get to the point where I hit maximum capacity and at that point I will have to make decisions.

I will certainly start with a CMC. That alone at that point will free up about 1/4 of my day. The next thing I will do is hire someone to work the design counter because I just love BS'ing with my customers. That alone can free up 1/3 of my day. Usually by the time the customer leaves after picking up their art I tend to know what they do for a living, where the kids go to school, how they came to live here and most of their sources of income along with their politcal views.

I really need more space now but have fought it for a while and it is a good thing because as a one man operation my mothers accident this summer would have buried me. Actually it would have most likely killed her because I would not have been able to spend 18 hours a day in ICU putting pressure on the doctors to do what was needed to wake her up (on a side note anyone with family in the hospital please be there because the doctors make assumptions based on previous cases).

I have the opportunity to move across the parking lot for an additional $300 per month but have not acted because of time of year. That would give me 3 times the space and I could add the portrait studio in addition to moving my 2 Epson large format printers from home to the store. The space is not going anywhere fast because of the economy and the Hard Rock Park closing accross the street fom me. I will most likely do it after the first of the year and my existing space will be used as additional dining space for the sandwich shop. Overall it will only raise my nut to about 5k. I will be forced to act like a grown up business owner at that point but like you say, simplicity is bliss right now.

I really did want you to tell us that your nut was 600K for the year and I imagine I'm pretty close with that figure. It's really all about risk and reward. I'd be willing to bet right now that 90% of the owners wish their life was as smple as mine is right now. I'd also be willing to bet that 10% have basic understanding of your business model and would be willing to take the risk to be in that position.

The thing that makes this business attractive to all is that there is room for every type of busness model. Right now I'll take my very small slice of the pie and be happy that I can have hours of 11-6 Tues-Fri (plus Mon for Christmas) and 11-3 on Saturday. I know there are days that you wish you could sleep till 10 AM and be sitting at home eating dinner at 6:15. There are also days that I wish my resister went through 3 rolls of tape and rang in 15k.

This thread has really turned out great because Grumblers are talking about the business of being in business. Just like this country there is plenty of room for every size, shape, color and attitude. This is the kind of discussion that will cause me to get motivated to expanding, someone else will find some lower price points, some will find some higher price points, another will simplify and someone new will use it to start their new business. Most importantly, we should all survive to have the same arguments next Christmas.
 

Grey Owl

SGF, Supreme Grumble Framer
If you're talking about Section 179, the limit this year is $250,000 (but you can't use it to declare a loss), and the amount you can claim is reduced by the amount of qualifying equipment exceeding $800,000. So if you put $1,000,000 worth of equipment into service you could only claim $50,000. I don't think too many companies in the framing industry have to worry about the limits...
Yes, you are right, it is Section 179. I last took it in 2006. At that time the IRS maximum amount was $108,000, with a reduction starting at $430,000.

As my cap expenditures were less than $108,000, I could expense all cap expenditures, as long as they were less than my income, or $108,000, so I didn't have to worry about the reduction starting at $430,000.

So based on your info, I will again be able to expense all of my capital expenditures instead of depreciating over a period of years.

Thanks
 
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