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"The Articles of Business"

Discussion in 'Picture Framing Business Issues' started by George Hunter, Jun 14, 2002.

  1. George Hunter

    George Hunter Grumbler

    Has anyone ever used “The Articles of Business” by Vivien Kistler to calculate frame pricing?
    I disagree with her method of calculating actual costs for the following reasons.

    For a 20% moulding wastage the book states that actual cost should be calculated by taking the cost of moulding for the job and adding 20%.
    So according to Vivien Kistler , for a frame which uses $100 worth of moulding you must charge the customer $120. Sounds reasonable. Except if you buy $120 worth of moulding and you know that 20% is wastage then you have $96 of usable moulding not $100.

    The error lies in regarding the cost of required moulding as 100% whereas in fact it is the actual cost of moulding purchased including wastage which should be regarded as 100%.

    The formula in the book for actual cost = cost + wastage
    reads as 120% = 100% + 20%
    It should read 100% = 80% + 20%

    In practice if you need $80 of moulding for a job
    then the formula is 80 X 1.25 = 100
    So for 20% wastage you must multiply cost of moulding by 1.25 to get the actual cost of moulding.

    If you followed the formula in the book you would multiply 80 by 1.2
    80 X 1.2 = 96. You would be undercharging by $4 and if you apply the mark up example of 2.5 then you are undercharging by $10.
    If you calculate glass and mat costs using the same method then you are undercharging on these items too and by a considerable amount on every job.

    George
     
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  2. David N Waldmann

    David N Waldmann SGF, Supreme Grumble Framer

    Your mathematics are correct. However, the question remains: "What IS the waste factor?"

    Knowing that Vivien is fairly widely regarded as well educated in the framing business I'd venture a guess that she has it figured out right. And that you'd be overpricing and overbuying if you are using a waste factor of 20% of gross rather that 20% of net.
     
  3. George Hunter

    George Hunter Grumbler

    David

    Thanks for your reply.
    The fact remains however, that the formula given in the book is an example given so that you can insert your own figures.
    If you did you would definitely be miscalculating actual costs.

    What I find very interesting is your point of view which appears to be: "Vivian is highly regarded in the industry therefore she must be right".

    What does everyone else think?
     
  4. PurplePerson1

    PurplePerson1 SGF, Supreme Grumble Framer

    It sounds as though George may have a Grumble with Vivian.

    I think Vivian is a wonderful speaker. I have driven far and learned much from her. I would go again.
     
  5. George Hunter

    George Hunter Grumbler

    I am sorry if I have given the impression that I have some kind of grumble with Vivian.
    This is not the case. I have never met or spoken to the lady and I know very little about her. I am sure she is a very nice person.

    It is simply that I bought her book to help me develop my frame pricing system and found that if I followed the advice given I would have a system which undercharged.
    I thought it was an important point to bring up because there may be other framers who are currently allowing for less wastage than is actually the case.

    It appears the discussion is academic anyhow because there has been little interest in it so far. I guess most framers are using bought software packages or pricing charts.

    George
     
  6. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Hi George- This is an argument you're not going to win. Not because you may be correct, but there are many things like this that don't get many people excited.

    So might I offer a solution that might work for you? Forget all the formulas. I've seen 8 and 9 step formulas so convuluted that leasing time on thwe NASA mainframe couldn't figure out. The only formula that works well is the one that works for you. And that's found on the bottom line of your Statement of Income.

    That comes from understanding the relationships of all the numbers, your personal situation, and your personal requirements.

    The easiest rule of pricing? If you don't make enough money, you have three options: You can sell a lot more, you can pay a lot less for the same product you carry now, or you can raise your prices.

    Which one of the three do you think you can affect the easiest?

    The difficult part of that decision is how much? And again, without going into a formula on price-demand elasticity (yes, there is a formula for that)you just have to understand the numbers.

    BTW,I like Vivian. I think she is very motivational and interesting. But when we take the attitude that if she says it , it must be true, then we cheapen the purpose of education. And I'm sure she would be the first to agree. I do think she speaks well to the average small framer.
     
  7. George Hunter

    George Hunter Grumbler

    Bob

    Good to hear from you. I was beginning to think I was alone on this one.

    I agree with everything you said. If I may try to summarise, frame pricing is specific to each business and is something that requires work and effort to develop and maintain.

    I have written frame pricing software for my business and it works well for me.
    A lot of people have expressed an interest in it but I know if I gave it away I would have to spend hours tailoring it to individual needs.

    I have learned 2 things from the responses(or lack of them) to my original posting.

    1. People are not really interested in getting down to work on the numbers side of the business.
    2. If you wan’t to make yourself unpopular suggest that Vivian may be wrong about something.

    George
     
  8. Dermot

    Dermot SGF, Supreme Grumble Framer

    Bob

    I guess you have another fan in Ireland now, it look like you won’t have to do as much work on George as you had to do on me, I was hard work, thanks for your tolerances.

    You are so right all aspects of business should be up for review at all times regardless of how sure you are of your footing.

    George

    I’m beginning to learn that good advise/reviews are not always received in a positive manner, I too also posted a thread some time ago about pricing and got very little response, I suspect that most (note I say most not all) framers do not fully understand there pricing method, I get the impression that the attitude is “it works………I think……….so don’t ask silly questions”.
     
  9. Jim Miller

    Jim Miller SPFG, Supreme Picture Framing God

    Pricing of custom framing can be very complicated or it can be very easy, depending upon your mindset.

    For example, when I first started my business I carefully calculated precise costs for all parts, applied the most accurate factors for overhead and labor, and then added profit. And it all went out the window in a few months when all of the costs changed.

    Over the years I've learned to check profit rates often, and I make sure we remain profitable by whatever action is appropriate. To be honest, I believe Vivian's mistaken calculation of moulding waste (which I agree it is) is a trivial matter.

    I'm thinking (dreaming?) of simplifying our pricing yet again. I would like to simply charge $500.00 per hour of shop time. We're open 9 hours per day and sell an average of ten frames. So, if I charge an average price of $450.00 per frame, our profit should be OK.

    But first, I want to make sure we can remain competitive with that plan. ;)
     
  10. JRB

    JRB PFG, Picture Framing God

    If y'all want my two cents worth, I think part of the reason for lack of response is, this is a public forum. I think a lot of people would not want to post their pricing methods to the general public.

    I think a lot of us are in this industry for the craft of it, we like working with our hands. Getting into the nitty gritty of numbers is not all that exciting for a lot of us. I work a set mark up on everything I purchase, seems to work for me, I'm not going to try and fix it. ( Maybe adjust it a little from time to time. )

    Scrap is not a huge concern, we make things from it, we donate it, we sell it, or we trash it.

    John
     
  11. B. Newman

    B. Newman SGF, Supreme Grumble Framer

    John's right. The "techinical/craft" (actually doing) side of this business gets huge responses. The business/marketing side does not. Whether that is because folks don't want to share/divulge their numbers, or because most people just don't like that side of the business, I don't know.

    However, those of us who love the business/marketing side keep posting because every once in a while, someone says something, and you unearth a nugget, and that makes it worth all the effort.

    Betty
     
  12. Emibub

    Emibub PFG, Picture Framing God

    My two cents worth: We are probably more right brained than left brained,hence our creative work with our hands side.

    My personal feeling is that a lot of people might be intimidated by all this info. I am using myself as an example only. I am a one of those who though being a good framer was enough. I know I need more than that to own a store. I read and reread the archives in this forum for information. I was very intimidated to ask questions for fear of looking stupid. In fact Bob Carter intimidated me the most with his knowledge. Ironically he was the first one to offer his services to turn my shop around. Now instead of seeing a bunch of white noise I am starting to understand how all these numbers affect each other. But for the most part I will just observe and not participate in these discussions, because I am totally out of my element. I imagine there are plenty of others just like me on the sidelines soaking up the information. So it may seem like nobody is interested but I bet they are. The shame is that instead of having a dialogue or discussion it comes off like a diatribe. To have such successful people willing to share their ideas and information is a true gift.

    This forum is something different for everybody. I primarily use it for the info to increase my business. Occaisionaly I have a framing question to ask. It is nice to know there are other people out there who can feel your pain from time to time.
     
  13. David N Waldmann

    David N Waldmann SGF, Supreme Grumble Framer

    I'm sorry, I didn't understand that. I thought that they were given as a formula to use. That's why I said:
    Maybe I should have read the book before I commented. Sorry.
    ..............

    Actually, that is not my view at all, and I apologize if that's what came across. What I was attempting to suggest was that since so many people seem to know her and acknowledge that she is successful as a frame shop owner she must be doing something right. When it comes down to it I suppose know one really knows if her frame shop is actually successful (read "making a decent profit and living wage") or if she's just raking it in from the sales of her flawed book.

    As to the actual waste factor that is applicable and the way to calculate it I have two things to say:
    </font>
    • 1. When you are starting with a known required end point (the feet of moulding that will be in a frame, for instance) it is much easier IMHO (and no less accurate if properly calculated) to add on a percentage to the net requirement than to figure the net yield from gross. We do this all the time in the manufacture of flooring. If someone wants to cover 500 Square Feet of floor we take 500 and add on 40%. We call that a 40% waste factor, even though only about 29% of the gross amount is wasted. So if I go around telling everyone that flooring has a 40% waste factor are you going to tell me that we are losing money on every job because we are only using a 29% waste factor? Experience (and this is what I was suggesting in my original post about Vivien) has proven to me that we make money using this formula, whether you agree that it can be called a "waste factor" or not.</font>
    • 2. If 20% waste of gross stock (which is what I understand to be the "example" (?) given in the book in question) is really right we should raise our chop prices considerably. I'm sure that there are jobs where an amount equivalent to one quarter of the completed frame is scrap, but I sure hope it's not the norm. Even 20% of the net frame sounds pretty high to me. But I guess we probably won't be getting many comments on that part of the question. </font>
     
  14. George Hunter

    George Hunter Grumbler

    David

    I have no problem with anything you said.

    Anyone can use any method or formula they choose to express waste and calculate costs.

    However, if you then decide to sell your formula/method in book form then you must ensure that the terms used are clearly defined, otherwise what was intended to be helpful becomes just the opposite.

    Regards

    George
     
  15. rosetl

    rosetl CGF II, Certified Grumble Framer Level 2

    I also feel one reason there isn't a lot of specific talk about pricing, profit margins and the like is that this is a very public forum.

    As to the 20% of gross waste % figure -- my experience shows that it is pretty real quite a bit of the time, though it is tough to face. When we were doing some quantity orders (say even 25 of a design) I thought I was liberally ordering 20% more to ensure we'd have enough and not miss deadlines -- and only occasionally had a few sticks left over, often to my surprise.

    I'm sure many of us sell a lot of frames needing 10-11 feet. If buying length per order, one often gets 16 and you end up with apprx 5' & scrap left over. Until we utilize those short sticks, that's a lot of waste----whether or not we are a chop service or a retail business.
     
  16. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    I really think the limited responses that George is looking for comes from most framers simply not understanding the numbers. They speak to those issues that they know and understand well. Like John, most don't "get into it".

    But I'll bet more framers have gone out of business from being lousy operators than from being lousy framers.And a lot of great operators are still around while not being particularly good framers(Michael's?).

    Maybe a good blend of both might be a good answer?
     
  17. D_Derbonne

    D_Derbonne PFG, Picture Framing God

    I usually don't speak up on these issues because I'm not knowledgeable, not because I'm not interested.
    I am striving to make my business profitable and read all the information I can get my hands on.
    Please continue to educate us! We want to learn!
     
  18. George Hunter

    George Hunter Grumbler

    I have to admit I was surprised by the lack of interest in the numbers issues.

    The way I see it is like this. If your happy with your business as it is now and you have no desire for growth or increasing your income and you are confident using whatever method you use that your business is not in decline then you probably don’t need to concern yourself with data collection, analysis and adjustments to your business methods.

    In all other cases you have to assess your current position, decide where you want to get to and work out a strategy to get there.
    The only way I know how to do this is with numbers.

    I can understand why people don’t want to discuss their profit margins or other matters on a public forum such as this or why they don’t feel sufficiently knowledgable to contribute but if anyone wants to email me please feel free to do so. I am happy to discuss most aspects of my business.

    I wouldn’t claim to have anything like the knowledge or experience of someone like Bob Carter whose posts I read avidly . However, I am constantly reading,learning,assessing and reassessing my business. Maybe one day……

    George
     
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