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Wholesale Pricing - What do you charge?

stevens

CGF II, Certified Grumble Framer Level 2
We have a potential client that has about a dozen frame jobs a day and are trying to figure out the pricing. We have not done anything like this before, so we are looking for advice. All of the costs have been calculated, the clients end retail price is already established, but we need to figure out the numbers in between (our profit and their profit). I think we are going to be straight up and ask them what their current margin is, but wanted some input before we tried that.

Trying to calculate some prices, the absolute minimum margin for us will be 25%.

Our Markup %, --- Their Margin % on small, med, large
25% ------------ 37%, 64%, 63%
40% ------------ 30%, 60%, 58%
50% ------------ 25%, 57%, 55%
 
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Dave

SPFG, Supreme Picture Framing God
Not sure I follow you on this one but I would have to say that only you can determine, based on your fixed and variable costs what you need to cover everything and make a decent profit.

Just a few factors to consider:

~ Are they paying on delivery, ahead of time, or in net 120 days?

~ Are these frames standardized sizes or is each a unique design or size?

~ What are your labor and overhead costs?

~ Will this deal help you negotiate better pricing with your vendors?

~ Who handles pick up or delivery?

etc...

Too many variables to give you a fixed margin percentage.
 

Judge Roy Bean

Grumbler in Training
are you sure they are really going to buy 12 frames a day?
A lot of times a company will call around and get quotes for a large volume and ask what the discounts are for said lg. volume. Next they order a small portion of what you thought they were going to buy. They will ask for the new/smaller volume at the big discounted price. By that time they already have you on the hook.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
Not enough information and what we have been given is mistated. You say your markup is 25% but say you need a minimum margin of 25%. If your markup is 25% then your margin will be 20%.

Example:

Cost of materials is $80 and it is marked up 25% the total job cost will be $100. Of that $100 $20 is profit or margin. Your margin is 20%.
 

GhostFramer

MGF, Master Grumble Framer
I think Judge is right. I have heard that same deal many times. Claims about how many hundreds they are going to do, but when the time comes they only want to frame a fraction of what they asked to be quoted on. Maybe offer them a sliding scale.

10-15= $
15-20= $

So you dont get stuck offering a fantastic deal for only a couple of pieces. Maybe even start higher and tell them as volume continues you can lower the cost for them to ensure they are going to hold up their end of the deal.
 

Larry Peterson

PFG, Picture Framing God
are you sure they are really going to buy 12 frames a day?
A lot of times a company will call around and get quotes for a large volume and ask what the discounts are for said lg. volume. Next they order a small portion of what you thought they were going to buy. They will ask for the new/smaller volume at the big discounted price. By that time they already have you on the hook.
You can counter that my making the discount levels cumulative and incremental. Whenever I am asked about discounts I always give them a discount schedule.

Let's say I was going to offer a 20% discount for 40 or more frames. I just had a customer that framed all 44 Super Bowl programs. He didn't do them all at once, but over a period of about 6 months.

Using made up discount levels, he got 0% for less than 10, 5% for 10 or more, 10% for 20 or more, 15% for 30 or more and 20% for 40 or more. Whenever he passed a discount level, the discounts earned were applied BACK to the previously purchased frames so that at any time his total discounts were for the number he had purchased to date. By the time he got over 40, he had received the full 20% on all frames. .

These aren't the actual numbers, just indicative of the process.

He ordered and paid in bunches of 8. We agreed to the entire discount process prior to starting. For the first order he got no discount. For the second batch of 8 he got 5% for frames 10-16 and and 5% credit for frames 1-9. For the second batch of 8 he got a 10% discount for frames 20-24, an additional 5% discount for frames 10-19 and an additional 5% discount for frames 1-9. Same logic applies to the future batches. The last few frames ended up very cheap with the credited discounts.

Having done this several times, I put together a spreadsheet showing the discounts. Initially I will prepare the entire spreadsheet based on indicated frequency and volume and the modify the spreadsheet as we go along. I always give the customer a copy (and updates) so they know exactly where stand.

Not only does it clarify things, it also helps the customer budget out his purchases.

It might sound complicated but once you setup a spreadsheet for this, it works well.
 

stevens

CGF II, Certified Grumble Framer Level 2
Not enough information and what we have been given is mistated. You say your markup is 25% but say you need a minimum margin of 25%. If your markup is 25% then your margin will be 20%.

Example:

Cost of materials is $80 and it is marked up 25% the total job cost will be $100. Of that $100 $20 is profit or margin. Your margin is 20%.
Sorry mistyped. I ment our minimum markup of 25%. This is a true 4500 finished frames drop shipped a year deal (has been doubling year over year).

The interesting part of this bid is that they were not looking for it. We were asking about one of their products, they saw we had expanded greatly since we talked to them last year and said oh, you can mass produce frames now? There are a few big points that peak their interest: production is in the US, we can expand their product offerings with other high margin items, and we are an all in one stop for them which lead to faster turnarounds.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
While you are working on some tight margins it is comforting that this is an ongoing relationship. Keep a tight grip on receivables. I was burned out of $125,000 in the last housing recession. Only you can know what will make your business cashflow.
 

artfolio

SGF, Supreme Grumble Framer
The whole basis of successful wholesale manufacture of any product is establishing very accurately the cost of producing the goods.

There are four costs to be analysed;

Materials ( including a generous allowance for waste) It is easier to work on costing out a batch of, say, 20 frames rather than looking at a single one.

Labour at the hourly rate you would pay a worker plus all associated costs like leave loadings, etc.

Overheads.Find your hourly rate by dividing your total overheads for a year by the number of working hours in a year.

Any other incidental costs like shipping, packing, delay in receiving payment etc.

Once this is established you need to add a profit margin of at least your usual gross turnover to nett percentage. There is no sense in taking on a job which will reduce your overall profitability.

I believe that many framers get carried away with discounting for bulk jobs. There is really no economy to scale in this business, ten frames takes exactly ten times the inputs of one but buyers still seem to expect discounts to increase exponentially until, presumably, we start paying them.

Above anything else, look out for your own interests in this kind of deal.
 

Jeff Rodier

SPFG, Supreme Picture Framing God
There is really no economy to scale in this business, ten frames takes exactly ten times the inputs of one
That statement is not accurate. Cutting and joining the same frame all day long takes only a fraction of the time per frame. When I make large numbers of ready mades I do from 40-60 in a day. A commercial job with repetitve sizes I can do 150 in a day. Mats are the same. Repeating the same size of mat can be cut as fast as the CMC will move. Different sizes and colors require dimensions to be input along with pulling the individual sheets from the rack and replacing the scrap once the number has been written on the corner of the board. Repetition is much more efficient than varied tasks.
 

JWB9999999

SGF, Supreme Grumble Framer
You can counter that my making the discount levels cumulative and incremental. Whenever I am asked about discounts I always give them a discount schedule.
By coincidence, I just spent 12 hours over the last 3 days working up a quote for a new, bulk customer too. And Larry is right: make the discount levels incremental based on volume. That's exactly what I did.

This particular potential customer came in asking for bulk quotes, but left asking for quotes on single frames too. Already omnious. So I gave them quotes for 1, 4, 16, 32 and 64 frames of various styles and matting layouts. I also had to avoid the tendancy to give away all my profits through excessive discounts.

In the end, I offered: No discounts at all for singles; up to 16 they only get discounts on frames purchased in multiples of 4; after 16 the discounts are continuous up to the next discount level (ie. 22 frames receive the same discount as 16). A little complicated, but my markups are already extremely low. They will be getting a good deal from me, even if they purchase single frames at the regular price.
 

Paul N

In Corner
That statement is not accurate. Cutting and joining the same frame all day long takes only a fraction of the time per frame. When I make large numbers of ready mades I do from 40-60 in a day. A commercial job with repetitve sizes I can do 150 in a day. Mats are the same. Repeating the same size of mat can be cut as fast as the CMC will move. Different sizes and colors require dimensions to be input along with pulling the individual sheets from the rack and replacing the scrap once the number has been written on the corner of the board. Repetition is much more efficient than varied tasks.
True (especially in your case...;)) but after the cutting and joining, fitting labor and supplies are the same and don't diminish with quantity.
 

Dave

SPFG, Supreme Picture Framing God
True (especially in your case...;)) but after the cutting and joining, fitting labor and supplies are the same and don't diminish with quantity.
I beg to differ with you, Paul. Supplies should be cheaper if you can plan ahead and bulk buy or get a special quote.

Your labor also should be cheaper since you can gear up for doing multiple pieces and possibly get help so that an assembly line type staging could be used.
 
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