Embroidery Pricing Matrix Increases Profits

Price your embroidery with a pricing matrix based on cost of item

​Pricing your embroidered apparel with a pricing matrix allows you to increase your profit percentage on lower cost items such as t-shirts and baseball caps. The matrix will allow you to say price competitive on higher cost products such as North Face Jackets. An example is when you sell a t-shirt for $8.00 (cost is $2.00) you are making 75% margin($6.00 /$8.00) *100 = 75%. You are making a high profit percentage on this t-shirt. 

---

North Face Jacket Margin Scenario

​Let's look at the North Face Jacket that you sell for $90.00 and the cost is  $50.00 you are making a 44% margin. ($40.00/$90.00)*100 = 44%. You are making a $40.00 profit which is way more than the $6.00 profit on the t-shirt with a margin of 75%.

---

What if we kept the same margin as the t-shirt?

​You wouldn't be price competitive if you sold the North Face Jacket at a 75% margin. $50.00/(1-.75) = $200.00 selling price. You need to have different margins based on the cost of the item.

Quantity of items and embroidery decoration
​

​If you are adding the embroidery to the items you need to include your decoration costs and the quantity you are embroidering. Let's say we are selling 12 t-shirts. The embroidery selling price is $8.00 with a $4.00 cost per item. 

---

T-shirt profitability (12 t-shirts) $120.00 profit (75% margin)

• T-Shirt Selling Price Blank $8.00 (cost $2.00)
• Embroidery Seling price $8.00 (cost $4.00)
• T-Shirt with Embroidery Selling Price: $16.00 per t-shirt
• Total Cost $6.00 (profit per shirt $16.00 - $6.00 = $10.00 profit
• Units sold 12 t-shirts * $10.00 profit = $120.00 profit on the order

North Face Profitability (12 jackets) $528.00 profit (44% margin)

• North Face Jacket Selling Price Blank: $90.00 (cost $50.00
• Embroidery selling price $8.00 (cost $4.00) 
• North Face with Embroidery Selling Pricing $98.00 per jacket
• Total Cost: $54.00 (profit per jacket $98.00 - $54.00 = $44.00 profit
• Units sold 12 jackets* $44.00 profit $528.00 profit on the order. ​

Example Margins based on Cost of Item

Conclusion

As you can see you will make more money by doing the same amount of embroidery work by selling higher priced North Face jackets.  Remember when you will have to decrease your margin percentage to stay competitive in the marketplace. "Work smarter not harder."

Author

Erik Mickelson is a contributing author to custom apparel blogs and editor of www.apparelgraphicacademy.com