If You Have to Ask...

You can't afford it. We've all heard that one before. But really, in today's economic turmoil, who wouldn't ask? And when they do ask, what will you tell them?

Of course, I'm talking about the price of a sign. If you, like me, have chosen to pursue hand-lettering as a career then you have to have some sort of semblance as to what to charge for your product. Suddenly things like overhead, labor rate, mark-up and profit will take on new meaning. Often you hear terms like the “going rate”, meaning the standard price of an item that has already been set by your competitors. Fear of “pricing themselves out of the market”, a phrase that means your prices have well exceeded the “going rate”, have caused some to price items lower than what is needed to make a profit.

So what is a person to do? How can you determine the right price to charge for your services?

While I am certainly no expert in financial matters, I would still like to offer some help gained from my 30 years in business making many mistakes, along with the helpful advice I gleaned from the many articles read on the subject.

Let's start with figuring your overhead. Obviously I cannot know the circumstances of every individual reading this article. Therefor the best I can do is offer some simple guidelines that can be applied to most situations. Your overhead refers to the things needed just to be in business. It might be as simple as a cargo van, insurance on the cargo van, gas and oil for the cargo van along with the legal requirements of business license, personal property taxes, etc. You should add to this the cost of anything else needed associated with your business. Lettering brushes, invoice and receipt pads, work clothes, etc could all be considered part of your overhead. People have to be able to contact you some kind of way so we'll add business cards and a cell phone. I've described a pretty lean situation with a minimum of overhead. Have I left out anything? Yes. I left out the most important factor of all, payroll. How much will you pay yourself? How much do you need to make to cover all household and personal expenses and how much would you like to make. You may want to start off with what you need with a little added in as a buffer. Think in terms of a year. This will help with the next phase. Before we go further though, lets propose a different situation for later comparison.

Tired of working out of a cramped van you take the plunge and rent a 20' x 50' storefront location with an office and bathroom. Now your overhead would include rent, electric, water and sanitation. Your insurance cost will increase. Now you have an office with computer, printer, copier and scanner. Unless you want to work sitting on the floor you will need office furniture. And you now need copier paper because you do your invoicing through a program like Quick-books. The bathroom needs toilet paper and cleaning supplies and you still use the same cargo van with all the associated expenses you had before. Do you get the point? No two people have the same overhead and one's overhead can change overnight.

This is important because your overhead will be the basis for determining your hourly rate and your hourly rate will be the basis used in determining what to charge. The overhead figures should be figured for a year. Some things like rent and insurance will be pretty constant. Other things like vehicle maintenance costs and the cost of work apparel might need to be an educated guess. After getting a total of business expenses for the year, divide that number by the days you will work in that year. Don't forget vacation time. So there are 52 weeks in a year, but you plan to take 3 weeks off for vacation. 52 – 3 = 49 weeks. You only plan to work 5 days a week so you multiply the 5 days by the 49 weeks (5 x 49 = 245) to arrive at 245 working days in the year. The number of working days should be divided into your overhead to determine how much you should make each day to reach your financial goals and will be the figure used to determine your hourly rate.

Using the first scenario, we arrived at $10,000.00 to cover business expenses and we needed to make $25,000.00 for ourselves. $10,000.00 + $25,000.00 = $35,000.00 needed for the year. If we divide $35,000.00 by the 245 working days we end up with $142.85 per day. How many hours will you work each day. We want the actual billable hours, not the time we spend running around to pick up supplies unless we bill the customer for that time. Suppose we figure that in an 8 hour day we have 6 billable hours spent plying our trade. Divide the 6 into the $142.85 and we have an hourly rate of $23.80. We would probably round that figure up to $25 per hour. Because some operations could have a greater perceived value than others we would do well to charge accordingly. We may decide to charge $75.00 an hour to design logos and $100.00 an hour to airbrush or pinstripe. You can charge more but don't charge less than the hourly rate your circumstances dictated was the right one for you.

The other figure we need is the cost of materials. On some jobs all we may use is a little paint in a paper cup with some paint thinner added. Whatever your material costs are, you would do yourself a favor to mark them up. I mark up materials by 40%. This little extra helps when I missed something in the bidding process or an operation took longer than expected. I don't just multiply my material cost by 40% either. I figure it a different way. I had noticed that most of my wholesale suppliers gave me a 40% discount, but when I marked-up my actual cost by 40% it was less than the original non-wholesale price. In other words, plastic letters might be listed for $100.00. This is the figure you show customers in the catalog to get the order. But the manufacturer gives a 40% discount to sign companies. ($100.00 x 40% = $40.00) So I only pay $60.00 for the plastic letters. But if I mark up the $60.00 by 40% ($60.00 x 40% = $24.00) I only make $24.00 instead of $40.00. Therefor when I figure my 40% mark-up, I do so by dividing by 60%. ($60.00 divided by 60% = $100.00)

Lets throw in another variable mentioned at the outset; “the going rate”. What if the going rate for a 4' x 8' single sided MDO sign in your area is $450.00, but with your relatively low overhead, you can do it for $275.00? Should you? Who benefits? It seems like the only one benefiting is the customer. You missed out on $175.00 just to easily get a job. What will happen two years later when you move into that storefront and your overhead increases and you have to charge $450.00 like everyone else? Will your customers understand the price increase? And what sort of reputation will you have among both customers and your competitors? Will customers go to you expecting you to be dirt cheap and might your competitors see you as an incompetent bidder hurting their chances to make a decent living?

Now lets look at it from another angle. Suppose the going rate for a pair of magnetic door signs is $75.00, but because you hand letter them you need to get $150.00. Should you do them for $75.00 figuring that you're only loosing time; the materials used are negligible? If you did that, how would you ever make what is needed in a year's time to stay in business? Remember, you can charge more than your hourly rate but should never charge less.

The final area of the job bidding process I wish to discuss is “job tracking”. Recently, I started tracking the time it takes to do every job that comes through my shop. I used to do this quite often, but after being in business so long I got away from it, charging instead from a price list I had compiled both from previous job tracking on some items and the “going rate” on others. However, with my venture back into hand-lettering I didn't really know what the going rate was and my only way to price jobs was to guess. So I guessed, bid the job, and then when doing the job tracked my time to see how I did. A few weeks ago I made a 28” x 28” double-sided MDO sign to hang from an existing sign post. I bid the job based on a similar recent job, but still underbid it. I know this because I tracked the time it took to carry out every operation involved in making the sign. I was surprised to find that it took me over 2.5 hours just to cut the MDO to shape, and prime and paint it. I had probably allowed about an hour in the bid for this operation. Admittedly, I had to fill the voids in the edges with wood putty and re-sand before priming but I always have to do that. Based on my hourly rate of $60.00 an hour and figuring in the cost of materials (MDO, primer, finish coat, and two paint rollers with mark-up) I needed to charge $217.00 just for the white painted sign blank. Boy was I off. But at least I know I was off and can avoid the same mistake in the future.

There are only a very few pricing guides out there that include sign painting; most are designed for computer vinyl. Years ago when I used them, the suggested prices were always much higher than the market could bear where I live. That is why it is better to know the three constants in bidding any job, material costs, labor rate, and the time it takes to do the job. It is a trial and error method at first, but if you track all jobs and learn from your mistakes then you should be able to bid with confidence.

I know I have oversimplified the bidding process. I didn't discuss the paying of taxes, figuring in profit or planning for retirement. There are probably many other things that I will remember later that I wish I had mentioned. So view this as just a starting point. Hopefully, we can discuss these other concerns in a future blog. You might find a system that works much better than the one I use. But whatever you do, just keep paint'n!

The Road Less Traveled...

The road less traveled in the sign business right now is definitely hand-painted signs.

There are very few successful sign companies out there that do not offer computer cut graphics and lettering to their customers and fewer still that do not use the computer to assist in even some small way with sign production. I'm not talking about the guy living in a country with a depressed economy and no electricity who eeks out a living painting signs. I'm referring to those in developed lands that choose to do things the old way while perfectly capable of adopting the new way.

Take as an example one of my heroes in the sign painting world, New Bohemia Signs located in San Francisco. They have carved out a niche for themselves by offering only hand-painted signs. If you want vinyl you can't get it from them. Are they “purists” who shun the use of computers in any phase of sign production? That doesn't seem to be the case. Notice this excerpt from the FAQ section of their Ordering page:

If your design is in digital format we'd like the artwork as a vectorized file (.eps or .ai work nicely), to the exact sign dimensions, with all the type "outlined". But we can work from detailed, scale drawings as well.

The only way I know of to make use of a digital file is with a computer and the reason a vectorized file is useful is that it can be sent to a plotter. Do they then let the plotter cut the letters out of vinyl to apply to the sign? NO! The file is more than likely used to plot drawings that are made into patterns to hand-paint the sign.

Am I exposing New Bohemia Signs as a fraud. Absolutely not! If I'm exposing anything it is their reasonableness. They have to be profitable and competitive to stay in business. If there are phases of production that can be sped up with the use of technology without sacrificing in any way the expected finished product then why not use it. But, they have no desire to do what everyone else is doing, namely vinyl, and further realize that in many instances hand-painted signs are better.

A mom and pop run business baking home cooked pies would greatly benefit from a well designed hand-painted sign. Tattoo parlors and barber shops are other trades that by their very hands-on nature beckon the use of hand-painted signs. Really, any shop that has to compete with the franchises would do well to seriously consider hand-painted signs as a way to set themselves apart, be it a bicycle shop, pizzeria, clothing store or whatever. New Bohemia is committed to meeting this need for something different, something unique, something hand-crafted and I applaud them.

There are some who constantly bash computer technology saying that the computer vinyl industry ruined it for “the rest of us”. I don't know the circumstances of each and every individual that feels this way so am not in a position to offer specific comments in either support or rebuttal. I would only point to the examples of companies like Gary Martin Signs in Austin, TX, David Kynaston in the UK, New Bohemia Signs in San Francisco and so many others that promote hand-lettering through positive rather than negative means. Computers are here to stay and so it seems a fruitless endeavor to complain about the bad that they caused when we could instead be benefiting from some of the good.

I, for one, always had difficulty laying out ellipses and never much enjoyed lettering a bunch of Pool Rules signs in helvetica medium by hand. The computer now does these chores for me and does so perfectly. And when I think back to when I finally bit the bullet and ordered my first computerized vinyl cutter the motive was to keep up with production without having to hire someone. However, I am definitely a promoter as well as a practitioner of hand-crafted, hand-lettered signs, but am finding it a real challenge to sell to customers. The first words out of their mouth is, “I want the cheapest signs you have” and after I give them a quote they ask, “Don't you have anything cheaper?” Hand-painted signs will never be cheaper than their vinyl counterpart. But where is the real value anyway?

I find that I personally can produce more effective signs by painting them then by using computer cut vinyl. While I am not totally sure of the reason why, I do have some idea. I believe the sign contractor naturally, sometimes even unconsciously designs within the limitations of his sign equipment and skill level. As an example, my plotter can cut up to an 18” letter in one piece; anything larger has to be tiled. If I am designing a 4' x 6' For Sale sign I might opt to give the words FOR and SALE equal billing, keeping them the same height, so that I am sure to stay under the 18” limit imposed by my plotter. But what is really needed is the word FOR to be relatively small and the word SALE to be huge. The customer doesn't know the difference. Nine times out of ten they brought me a piece of notebook paper with the words FOR SALE on the first line, bla bla bla on the second and the phone number on the third. They don't know the difference and most of my vinyl slapping competitors wouldn't know the difference either, but I should. Below is an example of a job I recently completed that is all 100% paint. In this instance I refused to let my design be governed by my plotter's limited cutting capacity.

If a sign contractor cannot draw and cannot airbrush do you think he is going to suggest to the customer that this is what is needed to make their sign “pop!” Absolutely not! Many vinyl only shops are also limited by their freebie computer clipart collection. That is why you sometimes see a vinyl lettered sign that says Pit Bull's Pizza but has clipart of a bulldog with a spiked collar or it says Seagull Travel Agency with clipart of a flying eagle. I on the other hand can draw, airbrush, carve and am accomplished at gold leaf and yet I sometimes found myself turning out the same kind of sterile, boring work as everyone else. Why? I believe my attempts to up-sell to a better product were rejected so many times that I simply gave up trying and resigned myself to producing mediocrity.

But then, unexpectedly my life would take a change, not drastic and certainly not sudden but change all the same. One evening I was home alone looking at past issues of SignCraft magazine, the trade magazine for commercial sign contractors, when I noticed an article by Rob Cooper, a regular contributor whose work I greatly admired, on prismatic lettering in the Nov/Dec 2001 issue. The article started out with Rob relating how he was lettering this sign in New Zealand when a fellow signwriter (that's what they call sign painters overseas) working in the same sign shop walked up to him and asked, “So, Rob, where's the prism?” They both then laughed as Rob began to add a painted bevel effect (prism) to the letters. Next, he relates why he uses the effect so often and what sort of lettering jobs look especially good prismed. He then starts off the third paragraph in the article: “One of the first prism lettering jobs I ever saw that really blew me away was featured years ago in SignCraft. It was on a boat job that Rodney Vicik of Virginia had lettered; I think it said Bluewater. I couldn't get over the depth of the lettering and how it really looked like it was raised. I've never been the same since.”

I was stunned. I had submitted a few photos of a boat I lettered named Bluewater that were published way back in the Jan/Feb 1992 issue. Rob referred to the lettering as blowing him away in 2001 and I'm just reading this for the first time in early 2011. What could I do? I couldn't exactly call him and thank him 10 years after the fact. So I waited patiently (paced the floor anxiously) for my wife and daughter to get home from the gym and had each of them sit down and read it for themselves as I excitedly reenacted my own actions upon my reading it. After the shock wore off and the calm set in, probably a couple of days later, I began to reflect on my career as a sign painter. While not exactly turning out garbage I also wasn't producing the same level of work as I did when featured in the magazine. At least not consistently. Sure, I thought of a few impressive jobs done of late that could easily make the pages of SignCraft, but there just weren't enough of them. Why so few? What had happened?

It was then that I remembered all my failed attempts to sell a customer something better than the most basic of signs. My business was slowly turning into a quickie vinyl shop. I was getting fewer and fewer of the larger, involved jobs and more and more of the simple one-color vinyl jobs. My well equipped woodworking shop contained enough stationary power tools to make a cabinetmaker envious and yet it was sitting idle gathering dust while I was weeding line after line of 2” vinyl letters. I reached the point where enough was enough.

I'm a graphic artist. I can airbrush, hand-letter, pinstripe, carve and reverse gild gold leaf on glass. Why was I weeding vinyl instead of using skills that took me years to learn? As I mulled over the situation I found myself in, I realized that as long as I offer a cheap product, it will be the one that the majority will choose. If I don't want to do a certain job then I need to stop offering it. Could it really be that simple? There would be only one way to find out. I decided that I was getting out of the vinyl by the pound business for good. I was going back to my roots, hand-crafting and hand-lettering signs. And that is exactly what I did.  Oh, I still have a computer and plotter and still cut vinyl when it is obviously the correct media to use.  But, I am always thinking hand-lettering and will bid jobs to be hand-painted instead of using vinyl. And when someone comes in and wants the cheapest job possible, done with vinyl, I send them somewhere else. Now, I better understand why other sign artists have made the decision to go back to traditional hand-lettering. At the end of the day, they just want to be proud of who they are and of what they produced. That's all I want.