Pricing your t-shirts is a rather simple process… People make it far more complicated than it needs to be. In this module, it’s my goal to help you come up with a pricing formula for the t-shirts and products you plan to sell.
Knowing these 4 core elements are essential to pricing:
- Your cost of supplies/materials
- Factoring your costs for labor
- Factoring your costs for overhead
- Determining what the marketplace will pay
Your Costs for Supplies/Materials
Adding up your all of your expenses is a great place to start… How much do your t-shirts cost? How much did it cost to have those items shipped to you? How much are your transfers and how much did it cost to have them shipped to you? How many shirts do you plan on misprinting or messing up?
For the sake of easy math, I’m going to round numbers up.
Let’s say you order 100 white t-shirts and they’re costing you $1.50 each. It cost you $20 to have all 100 tees shipped to you… If you divide $20 by 100 tees, it cost you .20 cents each to have those tees shipped. So you’ll now add .20 to the $1.50 for each shirt and you’ll have your costs for each blank shirt ($1.70).
Let’s say you ordered custom designed transfers and your cost was $300 — when broken down comes out to .60 cents per transfer and let’s assume shipping was free because you ordered a huge amount.
So to print a shirt, it’ll cost you $1.70 (t-shirt/shipping) + .60 (for transfer) = $2.30
BUT… Let’s assume you’ll mess up 1 shirt per 100 (1%) because maybe you didn’t let the heat press warm up long enough before pressing and you destroyed the shirt/transfer… So you’re looking at a loss of $2.30 (tshirt, transfer and the shipping) but you’re going to divide that over the 100 tees to get your costs (.23 cents).
So your total costs to print a shirt: $2.30 + .23 cents = $2.62
Factoring Your Costs for Labor
How much is your time worth? That’s what we’re going to figure out. This may be different for each and everyone of you.
Some of you may be a one man shop… While others may have employees!
In this example, I’m going to assume you’re a one-man shop (or one-woman shop). At this point, you’ll need to determine the hourly wage you wish to make. Again, this could be different for each person.
$25 an hour may be reasonable for you while $50 per hour may be reasonable for the next guy.
Whatever your number, you must consider the importance of making enough money to reinvest back into your t-shirt company to cover additional expenses/overhead.
In this example, I’ll assume you wish to earn $30 per hour. And let’s also assume a new order for 50 t-shirts just came in from your website…
Again.. Let’s assume all of the following can be done within an hours time…
(I’m not saying you can heat press 100 tees in an hour — I’m simply using these numbers for easy math)
- confirm and validate the new order that just came in
- call and place an order for 100 tees from the wholesaler
- unpack the 100 tees that arrive in the mail the next day or two
- I’ll assume you already have the 100 heat transfers on the shelf
- heat press all 100 heat transfers onto the t-shirts
- pack the t-shirts up and schedule for post office to come pickup
Factoring Your Costs for Overhead
In addition to your costs for supplies/materials and labor, you also have additional overhead… Each month you must pay for the electricity you used, website hosting bill, marketing and advertising.
Each company will have different overhead, but here are a few examples of what some may incur.
- office lease (this could also be a portion of your mortgage/rent if you’re working from home)
- cell phone, fax, internet
- website hosting fees
- heat press machine
- alarm system
- marketing/advertising expenses
- packaging (boxes, tape, labels)
You can cut a lot of overhead expenses if working from home, thus putting more money in your pocket… For the sake of easy math, let’s pretend your overhead is part owner of your company and that you’ll also pay it $30 per hour. So that’ll add another .50 cents to each t-shirt, thus bring your cost up from $3.12 to $3.62 per shirt.
What is the Marketplace Willing to Pay for Your T-shirts
At the end of the day, no formula is perfect… Much will be determined on what people will pay for your tees and a big factor will be based on what your competitors are charging for their shirts.
First thing you’ll need to do is get on the phone, surf the Internet or hop in the car and go around and gather some ‘intelligence’ from the competition.
Price your stuff to high and you get little sales… Price it too low and people will think something is wrong with the quality of your product.
Make your pricing based on your numbers and then look at what the marketplace is currently paying and if you need to adjust, then do so… If your pricing is too high, figure out ways to lower your overhead/production costs… If it’s too low, raise it.
Examples would include ordering in bigger bulk to get additional discounts on your purchases… Maybe you’ll charge for shipping instead of offering free shipping (or maybe you’ll give free shipping instead of charging).
Also factor in the fact that your customer may order from you 2-3 times per year because you have a strong follow-up marketing system in place… So while you may lose on the front-end you’ll earn with their repeat business. Many companies do this because it’ll cost you MUCH less to service the customers you already have… Thus making your profits MUCH larger!
The number 1 reason people go into business is to make money and if your t-shirt business isn’t earning a decent profit, you go out of business.
And that leads to my next important topic — PROFITS!
So far, we’ve calculated it’ll cost you $3.62 to make a shirt… That included the costs for your supplies/materials, overhead and it included your costs for labor.
You are in business to make a profit and that $30 hourly rate we talked about early is NOT your profit… That’s simply the wage you pay yourself to go to work… No different than working for ‘the Man’. You punch a clock and you get paid for your time.
But if you really want to move to the next level in business, you must always be thinking about PROFITS… Profits is what’ll set you free.
We’re currently at $3.62 to make a shirt… If you wish to make a 35% profit, that’ll add $1.27 to the costs of your tees = $4.89
Now you have PROFIT!!!
The examples above are simply examples… If the numbers you come up with are acceptable in the marketplace, then you stand a chance to make really good money.
If necessary, adjust your numbers and see what the market will bear. You are a business-owner now and you may have to make adjustments and you’ll have to keep an eye on what the marketplace/competitors are doing.
You must conduct your research…