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Workroom Operations

by Kitty Stein, WCAA

Now that another year has rolled by, it is time to evaluate your prices like a good little business person. If you are like most of us, you are thinking up any excuse not to deal with this issue. ("I have to clean the oven" is not acceptable!) Between the groaning, I can hear you saying, "I'm making money. Why do I have to do this? And, anyway, how do I get the prices I should be getting?" Are you making money? Do you know that for a fact? Has your accountant (you should have one) sat down with you and gone over your books and told you that you are making money? Good money? Just because you have good cash flow -- money coming in and going out with you getting to keep some of it -- doesn't mean you are making money. It certainly doesn't say you are making the money you deserve! Pricing correctly and the ability to sell those prices is what will make or break a business. You Are Valuable! Before you analyze your prices, take time to look in the mirror. You are an individual with outstanding talents for sewing and creativity. You are an artisan and a craftsman. The number of people who have your knowledge and basic sewing skills is dwindling. Out of the number of people with sewing ability, very few have educated themselves in the professional fabrication of window treatments. The famous law of supply and demand applies here: If there is a freeze and the orange crop is dramatically reduced, then the price of orange juice goes up. As you know, there is a lot more to this business than just knowing how to operate a sewing machine. Not only must you know how to fabricate a variety of quality window treatments and interior coverings, but you must know how to measure for these items, estimate yardage, and understand all the limitations of a variety of fabrics. In many cases, it is up to you to pass this knowledge on to the designers with whom you work. Because you are a serious business, you have invested in professional equipment and tools to ensure a quality product. The drapery workroom business is an ongoing education in itself. Many times, trial and error is the only way to learn. Investing in books, seminars and trade show attendance dramatically increases your knowledge and your value! Every book you read, every show you attend and every year in business raises your worth! It's up to you to determine what you are worth. The extent of your education and experience as well as the cost of living in your area will help determine that. Consider what you might be paid if you worked for someone else. Then add some to it because you own the business and wear all the hats! The important thing here is to know what hourly rate you consider acceptable and deserving. Then use that figure to determine your pricing. Luxury Product I am amazed at how many people in this business don't realize they are selling a luxury product! A local department store, or even a national chain store, is not your competitor because it sells ready-mades and you don't! Suppose you walk into a Lincoln automotive showroom and ooh and aah over a new Town Car and exclaim how much you really like that car. Then, when you are presented with the dealership's best price and the payment schedule you turn around and say you just can't afford it. Is the salesman going to sell you that Town Car for what you can afford? No! He's going to send you to the Ford dealership to see less expensive cars. If you lose a customer to a department store or chain, it's not because your prices are too high, it's probably because the customer was shopping over her head! Selling a custom product for less than it's worth demeans its value and status. If a Town Car could be bought for the same price as a Taurus, then its value would be diminished. If you want to know how special your luxury product can be, test drive a Lincoln or a Cadillac. Now that's luxury! Serious Business Your drapery workroom is a serious, legitimate business just like Godiva Chocolates or Nordstroms or Tiffany's. Maybe you aren't as big and famous as they are, but your work is just as special. Their prices are high because they are outstanding at what they do. Superior products and service demand higher prices. This is the game of business. It is sad, but in our industry a very high percentage of workroom owners cannot support themselves. Generally, there are two reasons: One, they are afraid to charge higher prices because deep down they don't believe they deserve higher prices; and two, they don't know how to sell themselves and their products. But then there is the single mother who not only is supporting herself, but putting her children through college. I guarantee you she has had to struggle against competitors who weren't charging high enough prices. Some of those competitors probably were afraid to charge the full markup on the retail sales of fabric, hardware, etc. I recently heard one person say it was OK to double the price for a few yards of expensive fabric, but she just couldn't do that much markup on several yards of expensive fabric. Why not? Do fabric stores give discounts if you buy 20 yards of the same fabric? Would Tiffany's give you a discount if you bought three pieces of very expensive jewelry? They wouldn't care if you had to take out a bank loan to pay for it. It is not uncommon for retail stores to mark up their merchandise by a factor of three or four times! In our industry, the common markup is much lower. Sometimes, for volume, a slight reduction in price is in order, but let the customer know you've done it. Instead of calling it a discount, call it an "appreciation credit." Another reason for not discounting high-dollar sales is because too often we lose out badly on other sales. Because we are in the custom business, much of what we do is experimental and guesswork. We can't always guess correctly on estimating jobs we've never done before -- and if you haven't had to eat the cost of a job yet, count your blessings. So the high profit jobs help balance out the losses and extra expenses we didn't count on. You are in business to make money. If you are working full-time and are not making enough money to support yourself comfortably, then your prices probably are not high enough and you need to sell to a higher income market. And even if you don't realize it, you probably are hurting others. Those who do not charge enough bring down the standard of living for the whole industry. Outrageous Competition How do you deal with those competitors who won't trade tips and tricks and are not charging enough money? We all know people who might be from an older generation who have a serious fear of losing customers and money and look at you as the enemy. There also is the hobbyist who only wants some extra coins to spend on her hobbies or to buy some extra luxuries. She could care less about your business and has no idea that she could be hurting you. So what do you do? 1. Ignore them! Build up your self-confidence, market to the appropriate income bracket and charge the prices you need to make a comfortable living. From the first time I prepared my own price list, I stopped looking at what the competition was charging when making decisions on my pricing. I raised my prices when I needed to raise them. Of course, my competitors eventually would raise their prices because if I could get the prices I charged, why couldn't they? In order to do this successfully, you should educate yourself in sales-ability and marketing. If you were an outstanding salesperson, you could sell whatever you have at any price! Knowing how to meet your customers' needs and how to make them happy means far more than the price of the product. You also must examine exactly who makes up your market. It is not everybody out there! If your prices must be higher than your competitions', then your market is a higher income bracket. You cannot make money selling to an income bracket that shouldn't be able to afford your luxury product. 2. Join them! No, I do not mean charge the same prices! Get to know them, whether they want to or not. Call them, visit them on a regular basis and by all means, share your tips and tricks. Let them know you respect them and their businesses and want only to be friends. Don't give up. The law of nature says, "If you give, you will receive." Eventually they will warm up to you because they will see you really are not an enemy, but a compatriot trying to make a decent living at something you love doing. Your confidence, business sense and sales ability will rub off on them. Before you know it, everyone will be playing in the same ball park with respect for the other teams. Setting the Price The hardest part is determining your worth per hour. The rest is much easier. First, you need to establish the wholesale price, even if you don't sell wholesale to designers. The wholesale price of your labor is considered the same as the cost of fabric or the cost of hardware, etc. Then, mark it up just as you would the fabric and hardware. You are the manufacturer. You would not want the manufacturer of hardware charging the same wholesale price to your customer as they charge you, would you? However much you mark up the cost of your fabric, use the same percentage to mark up your wholesale labor! If you don't do this, then the person who sews only for designers cannot make a decent living. She sells her labor to designers who then mark it up to sell to the home owner. That designer can't compete with someone who is giving wholesale prices to the end customer. Yes, this high of a markup means you will be making a lot more money because you are doing it all! What a reward for being considerate of the workrooms who need to make a good living too! Here is how to establish your price: 1. Determine exactly what you want to pay yourself or your employees. 2. Do time studies. Time everything you fabricate. 3. Determine the cost of each item by multiplying the time it takes to fabricate it by your hourly salary. 4. Determine the selling price in one of two ways: Determine what your overhead cost is per hour and what profit you want to make per hour (you must have a profit!) and add that to your cost as determined in step three. Have your accountant help you if necessary. Or, an easy way is to multiply your cost as determined in step three by anywhere from two to 31/2 times. This figure will cover overhead and profit. Raise Those Prices! Now that you have realistic prices, can you get those prices? If they are a lot higher -- say, more than 20 percent over your old prices or above your competitors' prices -- you probably cannot get them right away. Raise your prices by a healthy percentage, then next year raise them again. Be religious about raising prices every year, even if you can start now with the prices you need. If you worked for someone else, you would expect a raise every year. Likewise, you should give yourself and your employees a raise every year. However, if you don't raise your prices, profits will be reduced by the amount you raised salaries! That's defeating the purpose of being in business. Build your confidence and fabrication skill levels and hone your sales and marketing skills by reading books, taking seminars and by networking with your peers in the industry. Not only prepare yourself to make good money but make a firm commitment to raise your standard of income and standard of living. If everybody would do this, then the status and income bracket of the entire industry would be elevated! Your vocation may be envied by others in less profitable businesses. Now wouldn't that feel great?! If you have any questions or comments about this article, previous articles or any topic if interest to workrooms, please contact me at: Workroom Operations Draperies & Window Coverings 666 Dundee Rd., Ste. 807 Northbrook, IL 60062-7913. Fax: (847) 498-0231 E-mail: workroomop@dwcdesignet.com Web site: www.workroomconcepts.com Kitty Stein is a 20-year veteran of the drapery workroom field, having owned and operated her own business for 16 years and having taught classes on window treatment construction. Until 1990, Stein and a partner owned a workroom with nine employees. She since has opened her own smaller workroom, Workroom Concepts, that has just one employee. She also does workroom consulting, seminar speaking and is the author of Order in the Workroom available through Draperies & Window Coverings.