THE BUSINESS PLAN: WHY YOU NEED TO CRAFT ONE
You have great contacts and tremendous design ideas. All you need to do is start your own t-shirt printing company, right?
Let’s look at some important questions you need to answer when you are considering how and where to start.
First, it is extremely important that you craft a business plan. Notice that I say “Craft,” and not “Create.”
A quality business plan is a tool to help clarify your goals and expectations. When you have goals you can outline a plan to help achieve them. A business plan should not be cast in concrete; a good business plan should have the flexibility to evolve with market conditions.
We pay strict attention to where we are spending our time and making money - AND where are we spending time and NOT making money. If we have done the same thing for 20 years and suddenly, we are not making money doing that we look at why. Can we fix it? If yes, we fix it and move on. If we can’t fix it, we stop doing it. It’s about the bottom line, after all. Profits and paychecks over “we have always done it that way.”
I have owned an embroidery company for 30 years. Part of our business plan as we grew was to call and market to ever larger companies . With our aggressive sales and marketing program we were very successful. What wasn’t part of the plan was the constant pressure to reduce costs by our large customers. Net profit margin was a part of our overall plan. Over the years we started to see a steady erosion of our net profit.
Since we had a plan, we had a target. We examined why we were having an issue meeting our net margin goals. The result? We decided the trend was going to continue. Having a business plan that we monitored allowed us to identify the problem before it became serious. This allowed us time to make a course correction to our business plan and ultimately wind up more profitable than before.
MEASURED GOALS, MEASURED RESULTS
What should your plan look like? The end result will be different for everyone. Some things to consider:
- Gross sales target in 6 months, 12 months, 2 years (be realistic)
- What you are going to do to reach the sales objective, measured in:
- Number of sales calls
- Number of samples
- Hours promoting the business
- Number of repeat orders
- Number of new customers
- How long before you have a PROFESSIONAL website up and running
- Net profit: How much do you need to make after all expenses are paid?
- Cost: Know your true cost of doing business. Rent, equipment, supplies, gas, electricity, phones, cost of goods, labor, and so on
This may sound a little daunting, but it’s well worth the effort. When you have it all on paper it’s easy to plug the numbers in and see where you really are.
Each of your business plan items will need its own “How will I make it happen” plan.
LET’S DO THE MATH
Take this scenario:
Let’s say you choose to start a Direct to Garment T-Shirt printing business. You want to make $60,000 your first year and you have to invest $25,000 to get started. You also want to recover your initial investment the first year.
It starts with bringing in a stream of new business, as well as growing with your existing customers.
Print and deliver 5 targeted customer samples each day. That is, print a shirt with a graphic that’s relevant to the customer you are calling on.
If you deliver 5 a day, that’s 25 per week, and around 100 per month.
If you have a sales conversion rate of only 10%, that’s 10 new customers each month. If the average order is 20 pieces at $15 per shirt, this works out to $3000 gross sales per month and $36,000 in new customer orders per year. This is just new orders - no repeat business or existing customers. It’s all about the sales call.
When you factor in repeat customers and referral business from your happy customers, the numbers get very large very quickly.
Still having problems getting out and making a sales call? Let’s start with the people you know.
This is just one order from 10% of the people you know. Plug your numbers into the chart to see what untapped potential is within your own circle.
If you print 50 shirts per day at $10.00 per shirt that works out to $500.00 per day in gross sales.
A white shirt costs $1.45 and average ink costs are around .60 cents for a full front color print. This works out to $2.05 in cost of goods per shirt, or $102.50 for all 50 shirts that day. $500.00 minus $102.50 = $397.50 net after cost of goods (not including labor and equipment) per day.
$397.50 per day X 5 days per week = $1987.50 per week. $1987.50 per week x 52 weeks per year =$103,350.00
5 samples to new potential customers each day $2665.00
$103,350.00 - your initial investment ($25,000.00) - sample cost ($2665.00) =$75,685.00
This is more than enough to cover operating costs and still leave you a nice profit.
On a typical DTG machine, printing 50 white shirts will take about three hours. With the other 5 hours in an 8 hour work day, you can be out making sales calls and delivering samples to drive even more customers to your shop.
Our numbers are higher than this. We deliver 10 samples per day with a sales conversion rate greater than 30%. Our average per print resale is $13.50.
I will let you do the profit math.