As the recession draws to a close, quick printers will have to deal with the challenge of raising prices. This is particularly true with prepress pricing. Too many printers use typesetting, design, and prepress as loss leaders to get printing and copying work. Printers need to look at their bottom line to make sure that all departments are contributing to the profits of the company.
Over the year, prices for all goods and services have started to rise. Paper prices are up as well as other costs. Successful printers have stayed on top of the rising costs by adjusting prices on a regular basis. Not so successful printers have failed to pass along the increased production costs. The beginning of a new year is always a good time to make sure you are getting paid a fair price for the work you do.
Printers still fool themselves into thinking they are making money in prepress by setting artificially high hourly rates for the department. The prices are artificial because no one ever really uses the hourly rate. Many shop audits show that if an hourly rate was applied to a standard job, the selling price would be four to five times higher than what the customer paid. Few owners compare the time it takes to do the actual work in the prepress department with the final selling price. Sadly, the total monthly sales for prepress functions barely cover the cost of the prepress operator.
For some reason, printers believe the prepress costs should only be a fraction of the printing price. In reality, the typesetting, design, and prepress functions can easily outstrip the printing and copying prices. The labor costs alone can drive up the final bill. It may take a prepress person several hours to complete their portion of the job, yet it takes the press or digital printer operator minutes to print the job.
Some printers use the excuse that if they were to charge for design and typesetting at the real costs, they would lose print work. Ironically, the amount of money they leave on the table for prepress usually is more than the margin made on printing. And printers wonder why the prepress department is often referred to as a black hole for profits!
Claim the Money
As the year begins, printers need to implement procedures that will assure they make money in prepress.
Set a realistic hourly rate. The $60 an hour rate may have made you money in 1990, but after 20 years of using the same rate, you are probably losing money. A more realistic figure is $100 an hour. For example, if a prepress person would bill half their time (20 hours a week) at $100 per hour, sales in prepress should be at least $2,000 a week, or $8,000 a month (with a four week month). What are your monthly sales? A one-person prepress department should bill at least $8,000 a month. A two person department should be billing a minimum of $16,000 a month.
Establish set prices for common jobs. An hourly rate is good for custom work, but much of an average printer’s prepress pricing can be handled with a preset menu price list. A price can be set for almost every product sold. By using a set price, the owner can easily measure to see if the prepress person is being productive or spending too much time on a job.
Track and manage a prepress person’s time. The production manager should be meeting several times a day with the prepress staff to assure work is moving profitably through the department. The prepress staff should be accounting for the time spend on most jobs. The prepress staff should also know how much of the selling price is budgeted for their task. If prepress is making $100 on the job, then the prepress person should spend no more than an hour on the job. Any more time spent, the company is losing money. The prepress person is responsible for time.