We tapped Michael Clementi, who heads up our Experience Center, to answer this week’s tip: How to determine your cost per print.
1. Why is it important to figure out your cost per print?
You need a cost per unit – what it is actually costing you to produce the product in order to maintain a healthy profit margin and a healthy company overall.
2. Is there an easy formula to use to figure out this cost?
It varies from printer to printer on square foot print cost for ink. I suggest you call your LexJet Specialist (800-453-9538) to see what cost per square foot your printer model uses. Plus, all of the media on our website lists the square foot price on the product page. After you know these two things, here’s the easy formula:
- Print Dimensions: Width x Height = Square Inches of a Print
- Square Inches of a Print/144 = Square Feet of a Print
- Square Feet of a Print x (Ink Cost per Square Foot + Media Cost per Square Foot) = Cost per Print
Here’s an example:
- Print size 16×20-inch: 16×20 = 320 sq in.; 320 sq in/144 = 2.22 sq ft.
- Now we’ve found out that there are 2.22 square feet in a 16×20-inch print.
- My aqueous printer model prints at .65 per sq ft and my media costs $1 per sq ft, so the total sq ft cost $1.65.
- So to figure out the cost of a 16×20 print on my aqueous printer, multiply 2.22 sq ft x $1.65 and you have a price per print of $3.67.
Don’t forget to inflate costs of media square footage when adding internal costs (shipping, time spent printing, etc.).
3. How can I lower my cost per print?
You can tile images in order to minimize waste when printing. You can also increase the size of your cartridges if your printer provides a larger volume option. This will drive the cost per square foot of ink down in some cases more than 20% depending on the printer technology. Beware that most printer manufacturers will raise the cost of the ink on older printers due to the volume of ink being sold going down after years of the printer being on the market as newer models are being introduced. Some printers will also consume more ink the older they get, which can also chew into the profit you are making per print.
4. Is there a difference for black-and-white vs. color printing?
The heavier ink coverage on a print increases the cost of the ink. To play things safe and keep your margins where they need to be, I would go by the same square foot cost for ink no matter the consumption per print. It will end up saving you money in the end rather than costing you if you under-estimate.
5. Is there software I can buy that will keep track of this for me?
Some printer manufactures include an accounting option that keeps track of your ink expendables and media cost and will give you a cost per print after it is produced. Some of them will even allow you to export the data into an Excel document. Again, check with your friendly LexJet Representative (800-453-9538), and he or she will be able to answer any questions you have.
6. How does this information help you plan?
By determining your cost per print, you will then be able to calculate overall profit. If you sell based on a sales number without knowing your profit on each item sold, it will be very easy to get in trouble by selling an item below what it’s costing you to produce it.
7. How can I use cost per print to develop pricing strategies?
When you have a firm handle on your production costs, it will help you introduce discount structures that will incentivize your customer to leave with more than one product in their hand. The only way to create an effective pricing structure is to first understand where you want your heaviest discount to land.
Here’s an example: Product A costs $10 to make. It sells for a retail cost of $30, but I am comfortable discounting it at 30% if the customer buys 30 units. If the customer buys 20 items, I’ll discount it 20%, and if 10 items are purchased, I’ll knock 10% off. If you offer this type of discounting structure, a customer can walk in, order 30 prints at the highest discount level of 30% off, and you still make $330 in profit while still above 50% profit margin.
Your customer is rewarded for spending more money with you by getting a cheaper cost per item, and you make more money than just selling 1 print to the same customer at $20 profit. Now you know what flexibility you have to discount, which is why it’s essential to know your cost to produce each item. It’s also good to note that a very healthy business plan should stay above a 30% profit margin.