Make a great frame, a good living and a healthy profit with a well-planned pricing strategy

The philosophy of proper pricing: make a great frame, a good living and a healthy profit with a well-planned pricing strategy

Tricia Bisoux

Setting prices for custom picture flaming can be part mathematics and part mystery. After all, the right pricing formula for a frame shop includes not only the tangible aspects of its operation, such as the cost of materials and electricity, but also those murkier intangibles, such as education, service and business growth.

“There is no issue in framing that causes more consternation than pricing” said Roy Super of Super Galleries in East Lansing, Mich. “As a result, many framers use the ‘suggested’ retail prices from their vendors or the default prices their software provides. They never seriously evaluate the individual components of their shops to see what prices are correct for them.”

There is no one-size-fits-all pricing philosophy for framers. Even so, demystifying the pricing process–and setting prices that reflect the individual operation and its aspirations–may be the single most important step a framer can take to build a successful business.

Understanding the Basics

Not surprisingly, accurate pricing begins with the basic costs of operating a frame shop: labor, cost of materials and expenses such as rent, taxes and electricity.

What is surprising, said Saper, is that many framers price their frames based loosely on labor and materials alone. They don’t know how much it really costs them to run their businesses. But it’s essential to establish the break-even dollar amount each order must generate, on average, for a shop simply to keep its doors open.

“You must figure out what it costs per day to stay in business, including property taxes, lights and other utilities,” Saper said. That is, if a shop’s operating expenses are $250 per day and it averages five orders per day, a framer must add an average of $50 per order to the cost of labor and materials just to pay basic expenses. That’s before he even takes profit into account.

In addition, making a frame comprises many more steps than design and assembly, and those extra steps also should be included in the price. Saper suggested that framers regularly do “time-labor analyses” of orders to quantify the time required to complete every stage of an average job.

“We clock how long it takes to do each part of the framing order,” he said. “We track how many minutes it takes to work with the client, write up the order, file the paperwork, file the art, pull the mat-boards, check stock, order necessarily materials, receive and unpackage the materials, recycle the packaging, file the inventory, pull the frame, miter the frame, build the frame, pull the glass, clean and cut the glass, pull the mats and backing board, cut the mats and backing board, hinge the artwork, assemble the frame, file the paperwork, call the client, help the client when she picks it tip and cross off the project as completed.”

Saper and his employees generate a daily report that shows how many orders were completed, the labor costs per framing order, the labor costs overall, the cost of materials and the retail price of the completed frames. Then, they generate a monthly report of the costs for the month, divided by the number of orders, to see the average cost of materials per order. Each quarter, they use these reports to re-evaluate the prices they’ve set.

“If each framing order is generating an average of $20 of revenue but that $20 doesn’t cover all my costs or make a profit, I need to increase my markup from 1.0 to 1.1 or 1.2,” said Saper.

One of the most effective ways for framers to generate additional revenue is increasing their multipliers for a product category, Saper added, from 1.0 to 1.1, for example. It might generate only 1 or 2-percent more per order, but that can be enough to increase revenue considerably.

Beyond the Fundamentals

Rarely should a framer use any single pricing method exclusively. Many framers who were contacted for this article said a single-minded pricing philosophy can spell disaster for a framer’s profits. Several recommended that framers do the following to make sure they examine all aspects of any pricing strategy carefully before basing their businesses on it.

Do the Math

First, run the numbers of any pricing structure on a number of jobs to see if they really add up to a profit.

For example, Jay Goltz, owner of Artists’ Frame Service in Chicago and an industry educator who focuses on pricing, pointed to a problem with the use of united inches (UI) in which the length and width of a framing material are added together, and that sum is multiplied by a set number to determine price. The problem with this system, he said, is that square inches multiply much more quickly than united inches.

Take a 36- by 48-inch framing order, for instance, which is 84 united inches, and a 9- by 12-inch framing order, which is 21 united inches. The UI for the first is exactly four times the second, so, using a system of united inches, framers would charge four-times more for the glass or the mat on the 36- by 48-inch frame than they would for the 9- by 12-inch.

“Then look at the square inches,” Goltz said. “It’s 1,728 square inches versus 108 square inches. Using united inches, a framer would charge only four times the price for 16 times the material!”

Adjust Those Charts.

The use of suggested pricing charts from vendors or publications, too, can lead to ineffective pricing, said Rob Markoff, an industry educator and owner of Artrageous! in San Diego. If framers don’t adjust those prices to reflect their actual costs and labor, they may create a formula for trouble.

“If your shop runs at $60 per hour and it takes 10 minutes to cut a mat, including design time, ordering, stocking and cutting, that’s $10 worth of labor. So your selling price can’t be less than $10–and should actually be more to cover the cost of materials plus profit. Yet, many charts still suggest that the cost of a mat should be less than $10,” Markoff explained.

Ignore Peer Pressure

The oft-repeated principle, “Charge what the market will bear” can be incredibly misleading, said Goltz. In fact, he added, no framer should base a pricing structure on what other framers ha the local market are charging because there is simply no way of knowing whether those “other framers” are making any money.

“What if the market will only bear $100 per order, but $100 per order won’t make you any money?” Goltz asked. “I would rather charge $120 per order and go out of business than charge $100 and be unable to make a living.”

Take time for pricing

Markoff said the most important thing for retail framers to understand is that pricing is not a black-and-white process. An effective pricing philosophy takes into account not only a shop’s expenses, but also the worth of its ser vices to customers and the livelihoods of its owner and staff.

Understanding of “the psychology and philosophy of pricing” takes it to the next level, beyond the fundamentals, Markoff said. “Educators in the industry are changing the dynamic of pricing from a textbook black-and-white equation of ‘This is how much it should cost,’ to a more profit-oriented mentality of “This is how much we should sell it for.'”

In the end, the best way to set pricing is to base it on accounting, asserted Goltz. And the only way to do that is to sit down and analyze every aspect of the business’s income statement.

“I know it’s painful to many framers, but I argue that if they had a full eight hours to spend to enhance their business in any way, there’s nothing they could do that’s more meaningful to their businesses than to work out an effective pricing philosophy,” Goltz said. “Pricing should come before developing that new ad, creating that new display or painting the interior of your shop.

Saper, Markoff and Goltz also agreed that a framer can make no better investment than in point-of-sale software–as long as they base the prices the software generates on their own situations. Once prices are set, POS software also helps framers keep track of the variable expenses and circumstances of their businesses and easily change prices when necessary.

Even more important is education. There are a variety of courses and textbooks available to framers who want to learn better business management techniques. Many can be found a trade shows and training schools. These educational resources offer framers the opportunity to better understand the financial ins and outs of their operations.

Markoff said that once framers learn how to determinine prices, the entire process can be streamlined by the use of point-of-sale software. “Framers who want to make a living at their craft need to acknowledge that they must learn business fundamentals before they can really understand the effects of the business on their costs,” he said.

PRICING in the United States

In an informal survey, we sampled framers’ prices from a wide range of geographic and demographic areas to get an idea of the level of product framers typically sell and the range of prices they typically charge.

We asked framers to estimate prices for two types of jobs, based on the level of product they typically sell to their customers. First, we asked them to price a frame for a 16- by 20-inch piece of artwork with a “high-end” treatment, using a 1 1/2-inch decorative wood moulding, double rag mat with a 3 1/4-inch border, gold-leaf fillet, reversible mounting and UV-filtering glass. Second, we asked them to do so for a 16- by 20-inch poster in a “low-end” package, using a 1 1/2-inch plain wood moulding, single acid-free mat with a 3-inch border, adhesive mounting and regular glass.

The samples to the right reflect what individual framers view as the price points they typically demand for such orders. But while such pricing samples offer interesting regional snapshots, the paramount principle of pricing prevails: The most effective prices are set according to each framer’s unique circumstances, and should reflect expenses, the perceived value of the work and, most importantly, the desired profit.

Type of Typical Typical

Region Community “high-end” “low-end”

WEST

California –Suburban area $346.50 $202.6

New Mexico –Metropolitan area $451.57 $234.61

Wyoming –Suburban area $384.28 $141.40

Average: $394.12 $192.89

EAST

Massachusetts –Metropolitan area $445.50 $184.00

Michigan –Suburban area $200.40 $113.16

New Jersey –Suburban area $496.97 $264.67

North Carolina –Metropolitan area $335.13 $207.42

North Carolina –Metropolitan area $299.02 $155.52

Vermont –Rural area $354.90 $189.31|

Average: $355.32 $185.68

MIDWEST

Kansas –(no answer) $357.90 $214.39

Minnesota –Metropolitan area $269.66 $152.76

Missouri –Metropolitan area $210.00 $150.00

Wisconsin –Metropolitan area $290.60 $153.30

Wisconsin –Metropolitan area $320.50 $122.05

Average: $289.32 $158.50

SOUTH

Kentucky –Rural area $284.69 $94.53

South Carolina –(no answer) $209.00 $121.00

Tennessee –Rural area $186.83 $112.73

Texas –Suburban area $255.86 $159.01

Virginia –Metropolitan area $273.03 $175.76

Average: $241.88 $132.61

AVERAGE OF ALL REGIONS: $320.16 $167.42

AVERAGE OF ALL PRICES: $314.33 $165.70

An Industry Survey

In an informal survey, we asked framers from around the country what factors had most influenced their own prices in the past two years and what they found to be their most effective pricing strategies. The way to successful pricing, many said, was simply to recognize the true worth of custom framing.

Changing Attitudes

Most framers said their prices had risen slightly to significantly over the last two years. Not surprisingly, several cited price increases from vendors, as well as increases in taxes, rent and other fixed expenses.

Several others, however, said that their attitudes and mindsets about pricing have changed through education and research. As a result, their pricing increases have been self-generated.

“The biggest influence on my pricing has been my own attitude,” wrote a Tennessee framer. “I keep telling other craftspeople not to set their prices based on their budgets alone. In the past couple of years, I’ve started taking my own advice!”

Said one California framer, “Taking classes on pricing gave me the confidence I needed to set prices that allow me to make a profit.”

Emphasizing Education

The educational opportunities now available to framers are also helping them take a more consistent and effective approach to pricing.

“The biggest influence has been my continued education,” wrote a framer from Virginia. The consistent use of the multiple resources available to framers, such as point-of-sale software, industry publications, online picture framing forums and seminars, has helped her set her prices more accurately. “With all the resources available,” she pointed out, “information and advice is at our fingertips.”

A North Carolina framer said, “In the last three years, we have taken Jay Goltz’s class three times, and we have been using his pricing method. That has made the most difference in our pricing. We are now realizing a decent profit.”

A framer from Michigan agreed, pointing to her experience in a class on pricing as an eye-opener. “Not only did the class give us formulas to work with, but it also gave us confidence in our prices. We know we are charging a fair price and can say it to a customer with confidence.”

Offering the Best

Upgraded offerings are the main catalyst that has increased price points at another North Carolina frame shop. “We have raised the quality of the art we offer, both in prints and originals,” the framer wrote, adding that he makes sure to always have several high-end displays on view for customers. “Our customers made us aware of what they wanted and were willing to pay for.”

Selling customers on more expensive framing orders is often simply a matter of showing them the effects that wider mats, fillets and more expensive mouldings can have, said several framers. “I have found that my hand painted French mats are my most effective tool for ‘selling up,'” the Virginia framer wrote. “My large finished corner-frame samples are my second.”

A Wisconsin framer responded that she has moved to higher-end lines and more unusual products to move up her average ticket price and keep her sales strong. “I have economy lines, but I have placed a strong emphasis on carrying lines that no one else in my market has, hopefully to give me a more creative edge,” she wrote.

In addition, the sale of UV-filtering and anti-reflective glass helped several of these framers push their profits upward. For example, the California framer uses AR glass in most of his framed samples to demonstrate how well it works.

Customers want their artwork to look good as much as the framer does, wrote a framer in New Jersey. “We show customers the best framing for the art. We also show them several glass specifiers and ask them which glass they like best. Most choose anti-reflective. It is a lot easier to sell customers expensive glass when they choose it.”

Show Confidence in the Product.

Once framers have confidence in the value of their products and services, it becomes much easier to present their customers with high-end looks and set their prices accordingly. Selling the quality of the overall product, rather than the materials and labor that go into it, is the most effective strategy for one Minnesota framer.

“We show the best first, giving the price for the quality, including related services, as a single cost. That is, we automatically price for conservation glass, and our matting price includes backing and hinging,” the framer wrote. Giving too many prices for services–offering a separate price for hinging, for example–can confuse the customer and hurt the sale.

The New Jersey framer agreed that customers are more interested in the quality of the service and finished products than they are in an itemized list of prices for the frame. “Give the complete price for the job after showing the customer all that goes into the framing of their piece,” he wrote. “Most people are willing to pay the money if they see a value in what I am selling.”

Are Your Prices Too Low?

Unfortunately, many picture framers don’t realize that their prices are set too low to cover the entirety of the expenses they incur annually, let alone generate enough profit for their businesses to grew. Framers who wonder if their prices are wrong for their businesses need only answer a few questions:

1 Do you know exactly how much it costs to operate your shop per hour, month and year?

2 Do you set your prices internally, according to your own income statement, rather than externally, according to vendor-supplied price lists or published pricing guides?

3 Do you factor into your prices the money you spend each year on business-related trips, education, advertising, industry-related memberships and shop improvements?

4 Do you use a point-of-sale software program?

5 Do you update your prices regularly to reflect both rising costs and plans for growth?

6 Do you shop the competition not only to compare prices, but also to compare the quality of service and value of product they offer to determine whether you’re charging too little?

7 Have you taken a class to learn the basics of accounting and pricing?

If you answered “yes” to most or all of these questions, you’ve probably taken the right steps toward a healthy pricing philosophy for your business. However, if you answered “no” to too many of these questions, your prices may not be set to make a profit. Worse yet, they may actually be costing you money, said Jay Goltz, owner of Chicago-based Artists’ Frame Service and an industry educator.

“Many of the methods that I see people using have absolutely no basis in reality or accounting. Pricing must be based on your income statement,” he said. Only by linking a shop’s pricing structure to its income statement, he added can a framer come up with a formula that will generate a profit. FBN

COPYRIGHT 2003 Advanstar Communications, Inc.

COPYRIGHT 2004 Gale Group