Think You Know Your Costs? Here's What You've Missed.

Ty Barho

Ty Barho

I grew up in a small sign shop from age 12 and went on to co-found BuildASign.com from scratch to $100M+ and one of the largest sign retailers in the country. I now help shops grow efficiently.

I once went to an open house at a print-house in Dallas, Texas, looking to purchase a large roll-to-roll.

It was a pretty decent sized shop with lots of equipment, a big warehouse, and a super-clean operation.

Toward the end of the open house, the shop owner thanked everyone for touring the shop, announced the lunch menu, then started to talk a bit about the history of the operation.

At one point in the short speech, he said...

"... and we're all printers, so we understand that we have to learn to survive on small margins"

I remember thinking to myself at the time...

confused

At my shop, this simply wasn't the case.

Over the years, and to my surprise, I've heard this phrase over and over again in the industry.

Printers tend to think that because we're in a semi-commodity industry, that we need to scrape by on piddly margins, and simply accept it.

And, no, I'm not saying you need to price-gouge...

It's a simple matter of understanding your costs.

The "Common" Cost Formula

At the surface, costing a print job seems fairly straightforward:

Add the costs of ink & materials, roll in your labor cost (or a solid estimate), and append any general setup costs.

You can go as simple or complex as you like on calculating these, but those three fundamentals tend to remain the same for every shop I see.

Raw Materials + Labor + Setup Costs = Total Cost

This basic costing methodology has been the costing cornerstone for most print shops I see, for as long as I've been in the industry.

There's just one issue with it...

It's wrong. Dead wrong.

That's right. All this time, you've been missing enormous amounts of direct costs, and assuming that your formula is right.

what

In reality, there are tons of hidden costs in every job you produce.

And no, I'm not talking about generalized operating expenses (HR, etc), I'm talking true, hard, direct cost dollars.

These costs hide in your books as operating expense, but make no mistake, they are NOT opex. They are direct costs that you incur every single day, and could be avoiding.

The only thing you have to learn is how to find them...

Adopting the right mindset

The first step in learning to find these hidden costs is to adopt the right mindset.

Most owners & operators are stuck in the "Common" Cost Formula mentality.
They only see a job by the sum of it's obvious parts, and never stop to take a look at the less obvious components.

There's a pretty simple trick to start getting yourself in the right mindset... think like a hyperactive stopwatch.

stopwatch

If you're thinking like a hyperactive stopwatch, you don't care WHAT you're timing, you're just timing everything. Bird's flying, bees buzzing, cars driving buy, people talking... you're timing it all. Everything. Relentlessly.

That's the mindset you need to start discovering where your hidden costs lie.

Think about this in the context of an order...

How much REAL TIME in each order is NOT direct materials, labor, and setup?

I'll give you a hint... it's not Zero.

Did you have to have a phone call with the customer? Yep, probably more than one. How about communicating with your production manager? Did that too.

Enjoying the read?

Take the next step & see how we can help you reduce your costs.

Learn About Take2

The truth is, every order is eaten up with small hidden or unplanned costs. There are, however, a couple that of these costs that are giants among mere mortals, constantly draining your margins every day, week, and month.

Let me introduce them to you...


Giant Cost #1 - External Communication


Communicating with your customers. Constant back and forth, all day, every day. And the most common tool of choice?

Email, of course.

email

Most shops completely fail to calculate the time in email into their hard costs. And these are VERY real costs.

Let's take a quick look...

According to a recent study the average business person is spending roughly 18 hours per week reading and answering emails. That's 45% of their work week, just in email.

Think about that.

If you have 5 people, that's 90 hours per week you're paying for people to read & respond to email.

If you're paying each of those people $30k per year, that's $1,298 per week, or $67,000 per year... just for email.

Now, you obviously HAVE to send some amount of email, but for $67k a year, doesn't it make sense to take a harder look at how you might be able to reduce those costs?

Sending 1 Email

Take a quick look at the average Single Email Cycle (the time it takes to read and respond to one email). Most people think it looks something like...

You need to update a customer, so you...

  1. Open Outlook (or Gmail)
  2. Perform a search
  3. Quickly scan the thread
  4. Type your message
  5. Click Send

Seems pretty straightforward and efficient, right? Guess again.

In reality, SO MANY components of email are missed. Would it surprise you to learn that the average Single Email Cycle looks more like this?

You need to update a customer, so you...

  1. Open Outlook (or Gmail)
  2. Notice a message in your inbox
  3. Quickly open it and read it
  4. Click on a link
  5. Spend 30 seconds quickly checking out the page
  6. Flip back to your email
  7. Quickly scan the thread
  8. Type a message
  9. Realize you need to include an art file
  10. Open up your design program
  11. Try to find the appropriate file for the job id
  12. Export a JPG to your desktop (so its small enough to send)
  13. Go back to your email
  14. Attach the file
  15. Reread the message you typed for errors
  16. Click Send
  17. See a new message in your inbox
  18. ... and so the story goes

distracted

You see, the truth of it is people delude themselves into thinking that they stay on track, don't get distracted, and keep their head down in their day to day.

And shop owners, more often than not, fail to realize just how much all of the little inefficiencies (like hunting down and exporting proofs) are costing them on a day to day basis.

This is ESPECIALLY true when it comes to email.

The True Cost of an Email

Look at the Cycle above. According to the study, average business people are spending 45% of their time in email.

That's about 3.6 hours per day.

Let's say on average, a person on your team reads & responds to 15 emails in a day...

That's 14.4 minutes per email.

Looking at the "Real" Cycle, it's easy to believe it could be that high.

So how much does a minute cost? Well, without shop costs a...

  • $30,000 per year salary is...
  • ...roughly $14.42 per hour, or...
  • $0.24 per minute.

This means that at 14.4 minutes per email, the TRUE COST of ONE EMAIL is $3.46.

$3.46... Three dollars and forty-six cents... for every... single... email.

Plain and simple.

And there's never been a more real direct cost.

Enjoying the read?

Take a minute & see how we can help you reduce the cost of email.

Learn About Take2

The Core Problem

But you have to communicate with customers, right? Absolutely.

The truth is that the main problem with email isn't reading and responding to a customer message, it's everything else.

It's the distractions.

The flood of new messages we're all getting each and every minute of every day. Advertisements, invitations, and group updates grabbing at our attention every time we open our inbox.

It's the "other" parts of email.

Attaching proofs. File too large errors. All of these things eat up time.

These are the core of the External Communication Giant.

And this Giant is a real, direct cost, feeding on your business every day.

And that's just the start...


Giant #2 - Internal Communication


Does your team ever talk to each other about orders? Has someone ever sent an email to a production manager? Have you ever gone back to check on the status of an order?

If so, you're familiar with Giant #2.

Internal Communication can be one of the biggest direct costs in your entire organization.

This Giant is more of a blanant, angry Giant. Instead of hiding in the shadows and silently draining your margins, it prefers to walk up to you and smack you in the face.

punch

Let me show you some examples...

The Work Order Cycle

Paper or otherwise, we are all familiar with the work order. Some people call them jobs, tickets, or order slips, but no matter the name, you know what it is:

It's how s**t gets done.

Orders come into the front, get passed through graphics & prepress, and make their way to the back of the shop.

Production gets managed, work is complete, and little Suzie WorkOrder makes her way to the front, where Accounting takes over.

No big deal, right? Well... not so fast...

Did you count how much communication had to happen for Suzie to make it through your shop?

  1. Order created
  2. Handed to graphics
  3. Art Revision 1
  4. Art Revision 2
  5. Art Revision 3
  6. Prepress
  7. Production Manager
  8. Printing
  9. Finishing
  10. Fulfillment
  11. Back to Production Manager
  12. Finally, Accounting

And that's with absolutely no changes...

The simple reality is that...

You're talking more than you think you are

It's not uncommon for a single order to have 20 touch points between your team members.

That's excluding the "real" work, like doing a design, or printing a banner.

This is an enormous cost, and like any other direct cost they can, and should be, controlled and optimized.

Do you know how long each of those touches takes? Are they paper? In Person? Email? How long do people spend walking from front-to-back office?

All of that communication & back and forth between departments takes time, and time costs money.

waste

In most shops, these are costs that are draining your margin, day in and day out.

Small Inefficiencies add up to BIG dollars

All of these little touch points seem relatively harmless...

"Oh, I just had to tell Bob about that order update, and it was easier to do in person."

But think about the 30 second to walk to the back, the 2 minutes of extra conversation, and the 30 seconds to walk back to your desk.

That's 3 minutes of time for a 10 second call to his extension.

If you could reduce every labor component in your business by 94%, wouldn't you do it? I know I would.

These tiny communication inefficiencies happen all day, every day, and most of them are completely avoidable.

Oh, and the kicker?

Are any of these communications email?

Well, guess what? If they are email, they are subject to Giant #1.

That's right. All the distractions of email happen even more frequently if you're using email for internal communications.

There's literally no worse way to communicate in your shop than email.

email

So where do you go from here?


Cracking the Communication Nut


I hope you're starting to get a clear picture of where a HUGE portion of your hidden direct costs live, and how those almost always tie to communication, both Internal and External.

The bad news is that if you're like other shops, you've probably got a problem.

The good new is that there are some solutions.

We've identified one of the core problem children... Email.

As much as you can, eliminate email, and the time spent in it.

When I'm trying to crack the communication nut or reduce email, it typically approach it in 3 ways:

  1. Policies
  2. Processes
  3. Software

Create "email" policies

I've seen lots of great email policies implemented over the years, including..

  • Email Hours - Only allow email checking at certain hours of the day, for limited time periods. The time limit helps people stay focused, and be conscious of how long they are spending on each email. If you have 2 email hours per day (say 10-11am and 2-3pm) it's unlikely that you're going to miss something important. If people want to stay "plugged in," let them do it on their own time, not yours.
  • Avoid Internal Emails - Get clever about how information moves through your company. If you have to choose between paper and email, choose paper for fewer distractions. Use shared folders for files instead of email attachments.
  • Email Templates - Take an afternoon and compile some email templates, like "Art Approvals" and the like. Not only do these help with errors and omissions, they help save time typing, and if your team has a process in place (like finding & using a template), they are less likely to be distracted by their inbox.

Implement Firm Processes

You can help your team stay on track without being the Water-Cooler Patrol.

klink

Instead of having people hand deliver Work Orders to each team member personally, create Inboxes for each department... AWAY from people's work stations.

That's right. A little Feng-Shui can go a long way to reducing the chatter and wasted time.

If I'm not walking directly up to Bob's desk, I'm much less likely to talk about last nights Astro's game.

Start paying attention to where time gets wasted, and you'll start having clever ideas about processes that reduce the waste.

Invest in Good Software

Good software can go a long way to helping you reduce wasted time in both internal, and external communication.

When you're evaluating software from a waste perspective, you want to be sure that it:

  • Makes communcating fast & easy
  • Keeps your orders & customers at the center
  • Keeps your team focused on the task at hand (sorry Slack)

Great software can even tie communication into your basic, every day shop management.

Shameless Plug Time: Take2 was built for exactly this purpose. It helps eliminate email from your normal workflow, and put all of your Internal & External communication in one focused place: your Order Timeline. If you're interested in seeing how we can help you reduce the cost of communication, and improve your bottom line, get in touch with us today!