Business Partners

[John Esberg]

Hello everyone,

Today on the phone I ended up with a nice offer from a large firm to compliment my business.

I am a laser engrave who does all of the standard awards, recognition, and personaization along side with my more indepth wood products.

My new associates' capabilities are embroidery, silk screening, direct ink t-shirt printing, & vinyl transfers.

Surprisingly in my large area I have very little competition. My standard rate for wholesale is 2.25 times the material cost. This gives me a profit if I don't make a mistake and covers shipping.


So, I'm wonder what you would recommend for margins or % off I should initially offer these guys for working with me. Any advice?

Also, what do would you think they would offer me as a discount on thier services?

Looking forward to your input,

DAK

P.S. Here's an inlay I recently finished off from scrap wood. I thought you might like it. Something a little different.

[Mitchell Andrus]

I will never, ever, ever have a partner. Nor will I ever employ family. I'm on my fourth business and these two rules have helped make me quite wealthy, thank you.

I retail price all of my work so that I make a profit when a reseller gets a 30% discount (I drop-ship).

If you do the math, this allows the reseller a 42% * mark-up on his costs, before sales processing and marketing costs. My resellers make money at a 30% discount.

Remember, when I retail, it costs me advertizing, sales time, and credit card processing fees, so I never REALLY get a 100% sale.

That all said.... go slow. Offer to invoice at retail minus a set percentage at both ends, say 30% for a year. Don't discount deeper than you'd discoount anyone else, you'll resent them every time they give you an order. If the discount is even steven in both directions, a steeper discount benefits niether of you. Proper bookkeeping will prevent the whole 'partnership' from getting lopsided. As attractive as it may look, bartering is not the way to go either. Eventually, someone isn't getting paid enough.

Been there.

* $100.00 item = $70.00 cost to reseller. $30.00 profit = 42% of $70.00.

[Gary Hair]

I am inclined to agree with Mitchell about the discounting. Make it the same for both of you. I don't know if I'd go 30%, but that may work out. If they end up dealing with the customer and actually earning that 30% then it may be a great deal. Give it a "trial period" and see how it works out, maybe 6 months.

As for the inlay - WOW that is beautiful! How about some details like: size, wood types, time to make, etc? If the easel and the shadow give me the right perspective, that thing looks to be about 24" in diameter, is that even close?

[Joe Pelonio]

I agree with not having a true "business partner" but do have several good wholesale customers that buy from me, and much less frequently I buy from them. I do signs (vinyl etc.) as well as laser work, they do no actual production, just call on customers and order from me or one of their printers/manufacturers of advertising specialties. This weekend, for example, I'll be lettering 5 vans for one of them. To their customer I am "his vinyl guy" but in fact we are two totally separate entites. I operate the same way with my other wholesale customers. This particular one gives me a lot of business and we negotiated the rates. I charge him double the material cost plus actual labor at half my normal rate. In some cases he buys the material so it's just the labor. For most of my other wholesale customers I give a discount of from 10-25%, and that depends on the amount of work they give me. If it's one job every week or two, I'm not making much from them. If they give me 4-5 jobs a day, I can still make money at a lower price, and they are saving me from having to deal with the customers, design work, and collecting the payments. They just send me POs and a check every other week, and they have an graphic artist that sends me files ready to use on my systems.

[Mike Null]

I do a considerable amount of wholesaling. On some things I'm able to say your discount is 40% of my selling price. On others it may be 20%. Not all things are equal and if you try to standardize a discount at one place or another it will fail you.

My margins vary widely depending on the items. Plaques, for example, are very competitive and don't leave room to allow a high wholesale discount. Labels, signs and name tags offer a little more flexiblity.

Custom work is another area entirely.

Art preparation and jigs have to be considered.

I believe I would do some research on the web for prices on the products you would supply and compare them to what you think your prices should be. Then you can set a discount from there.

Even with the lower margins I prefer wholesale business because it is more reliable, higher volume and usually quick pay. Also, I work from my home so I don't want retail traffic.

My compliments on your inlay job.

[John Esberg]

I am inclined to agree with Mitchell about the discounting. Make it the same for both of you. I don't know if I'd go 30%, but that may work out. If they end up dealing with the customer and actually earning that 30% then it may be a great deal. Give it a "trial period" and see how it works out, maybe 6 months.

As for the inlay - WOW that is beautiful! How about some details like: size, wood types, time to make, etc? If the easel and the shadow give me the right perspective, that thing looks to be about 24" in diameter, is that even close?

Gary,

To answer your question on the inlay, yes it is a 24" diameter piece. I believe the engraving time was about 2.5 hours. Assembly was about 2 hours (including watching TV in the living room hanging out with my wife). It's made of Black Walnut, Maple, Padauk, Brazilian Cherry & 9 Ply Baltic Birch Plywood.

Till later,

DAK

[Karin Voorhis]

I am in AWE of your great inlay!!!!!!!!!!!!!!! Thta is just simply amazing!!!!!!!!!!!!!!! The time is also amazing It would take me a year to do that right now with my skill set!!!!!!!!!!!!!!!!!!

[John Esberg]

I am in AWE of your great inlay!!!!!!!!!!!!!!! Thta is just simply amazing!!!!!!!!!!!!!!! The time is also amazing It would take me a year to do that right now with my skill set!!!!!!!!!!!!!!!!!!

Karin,

You make me blush. :o Thank you for the compliment. If you're ever on this side of NY, drop in for a visit some time.

V/R,

DAK

[Karin Voorhis]

Karin,

You make me blush. :o Thank you for the compliment. If you're ever on this side of NY, drop in for a visit some time.

V/R,

DAK

Thanks I get up your way on the Bike sometimes when I get breaks coaching others to ride bikes..... I would love to see your work and how you do some of it...... I went to your website and it is all amazing......

[David Lavaneri]

John,

I agree with those who say you'll be better-served by a wholesale business relationship, than a full-fledged partnership.

I have yet to see a partnership, (even though some appeared to be "made in heaven") fail to end up in a bitter breakup.

I would suggest pricing your product to "include" mistakes. Running error-free is a lofty goal, and a potentially-costly tactic.

The inlay is beautiful. Even though the potential partner may have a more extensive array of processes, you may find that you're more specialized.

That could translate to being more valuable.

David "The Stunt Engraver" Lavaneri

[Rodne Gold]

Ideally , you want to find a set of products that combine both your processes, not offering either or and come it at your regular or just below regular pricing for your services as the value of the item using combined services would be a lot higher than normal
So whoever is selling the product to the end user makes the real money on the item and not on "savings" due to the wholesale nature of your "partnership"
In terms of their industry , it's pretty cut throat. Look in the yellow pages and you will see a million embroiders , a zillion screenprinters , a ton of vinyl cutters print/cut ppl , you get the drift. Their margins would be a MUCH smaller than yours for retail and I would not think you are going to get a substantial savings in "wholesale" unless your wholesale quantities are vast. You might as well then use anyone else for these services.

My co has got all of that equipment barring embroidery , we decided to forgo embroidery cos of its lousy margins , space problems and high cost of machinery and software. We no longer do screenprinting cos its not at all cost effective (too many "garage" competitors) and direct T-shirt printing is slow and has many problems.
Vinyl print and or cut machinery used to be profitable a few years ago , now the market is flooded with cheaper print and cut machines and margins have fallen hugely.
So in essence , the "partnership" is far more weighted to be beneficial to them than to you. In reality , they will be using you as a supplier , and vice versa , however if you would be limited to supplying them only in terms of wholesale , you might find yourself with less business than normal and more importantly , poor profitability.
My accountant has a good saying , Turnover is vanity , profit is sanity
At any rate , as I say , find products where both your services are used , for example , you can laser cut apliques for their embroidery section as well as laser cut fabric panels they will be embroidering on , You can offer laser engraving as an alternative or add on to mark what they embroider , the laser will engrave fleece , mark denim and so forth.
As to screenprinting , well you can either offer a cutting service for various substrates they screen on or die cut after that have screened on certain substrates , you could offer laser engraving on screened acrylic awards , or ask em to screen faux marble or other effects onto substrates you can use as engraving material.
I would NOT cut your margins at all in terms of what you normally charge wholesale , but rather give em preferential treatment , good delivery etc as their "discount".
I cant tell you how many times I have been approached with "mutually beneficial" proposals and have been promised quantities that approach telephone numbers only to find that they are more like shoe sizes. Don't commit yourself on word alone.

[John Esberg]

Hello everyone,

First of all, thanks for your input. I appreciate all of the response from the bottom of my heart.

My meeting went well. It was postponed so I could recover from bronchitis beating me down a bit. We met face to face and the net result was I will be doing wholesale engraving services. He will supply the blanks and I'll take care of the rest. Exactly where I wanted to start. Later this week I will negotiate pricing, delivery and my least favorite detail: mistakes.

In my experience when I do wholesale engraving services, I only do it on the pretenses that if I make a mistake, I will only credit the cost of the blank. I don't refund/work off the full retail cost of the item. This is the result of my past experiences where I charged a friend $3.00 to engrave his name on a $35 MSRP wooden pen: never again.

So I'm curious, how does everyone else handle the issue of recovering from making mistakes with your machines?

DAK

[Joe Pelonio]

So I'm curious, how does everyone else handle the issue of recovering from making mistakes with your machines?

DAK
I'll inform people, in writing if possible (e-mail is good for this) that I am not responsible for replacing any item that I engrave which is damaged or destroyed in the process. I will also verbally inform them of the risk if it's a material I have not tried before. On the other hand, if it's an easily replaced item such as a piece of acrylic that they brought in, I'd go ahead and replace it since any problem would have been my fault or laser malfunction since by now I should know what I'm doing. The biggest problem is when the wholesale customer gives you several hundred custom made items to engrave and/or cut without a sample. Always ask them to provide 2-3 extras of anything like that for you to practice on and get the settigns right. Obviously if the "mistake" is something like running an engraved sign on brushed aluminum with the brushing vertical instead of horizontal, I should and will do it over at my expense.

[Mark Winlund]

[quote=Joe Pelonio]I'll inform people, in writing if possible (e-mail is good for this) that I am not responsible for replacing any item that I engrave which is damaged or destroyed in the process.

We had a rubber stamp that essentially said the same thing. We also charged a lot more to engrave expensive, one of a kind items. If a mistake is made, that customer is gone forever, with all of his friends and neighbors. Getting a premium price meant we could take a lot more time to check it and get it right before engraving it. On an heirloom watch, for instance, we might get $200 to engrave it. It helps to have a friendly mfg. jeweller nearby to fix the "oops".

Mark

[Mike Null]

On customers goods I tell them up front that I will not pay for a replacement in the event of a mistake. I do not charge for the engraving either.

If it's my merchandise then the customer never sees the mistake.

The place I've left the most money on the table is in the area of art and set up fees. This is especially true with retail type customers where I've been much too lenient in terms of setting ups jobs.

Just last week I worked 4 hours on a job and only billed $125. It should have been at least $250.

[Rodne Gold]

There is no "wiggle out" type arrangement if you want your reputation intact , if you mess up the piece due to your error , whatever the error is , you make good - end of story!!

We always ask for one item to destructively test if its not our own known goods and there is a qty order involved. We also insist that any sample we do is exactly the same as the production run item.
We also price according to risk , A mont blanc pen would be like 10x more expensive to engrave than a BIC.
If there are "difficult" one offs on materials we havent encountered or objects where we are guessing the composition , we advise the customer that we have never done items of this nature and considering there isnt a sample to test on , we cannot guarantee results at all , and then they have the choice whether to elect to go for it or not. However this is not a "mistake".

Apart from anything , we always make sure proofs of engraving are signed off by the customer and put EVERYTHING on paper.
A couple of tips
1) in volume jobs , make sure all items are the same size wize , often you get a sample and the sizes of the production run are all over the place making precise positioning a nightmare.

2) Make VERY certain the production volumes quality and composition are the same as any sample you do - we have encountered this a lot , we get a sample and the production run is not the same , bing of a slightly different aterial or inferior quality.
3) Guesstimating what an object is made of is difficult these days , especially if a customer sends a pic from a catalog , what with the chinese in the picture , you might think something looks like stainless and is actually not , it might be a paint finish on a steel blank

[Mitchell Andrus]

So I'm curious, how does everyone else handle the issue of recovering from making mistakes with your machines?

DAK


Ask for a sample or two for setup/testing These are expendable. Allow 1 to 2 percent of the production run to result in rejects without penalty. Any good business man (your client) will know there are going to be failures and the client should have spares built into his budget.

My dad does silk screen process printing (45+ yrs). No one EVER walks in the door with 100 pieces if 100 pieces are needed at the end of the day.

[Frederic Gagnon]

Rodne, you mentionned engraving on Mont Blanc pens... I was asked to quote on a job for engraving 20 of those. They are the black models made of "resin". I was wondering if you have any tips, suggested power settings, for engraving them? I would probably color fill them with gold paint as well, but it has to be very permanent since it will be hand held right on that area... Kind of a stressing job!!

Thanks,
Fred

[Marc Myer]

I appreciate this thread!
I'm preparing a proposal for a business arrangement, and could use some of your great input.
I'm looking to do fast-turnaround customized wood plaques and small touristy items for a retail photo concession at a very popular tourist destination (They're only a couple of blocks from my home!).

They take photos of tourists dressed in Polynesian headresses and costumes, and the like. They are delivered the same day within a few hours. I would do some photo plaques, and some smaller items like keychains, bookmarks, etc.
They would do the selling, we will wholesale to them. Should it be based on a percentage of retail price? What kind of percentage is most mutually beneficial, especially given a very quick turnaround?
Any advice on pitfalls or other things I may need to consider?

[Roy Brewer]

They would do the selling, we will wholesale to them. Should it be based on a percentage of retail price? What kind of percentage is most mutually beneficial, especially given a very quick turnaround?
Any advice on pitfalls or other things I may need to consider?

Marc,

I don't have personal experience wholesaling at a percentage of the profit, but whatever agreement you come up with should match what seems to have become the de facto minimum of $60/hr profit. Numerous laser owners get much more. Can you sell your time for less and make $? Certainly, but experience has shown that you don't have to. If you can't make $60/hr on your laser time, you should be looking for other avenues of distribution.

Pitfalls? As you've probably learned photographs are the toughest thing we do. It would be hard to tell the photographer "garbage in, garbage out!"

[Rodne Gold]

I havent engraved a Mont Blanc pen on my lasers , so can't help with settings etc. Problem with expensive items is that you generally don't get one to practice on and it has to be right first time.
Best way is to use some masking tape on the item and REAL low power to see poitioning and accuracy and then keeping it in the same position , whacking it a little more. Alternatively , find a place on the item thats not visible and do something real small there as a test.

In terms of the photo engraving :
Firstly get Photograv , its a program specifically for engraving photos with a laser , you will get good results from word go
As to pricing , all your stuff will be mostly one offs , so factor that in. Set a price and allow them to charge what they want. I would allow for at least a 60% margin for them and would probably want more in the 100-150% margin if I were the concession stand holder.

2 things :
1 , they might find your sales taking from their more profitable photos and might not punt you , 2) You might underprice yourself and be doing a lot of work for little money and soon get fed up with it all.
I would imagine the pics are digital and thus you can just DL em or have em mailed to you?
I then assume you have to be keeping a stock of their stuff to laser on?
Or how do you envision pickup and delivery will happen?

[Dave Jones]

A couple of thoughts...

Since they are promising these pictures to their clients within a few hours, basically every one of them is a rush job. Be sure to price them accordingly.

The photographer has decided to take on these clients as a rush job. By getting into this agreement you are committing yourself to be on-call for the photographer at any time during their business hours. That means you basically can't go anywhere or do anything that takes you away from your engraver for more than an hour or so. That's a heck of a commitment.

I would offer them a normal price with a 24 hour turnaround and a premium price for a few hours turnaround. Let them choose how important that rush job really is.

I personally would probably not agree to be on-call at short notice for some other business all day every day. But that's just my personal opinion.