Untangling the Economics of Wide-Format
Wide-format printing is changing. It’s becoming faster, more versatile and easier to produce.
For in-plants, this means more competition, but it also means more opportunities. The wide-format toolbox is growing, which means creativity can take your in-plant a long way.
Like any business venture, there are considerations to account for, and for those new to wide-format — or to a segment within wide-format — there are mistakes that can easily be made. Fortunately, they can just as easily be avoided.
The majority of these missteps are happening on the business side. The economics of wide-format can be confusing to newcomers — especially those who are used to traditional print pricing and economic models. The reason for the confusion is the same as the reason wide-format is particularly attractive: the big margins.
Fully Burdened Cost
In most of the print world — and many other industries — pricing is traditionally done “cost up.” This means taking the cost of the materials — ink and media — and adding to that all other costs involved, including labor and supplies. That results in what’s called the fully burdened cost: a clear picture of the actual investment that goes into producing an application. From there, one adds the markup — say a healthy, standard 50% — and there’s the price.
Consider, for example, a direct-to-substrate UV device printing to 1/4˝ acrylic. The ink and media costs would be about $2.80 per sq. ft., or $4.98 fully burdened. Of course, this depends on one’s operation and the suppliers, but these are fairly common average numbers. A 50% markup on that would take the sale price to $7.47 per sq. ft. Pretty nice, right? But as the saying goes, “wait, there’s more!”
It might be surprising for printers to learn that their competition is likely selling that same application for as much as $16 per sq. ft. — the going street rate for such a job — and that they could be, too. But that begs the question: How did they arrive at $16 per sq. ft.?
There’s no one-size-fits-all formula, because it’s all market based. However, that doesn’t mean it’s guesswork. As posters in libraries have long been emphasizing, knowledge is power. Wide-format pricing is based much more on how the market values it and what the market will bear. Knowing that requires knowing the market. Compare your offerings with competitors offering similar applications. Look at the pricing and practices of businesses in the same region. While online ordering and fast shipping speeds have flattened markets to a degree, there are still differences to be found.
By teaming up with the right third-party expert, businesses can get a stronger picture of what the rest of the industry is up to. Nothing beats the informed insights of an expert able to apply what they know to printers’ unique situations.
Driving Down Costs
While talking about setting prices to make the most out of wide-format’s great margins, it’s important to address the other side of the coin — reducing costs. Direct-to-substrate UV printing is one way to do this. It’s faster and less expensive than manual processes, meaning printers can take on more jobs at lower cost, driving greater profits.
To offer an example, think about rigid signage, such as what is used for lawn signs or poster board. In-plants not taking the direct-to-substrate route will have the cost of the base substrate (e.g. adhesive vinyl) at $0.50 per sq. ft., including materials and labor; ink will add $0.25 per sq. ft.; laminate contributes another $0.50 per sq. ft.; the mount — foam, board, or gator style — will add $0.25 per sq. ft.; and, finally, trimming and cutting will tack on another $0.83 per sq. ft. All told, that adds up to $2.33 per sq. ft. in costs.
Now, consider the same job, but with direct-to-substrate UV printing. First, printers can get rid of the base substrate, which is $0.50 savings per sq. ft. They can also drop the laminate, which saves another $0.50 per sq. ft. And, using less expensive ink means spending only $0.15 per sq. ft. In sum, that’s $1.10 in savings per sq. ft., and those $1.10 increments add up fast.
If a business prints 25 yard signs per day, at 3 sq. ft. apiece every day for a 22-day work month, that’s $1,815 in savings. If it produces 20 foam-core signs per day, which are about 12 sq. ft. apiece, it would save $5,808 over that period.
Translating to ROI
Practically and holistically, what does this mean for an in-plant’s business? It means printers can make back their wide-format investment in less than a year — sometimes much sooner.
One last example looks at a business that has decided to add a flatbed printer. That addition immediately sets the bar the operation is trying to hit: making back the cost of the implementation.
Filling in reasonable average answers for all the previously discussed variables helps showcase how they all relate, as seen in the image above.
Calculators, such as the one displayed in that image, are available to help print shops turn that information into well-founded ROI estimates. As seen in the example, the platform pays for itself in five months.
What’s even more exciting is, if this is bringing outsourced work back in-house, net cash flow has a real opportunity to skyrocket. This example shows a more than $17,000 jump in that metric, which can be reinvested in the in-plant’s business for even more growth.
Hard-nosed traditional printers may raise an eyebrow at the 69% profit going into these calculations, but, as a reminder, the direct-to-substrate example delivers just under 70% profit.
As in-plants expand into wide-format printing, it’s important they look for knowledgeable partners who can help them get the results their investment deserves. By being informed, rather than settling for lower price points, printers can set their prices confidently and begin realizing the incredible benefits of wide-format faster than they could have imagined. l
This column originally appeared in the PRINTING United Journal.