Financial Opportunities

   Expansion, investment, managed growth: all terms that frequently cause sufficient concern that, 
   in the end, many of us do nothing for fear we will take away from our existing business.
         
   This site on the Get Sublimation website discusses the financial aspects of expanding an existing 
   business; Get Sublimation…… and bring more business to your business.
        
 What Sublimation is:

         n A technology that provides full color personalized products.
         n Generally very complementary to your current business, and frequently synergistic.
         n Low investment. Leverages some existing equipment, hardware and software.
         n Requires little additional space.
         n High margins
         n Involves personalized products that advance personal customer relationships.
         n Is well supported by an industry of innovative, aggressive companies whose success is solely 
            based on your success.

 
 What Sublimation Is Not:
         
         n A substitute for hardworking, smart entrepreneurs whose goal is the success of their business. 
  
         
 Getting Started: What You Will Need 

         n A desire to learn about this new technology and grow your business.

         n Equipment
              p Sublimation Capable Printer
              p Scanner 
              p Heat press
              p Sublimation Ink
              p Mug press
              p Corel Draw Software
              p Unisub™ Designs4U™, Designs4U2, and/or D4U3.

   n Inventory
              p Unisub® products
              p Transfer Paper
              p Sublimation Inks
              p Other:
                    n Mugs
                    n Shirts
                    n Magmates™
                    n Labor
         n Labor 
               Labor to produce sublimated products is generally variable. Once trained, labor hours can 
               increase or decrease in relation to sales.

         n Training
               Sublimation industry seminars are an excellent way to get both technical as well as business 
               training.  They are low cost and available to you at industry shows and regional seminars 
               through The Sublimation Network™.  Certification is now available to recognize advanced 
               skill levels. Some important fundamentals include design, marketing, and pricing. The 
               Sublimation Network™ Sublimation Education additionally earns ARA ceu's. 

 Incremental Profits from a "Business in Your Business"

   First, we need to understand what "incremental profit margin" means. Incremental margin can be 
   defined as the additional profit margin earned on sales after all fixed costs have been paid by 
   sales from the existing business.  When you expand your businesses horizons, in ways that
   utilize your existing overhead, the profits from these sales can be exceptional. Let's take a look at 
   what it takes to establish a "Business in Your Business", and an example of incremental 
   sales from Sublimation.

 Existing overhead that can be utilized by Sublimation

         n Store or Building
         n Computer
         n Corel Draw Software
         n Most utilities, insurance, CAM's
         n Management

 Incremental Capital Investment required: $1,000 per year
         n Heat Press
         n Mug Press
         n Printer 
         n Designs4U™ 
         n Scanner
         n Sublimation Target Marketing™.

         Total approximate cost $3,000. Assume a package purchase, and a three-year depreciation 
         schedule means $1,000 in depreciation per year.

 Incremental Inventory Investment required: $120 per year
         n Unisub® products
         n Ink
         n Paper
         n Mugs
         n Shirts

         Given the replenishment support provided by Sublimation Distributors, assume average on hand 
         inventory of $1000, with a 12% cost of money assumption, means $120 of inventory finance 
         expense per year.
       

 Understanding Cost of Sales

   Material Costs for sublimation include three factors:

     1. The cost of the product you sublimate plus freight to get it to your facility.
     2. The ink and paper used in the sublimation process.
     3. An allowance for scrap or waste during the manufacturing process.

     Product Cost: 

       This is easy to determine because you can get it directly from your distributors price list. You will 
       generally pay a premium for ordering single items, get a discount for buying in case quantities and 
       get an additional discount for buying five or more cases. As a general rule of thumb, adding five 
       percent for freight costs will cover your UPS charges, assuming you are buying case quantities. It 
       will be slightly more for some products (plaques) and less for others (name badges). The exception 
       to this rule is mugs or other ceramic products. Your freight on this type of product will typically be 
       50% or more of your cost, so you need to factor that into your pricing equation.

   Cost for Paper and Ink:

       These will vary depending on the type of system you have and the design you are printing. In 
       general, multi-color cartridges, which are used in the small Epson printers, cost the most/square 
       inch. The larger Epson printers (i.e.: 1280 & 3000) can be used with regular cartridges, extended 
       cartridges (which hold more ink and have a lower cost/square inch) and bulk ink systems, which 
       have the lowest cost/square inch of ink. 

       The amount of ink you use will vary with the design being printed. Text on a white background 
       will use less ink than a full color photo or printing a solid block of color. Ink manufacturers 
       estimate the cost at $.75-$1.30/page for an 8"x10". Using $.02/sq. inch including paper, 
       cleaning cycles etc. will give you a conservative basis for cost calculations when using most 
       printers.
       

   Scrap:

       Scrap will result from a variety of mistakes including spelling names incorrectly; printing items 
       before the press is fully heated up, dropping mugs, etc. Based on conversations with a variety 
       of sublimators we recommend using 5% as an allowance for scrap. It will probably be higher as you 
       begin the process, but should settle into this range. This means if you do a job with 100 items you 
       may have to reprint five, or if you do single jobs one out of 20 will have a mistake.  Single items 
       get a discount for buying in case quantities. 

   Here is an example of a 8"x10" plaque:

     Case price: $4.20
     Freight factor at 5%: $.21
     Imprint area: 7"x9"= 63 square inches x $.02= $1.26
     Total: $5.67
     Scrap at 5%: $.28
     Total Material Cost: $5.95

     Material costs are one important factor in helping to determine suggested retail prices. Market prices 
     are yet another.
         
     In the profit and loss example at the end of this section we made the assumption that material costs 
     will be 33%.  This means you will be selling product, on average at about three times material cost. 
     In many instances, the plaque outlined above or small volume name badges, you will want to price 
     significantly higher than this. In other situations, where the volume is larger, or with picture frames 
     where the cost is higher, a three time cost multiplier or even less may be appropriate. 

 Purchasing: Whom should you buy from?

   A commitment to good technical support on the part of the distributor is their way of becoming 
   involved in your success.  It shows an investment in you, and it is given with no promise of ever 
   making a dime.

   Because of this commitment, it is very beneficial for you to develop the same kind of loyalty 
   for your distributor.  There are sure to be times in your sublimation career when you will need 
   technical support or a "helping hand."  A distributor who feels no loyalty to the customer will be less 
   likely to "go the extra mile." If a distributor is going to invest time, money and energy into helping 
   your business succeed, it seems only logical that you should do the same. This doesn't mean you 
   should never buy products from more than one distributor. It does mean; however, that once you 
   find a distributor who is willing to help you get started,  answer your questions and provide quality 
   technical support, you should give them the same degree of loyalty they have extended to you. 

   Sublimation distributors are there FOR you. They CAN'T survive WITHOUT you. By the same token, 
   you can't survive without them so why not make a conscious effort to encourage and support 
   each other. Take the time to develop a personal relationship with your distributor. Get on a first 
   name basis. After all, in every sense of the word, you are a team. 

 Incremental Labor required: 10% of Sublimation Sales

   Labor can be considered a variable expense, required and paid for in direct relation to sales. If sales 
   commissions are incurred, they too will be variable. Generally, existing management is sufficient to 
   generate significant sublimation add-on sales. 

   Assume production labor at approximately 10% of sales. i.e.: A $16 (loaded) per hour labor rate is 
   capable of producing $160 per hour in product at retail selling price.
         
 Marketing Expenses: 2% 

   Direct marketing expenses associated with incremental sublimation sales, such as postage, printing, 
   and samples, on average cost approximately 2% of sales.

 Variable Selling Labor: 5%
         
   By definition, the cost of selling incremental business is not assigned to the profit & loss statement, 
   if it is already being captured under existing overhead or SG&A. However, if a salesperson is directly 
   compensated by the incremental business they sell, then the cost of that commission needs to be 
   assigned to the P&L statement. Plan, on average, this cost to approximate 5% of incremental sales.

 Other variable expenses: 2%

         n Visa/MC when used. Assume 3% charge on 33% of the incremental sales equals a 1% expense
         n Incremental utilities, bad debt, etc. at 1% expense. 


 An Incremental P&L
         
   Now that we have looked at the initial cost and ongoing expenses of installing a "Business in Your 
   business," let's look at an Incremental Profit and Loss statement with $40,000 in sublimation sales 
   per year.        

   -COGS (Product, freight, ink, paper, scrap) 

   -Variable Production Labor:

   -Variable Selling Labor:

   -Marketing Expenses:

   -Variable expenses:

   -Depreciation on equipment (@ $1,000 per year):

   -Carrying cost of inventory (@$120 per year):

Pre Tax Profit on Incremental Sales:

 Want to calculate your own P&L Statement, using your costs and assumptions?          
 CLICK HERE for an interactive Profit & Loss Statement. 

 CLICK HERE to move to the "Learning How" section.