If you need to add a new decoration process to the business, or just need to raise capital, then there are several ways that you can go about understanding and improving your financial status. Before you run out into the world asking for money, you need to determine how much money you need. The costs of decoration equipment vary considerably depending on the process. A quality manual heat press will cost between $1,200.00 and $2,200.00, while a quality pneumatic (air compressor driven) press will typically cost between $2,000.00 and $4,000.00. Heat presses are used to transfer many types of media, like vinyl, rhinestones, and screen print transfers. Screen printing equipment (the press itself, dryers, and equipment to burn and reclaim screens) will cost anywhere from $8,000.00 to $60,000.00. Screen printing has the lowest per-unit print cost, and is ideal for large orders with fewer colors in the artwork.
Embroidery equipment has similar costs to screen printing with the versatility of a direct-to-garment printer. Embroidery equipment can be used for short or long run orders, and most machines can sew up to 15 colors. If you want to offer full color, no minimum printing onto cotton apparel, then you will need a direct-to-garment printer. These printers can cost anywhere from $15,000.00 to over $250,000.00 Direct-To-Garment printers are the ideal piece of equipment for shops who get many requests for low run orders, or those shops that want to offer customers the ability to design custom products online. Sublimation printers typically cost about $500.00, and a wide format printer costs between $10,000.00 and $40,000.00 depending on the print speed and size. Most equipment manufacturers have the ability to offer you interest-free financing, which could help you lower your initial financing needs.
It is also likely have to pay rent and utilities whether you have a dedicated office space or work from home. One important question you will have to answer is, “how much money do I need for day-to-day operations until the business becomes profitable?” The key is to make sure every expense used to calculate your startup costs is absolutely necessary. The best way to do this for a product decoration business is to take the time to break down each decoration process you will use. For instance, if you are just pressing screen print transfers, then you will have to buy a heat press, the transfers, garments to print, tools to align transfers, lint rollers & pillows to clear the print area, covers for the top & bottom platens of the press, Kraft & parchment paper to help cure, labor, overhead costs, and other small accessories. That is a lot of expenses for a comparatively simple decoration process. Labor and overhead both tend to be overlooked when calculating costs and margins because they are indirect costs. However, labor is often a business’s largest single expenditure, and therefore must be factored into any projections.
Once you have figured all your expenses out, you can determine your margins for each decoration process to price your products effectively and forecast sales. Going through this extensive process will help you to have a complete grasp of your finances, and it will help illustrate your financial responsibility to prospective investors.
Once you have determined the amount of investment you need, you have to determine how much you can (or want to) provide personally. It is important for you to bootstrap the business. This means that you are financing it personally as much as possible while doing whatever you can to keep expenses down. Waste hurts in two ways. For one, money is lost. Secondly, it could have been used for other purposes. The ability to seek out waste and unnecessary spending will make financing your decoration business a much simpler task. Budgeting is not something that needs to be done only when your business is short of cash, it should always be an essential part of managing your finances. It should be noted that bootstrapping can help protect your business from the outside influences of potential investors, but it does place added pressure and financial risk on you.
Now that you have figured out how much of the initial investment you can contribute, it is time to find another route for funding your new equipment. The first place to go is to friends and family. It can be tricky to deal with relatives and those closest to you. However, if you have a concrete business plan and the trust of someone who is willing to help you out, then that is your safest route to financing. However, it is important not to allow your friends and family to become involved in the business beyond financing. If possible, negotiate a loan that includes interest in order to incentivize them to aid you without expecting to be involved in the day-to-day aspects of the business. For a startup product decoration business, this is truly your best option for financing your business.
The thought of financing your business venture can be scary. It opens yourself up to financial risks, and it requires a lot of work. For a decoration business, it is best to keep finances as simple as possible, and they can typically be included in the work of whoever handles the business’s accounting and bookkeeping. While accounting and finance are separate fields, for a decoration business’s purposes, it makes sense for them to work together. The accounting end is the organization of data, and the finance end of things interprets the data in order to benefit the business. With bookkeeping software, like Quickbooks, you can generate reports that are essential to understanding the business’s finances. For instance, Profit Margins, Debt-to-Equity Ratio, Balance Sheets, Profit & Loss Statements, and Company Snapshots.
Hopefully the information above has been helpful in starting you down the road to a higher financial understanding of your decoration business. In the decoration industry, margins are especially important. By breaking down your costs, you can increase those margins and discover what type of profits you might expect if you add a new decoration process to your business.
