New Shop Provides a Blueprint for Sign Industry Financial Basics

WENDY ZACCAGNINI OF CLAYTON, NC was looking to supplement her graphic design income when she sent out some feelers and found something unexpected: a business for sale! “Word got to me that a gentleman nearby was looking for help, so I gave him a call, figuring he was looking for a part-time designer,” Wendy said. “Come to find out, he ran his own little signshop, and was looking to move to Florida and sell his business. How could I not jump on the opportunity?” Now the newly minted owner of Zucchini Ink, a home-based signshop, she is quickly learning the ropes of how to simultaneously run a small business while developing her entrepreneurial skills. Whether your signshop is a one-woman show or a multi-million dollar fabrication shop, the basics are, well, the basics!

Wendy agreed to the use of her shop’s financials as a leaping-off point to discuss the financial metrics of the sign business, and, hopefully, propel her on the path toward being in the position to invest in equipment, employees and more in the future.

I asked my friend and colleague, Greg Williams of Sign 4, an independent Louisville signshop, to join me reviewing Wendy’s 2021 P/L and balance sheets as a way to mentor her as a team.
Wendy has a small but steady base of business she runs from her home. With her background in graphic design, she does all design work herself and outsources the product from wholesalers.
Greg and I put together some advice to help Wendy “tweak” her results:

Gross Profit Goal of 70%

Wendy is at about 60% gross profit for 2021, excluding labor. However, when measuring gross profit (with or without production labor), be consistent and make changes when something is out of line. Greg and I calculated Wendy’s gross profit simply by subtracting her cost of goods from her revenue.

Greg recommended a much healthier multiplier on the materials she is purchasing. Wendy currently marks up her costs two times — and Greg pushed for more! “My philosophy is that cheap shops close,” he said. Be savvy about buying materials and then charge enough to make it worth your while!

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Graphic Design Rates

Wendy is a designer, so she feels it’s easy to justify doing design work cheaply. She is charging $30 per hour, far below market. “You can charge at least double that,” Greg said. I encouraged Wendy to charge even three times that rate for really creative logo work. With whatever work owners do for their clients, they should charge what it’s worth, so eventually they can hire someone to replace themselves.

Package your design services. Logo work can require unending hours of edits. I encouraged Wendy to sell logo design as a fully described set of hours, so that if the client pushes for edits and changes, she has established that the changes will add cost.

When Wendy and I chatted about these adjustments to her business model, she was immediately eager and interested in getting started! No matter how long someone is in business, staying flexible and being willing to learn are key skills.

Watch for part two of this story about Wendy and Zucchini Ink! Next month we’ll have more tips and ideas for enhancing her bottom line and cultivating an ideal client base.