The Lower Cost of Direct to Garment Printing in the Custom T-Shirt Business
Direct-to-Garment is just one method that people use to produce custom tees and start a custom t-shirt business, and these hidden costs apply to every one of them.
When most people think about getting into the custom t-shirt, embroidery, bling or heat transfer business this is the way they estimate how much money they can make:
Sale price of the t-shirt = $25.00 – Cost of the shirt itself at $4.50 – Cost of direct to garment printing ink $1.50 = $19 in profit
Of course, they apply the costs of their chosen apparel decorating method in place of direct to garment ink. It could just as easily be rhinestone transfer material or screen printing ink.
While that is actually a good start to figuring out whether there is profit potential in the business, they’re a long way from figuring out what actually goes into the cost of that finished and delivered garment. Many equipment vendors, including ColDesi, produce simple ROI calculations based on specific equipment and the costs of creating specific designs, but only YOU can determine what your actual costs will be.
We’re going to use Direct to Garment or DTG Printing in this example, but you should apply the same ideas to whatever type of custom t-shirt business you’re starting.
Direct to Garment Printing
Direct-to-Garment has a few advantages of the other technologies that we’ll point out here so you’ll know to calculate them differently if you’re pursuing a screen printing business for example:
- No set up costs – a DTG printer is a computer peripheral just like any other inkjet printer. That means that if a customer gives you artwork, you can simply open it in your RIP software and print it onto a t-shirt ( you may not want to). Screen printing has an additional step of producing the screens themselves, which is a significant cost. By the same token, both Rhinestones and Embroidery will have (or should have) digitizing fees associated with each job because you’ll have to spend the time to convert an image into the appropriate kind of file.
- No minimums – there’s really no difference between producing 1 shirt and 50 shirts with direct to garment printers, minimum orders may be part of your business plan, but they’re optional.
- Color doesn’t matter – once again when you screen print a custom t-shirt the number of colors you produce impacts the number of screens you have to make. That makes full color much more expensive. There is a difference in cost for the amount of DTG ink used, but it doesn’t really impact your costs that much. With rhinestones, you do have a similar consideration though as there are some colors that cost a LOT more than others, so a rose colored design might have twice as much cost associated with it than a blue.
Having gotten that disclaimer out of the way, let’s take a look at some of the “Hidden” Costs that don’t usually end up in the custom t-shirt entrepreneur’s calculations.
#1: LABOR – Mostly Yours
Yes, even if you work for yourself you still have to calculate your labor costs in order to get an accurate picture of how much profit you’re going to generate.
Let’s say that you can print a particular custom tee for a customer in 5 minutes. With “hooping” time and back and for to the heat press, etc you may be able to produce 10 shirts per hour. Let’s also assume that those original numbers are correct and you spend $5 between the shirt and the ink and in your market, you can get $20 per finished shirt. 10 Shirts/hour at $20 each = $200.00, – $50 in ink and blank shirts cost is $150.00/hour.
Wow, $150/hour is GREAT MONEY!
If you work 8 hours/day and multiply that by $150/hour that’s $1200 every day in profit – right?
Nope. First of all, you’ll need to allow for paying the operator..even if it’s you.. something. That labor has value! Once you have an hourly labor cost you’ll attribute to yourself in these calculations you can apply it to the following Hidden Costs too:
If you’re a one-person business, especially if you’re a one-person business, an hours’ worth of actual printing and production time might take 2 or more hours to administer. Here are just a few things that will take time, and add labor costs to a typical job:
- Sales Time – how much time did you spend on the phone with this customer? Did they visit your shop or did you meet them at a networking event? Did you spend a day on outbound phone calls and had to make them for 3 hours before you found this one customer? That’s all labor cost.
- Accounting Time – What percentage of your day was spent creating a quote/proposal, calling blank suppliers about your order, making your invoice? How about ordering your DTG inks or other supplies to complete the job.
- Shipping & Handling – packing and shipping are just part of handling costs. Are you using branded boxes? Mailing labels? Did you deliver the product yourself?
There are a hundred small things that go into processing a specific order. Is the example order still going to be profitable for you? YES, it almost certainly is, you just have to do a realistic assessment of the labor costs involved.
Overhead, in general, is often overlooked when estimating whether or not a job will be profitable. But since many new direct to garment printing or custom t-shirt businesses start from a garage or home office, especially since the new Viper2 dtg printer will actually fit through a regular doorway, not dividing up the gas bill won’t contribute too much to costs. Taxes are another story altogether.
Tax codes differ by State, and often by County as well so you’ll need to consult and accountant to make sure you’re staying on the right side of the “Revenuers” and local governments. The big killer for many businesses is forgetting to collect sales taxes and pass that on to the appropriate authorities. The Florida Department of Revenue, for example, sends you a coupon book to declare your Sales and taxes you’ve collected, and you need to fill that out even if you make NO sales or you can accrue penalties.
You will also be taxed directly on your income, depending on how your company is set up. If you’re just starting out and using your social security number as your tax ID you’re still in for something new.. you STILL owe the government(s) income tax. And one thing you don’t want to do is to try and stiff Uncle Sam.
Remember, you need to follow the law and make sure that all that time and effort you spend, or the money you invest in a bookkeeper or accountant, makes it into your profitability calculations in some way.
In all the business calculations I see, the one line item that is typically missing from every category is one for Errors and Mistakes.
Here are just a few ways that screwing things up can impact the cost of doing business:
- Ordering supplies and blanks – you don’t order enough blanks, or the wrong ones, and have to overnight them to make your deadlines. How much is that FedX next day going to cost? How about doubling the cost of thread or backing with freight because you ran out? Neither of those is even close to what happens if you have to have a liter of ink or pretreatment overnighted! (here’s a great article on supply management btw)
- First Shirt, Cap or Bag Mistakes – No one is perfect, and the custom t-shirt printing process requires skill and practice no matter what technology you use. So it is reasonable to assume that when you go to complete that 50 shirt order you may not get the first one, or the 5th, exactly right. Maybe you accidentally folded the shirt on to the ink while it was wet, forgot to set it to print white, or maybe you assigned the wrong color to your embroidery design or messed up the hooping position.. whatever it is, a mistake will cost you 2 things:
- Time – to do it right and to reorder the blank
- Money – for the garment and supplies you wasted
These mistakes feed off of each other of course. If you mess up a shirt, but only ordered exactly enough for the job you’re doing you’ll have to overnight a replacement and of course if you haven’t ordered supplies with mistakes in mind you may run out of those too!
Making Money in Custom T-Shirts and Direct to Garment Printing
Direct to garment printing, just like most types of custom t-shirt business techniques, has propelled many entrepreneurs into very successful businesses, so don’t let Labor Costs, Taxes, and Mistakes keep you from starting your own. In fact, because you’re doing the research that led you here, your chances for success just increased!
If you’re ready to learn more about DTG and the Custom T-Shirt Business visit http://www.dtgprintermachine.com
You can also take advantage of the following resources:
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