Learn how to build a better sign and print shop from a few
crusty sign guys who've made more mistakes than they care to admit.
Conversations and advice on pricing, sales, marketing,
workflow, growth, and more.
Your listening to The Better Sign Shop podcast with your hosts, Peter Unis,
Michael O'Reilly and Bryant Gillespie.
All right.
Welcome back to another episode of the Better Sign Shop podcast.
This is part two in a series on the 10 Sign Shop Commandments.
Yeah, we'll call it like a miniseries.
Call it like a mini series
two part episode.
As always the sign Chopta.
God man.
I still love that nickname like.
Five years later.
Four years later.
Yeah.
I appreciate you giving it to me.
It
stuck.
It stuck.
Yeah.
Do clients call you Yoda when you're on coaching calls and Not
necessarily.
Not necessarily, but I do have it as like one of the packages on my website.
So when you go to sign shop consulting and you go to the pricing options, it
says like, meet the sign, shop Yoda.
And I'm like, oh.
That sounds pretty cool.
But I don't show up.
I don't show up in my Yoda ears anymore.
Uh, kind of, uh,
those a one and done.
Yeah,
I'm kind of, uh, letting my kids play with them nowadays.
Yeah.
That's all right.
All of your kids now.
Congratulations again, by the way, on the twins and the growing family.
Thank you, my man.
Thank you.
Yeah.
Uh, did you get that minivan?
Did, did you get that minivan recommendation that I sent you?
I did get it.
Uh, I did I buy it?
No, I did not.
I did not buy it.
Um, I, but I have to tell you, I, I, I, my wife is completely against mini vents.
Okay.
We recently just bought a Yukon xl, an O, like an A used Yukon xl.
Yeah.
The third row, we put our ki our boys in the back.
The girls get their own little captain seats, and in theory,
the vehicle is big enough.
I say in theory because.
My fat ass can't get in the back to buckle my kids into the, into the car seats.
I love it.
And I'm like, if this is the biggest truck on the market right now with a
third row and a trunk, I'm screwed.
I am absolutely screwed because my, my 4-year-old and my 2-year-old sitting in
the back in their car seats and I'm like, can you please buckle yourself in because
Daddy can't like reach over and do that?
Um.
So I'm struggling with it right now.
My wife loves this truck.
Iise, it, it does get a
little bit easier when they can buckle themselves, but like until you get to
that point, yeah, it's miserable man.
I been there like they had we not had the minivan would've been a struggle.
Honda Odyssey all the way, baby.
Just give up on your dignity.
Tell your wife to just like, Hey, we're getting a.
You know, because my wife is the same way, dude.
Like, she did not want to get a minivan.
Like, and she still doesn't necessarily love to drive it because she's always
had cool cars and like, that's the one area where she's like, ah, man,
I, I want to drive a nice, cool car.
Um, and you know, for all the things that she does, she deserves that.
But there's no arguing with the how amazing a minivan is.
You say amazing.
Like I'm actually, I, I didn't say I didn't look at one, so I'm not saying
I didn't look at it and entertain the idea, but the technology in
these things is just, oh my God.
Yeah.
Ridiculous.
I wish I had that, like a push button, turn the seat around, push button,
like the windows and doors open.
I'm like, I have to struggle with my Yukon xl.
I'm like, everything's manual.
Everything's like a lever.
You gotta pull, push whatever.
When you have your hands full, like I'm holding two car seats like this and my
and my kids are jumping in and Oh yeah, by the way, they gotta go in first, right?
Because they're in the back and once you put the car seats in, it's
like you can't squeeze through.
You can't squeeze around.
So I'm kind of living in that world right now where I wish I actually
did have a minivan and my wife is in love with our truck and I despise it.
Um, it's like a rolling tank.
You'll get there one day you'll get there.
Yeah.
Let's, let's jump back into this thing, man.
Uh, do we wanna recap the first five really quickly?
Yeah, yeah, we could, we could, sure.
So this is part two of the 10 Sign Shop Commandments, right?
So we are, if you, if you haven't listened to part one just yet, you
know, hit pause on this episode.
Go listen to part one.
We talked a lot about these Five Commandments, the first five, so
we'll recap them right now, but.
Gross profit margin.
Okay.
Should equal or exceed.
Hopefully you're exceeding it.
60% of your net sales, let's not go be beneath that threshold, okay?
60%.
Let's look at that.
Okay?
Your direct labor, let's look at your p and l here now guys, and let's take
a look at, you know, how much are you paying your direct labor staff?
If you're not sure what the direct labor staff is, go listen to episode
number one and we'll, we, where we talked about it, we brought it up
and we spoke about it at length.
20, should not exceed 20%.
Of your net sales, direct labor should not exceed 20%.
That's commandment number two.
Commandment Number three, your materials, your parts.
You know, your cogs should not exceed 17% of your net sales.
Okay?
Your business expenses commandment.
Number four, your overhead, your business expenses, your operating
expenses, bam, or what, how, whatever you wanna call them, okay?
Should not exceed 48%.
That's your cap.
48% of net sales.
Like let's, we have to break all of that down and penny push to make
sure that that does not exceed 48%.
Yep.
And number five, and we spoke a lot about number five, I can do a whole
episode on number five, maybe a whole series of episodes on number five.
Your advertising budget should not be zero.
Should not be zero, should not be zero, but it does not
exceed 11% of your net sales.
Okay?
So if you're, we, I had a, I had a, a really interesting question
come up from that episode.
I'd like to start here, Brian, if that's okay.
I'm not gonna jump right into number six and, and, and the rest of them.
Okay.
All alright.
We'll just, we had a little bit of a comment.
Let's,
yeah,
we have a little bit of a comment to make here on number five.
Okay.
And I promise it won't take long, but the question was is you're
saying that your advertising budget should not exceed 11% of net sales.
That's true.
That is what I said.
But how do you know what the percentage is?
If you haven't realized those sales yet, right?
So think about that question for a minute.
That's the, that's the, uh, that's the comment.
The comment is, I have to advertise in July to make revenue in July.
True, true.
You can also make revenue in, you know, August, September, and, and,
and every other subsequent month.
But let's just take a look in, in a month, which I think is where
this comment is coming from, is.
How do I know what 11% is if it hasn't been realized in that month?
Yeah.
We spent a thousand bucks on those amazing radio ads that are so effective these
days, and I, how do I tie that back?
How do you tie it back?
I.
I think that's a very interesting comment, and while I don't wanna make
a very long response here, this is why advertising is important because you have
to start at zero somewhere at some point.
If you look at your advertising dollars and you spent $5,000, I'm just gonna
throw a number out there, an arbitrary number out there, and it generated.
$50,000 for you, you're operating at 10%, right?
So you start there and then what does the next month look like?
Do you still have that $5,000 budget?
Are you expected to produce another $50,000 or more?
I.
You start there and you analyze and you make changes accordingly.
Your, your advertising budget is not a set in stone budget.
I think that is what people get confused about.
There's a lot of re there's a lot of vendors out there.
I mentioned a couple on our last episode, and they have monthly retainers.
Like that's just their cost, their cost to manage it, the cost of the ad spend.
You put, you marry them together and there's a, there's a fixed cost to this.
There's a budget.
And maybe you're not doing just one of those things.
Maybe you're doing, maybe you're doing a little bit of SEO, maybe you're doing pay
per click, maybe you're doing BNI, maybe you're doing, you know, ride the wave,
whatever it is, social sponge, whatever.
You're adding all that up and you're getting to a number, and that
number needs to produce revenue.
So your first 90 days is all about.
Experimenting with the budget, experimenting with this ad spend and
the budget and the money that you're spending and seeing what the results are.
So if you're not doing that, you have to start there.
But at a certain point, we talked about this again on episode
number one is forecasting revenue, forecasting lead opportunities,
forecasting this, these data points.
I know that the shop owner that does 4 million knows exactly a
range A, a pretty tight knit range.
Of how many opportunities they're going to have in a month.
Okay.
Uh, not every shop is like that.
I mentioned last episode that one of my $4 million clients doesn't have a
single advertising budget and lives off of referrals, but it's consistent.
Okay?
But if you don't have an advertising budget, you start one, you look at the
results, and you forecast opportunities in revenue after the first 90 days.
Let's just say three months is a good, uh, good measure to see
if something's working or not.
Yeah.
Uh, some people would say that's not a long time to look at.
S-E-O-S-E-O is all farming in a long-term play.
Uh, so I would, and once you start it, you don't really wanna stop it.
Okay.
So I.
SEOs a kind of a different topic.
We'll, we'll, we'll jump off that soapbox a little bit there.
Yeah.
Don't get me started on that one.
So the comment was very interesting, uh, just how do you know what 11% is?
And I thought, yeah, well that's, that is true.
How would you know if you, you've never done it before,
but you gotta start somewhere.
So create a budget.
Say, I'm gonna spend this month, X amount of dollars, and then we're gonna see
how much lead opportunity and revenue it, it drives, and then go from there.
Uh, that, and then, but the, the shop owners that are doing this are
looking at that pretty consistently and saying, I'm on target.
I'm underneath that 11%.
Yeah.
Or not.
Alright, number six,
sign, shop, commandment.
Six.
Earlier in number two, we talked about direct labor.
Now we're talking about total payroll should not exceed 30% of net sales.
Woo.
That's a tough one.
That's a hard one for most people.
Okay.
Um, I'm gonna take a beat and talk a little bit about this.
I feel like I owe it, I feel like I owe it to the audience to explain this one.
I usually see this one expressed in a different way of like,
revenue per employee, but.
Or sales per employee.
There's a lot of formulas out there, Brian.
There's a lot of formulas out there.
Revenue per employee is an, is an EOS metric, okay?
That was created outta the book of traction, and I don't
disagree with that at all.
I, I fully support that metric.
But here's what's very interesting about that metric.
That metric does not show up on a profit and loss statement.
It does not.
Okay.
It does not.
There's no chart of account that says revenue per employee.
Uh, no.
Yep.
So when you look at your total payroll, okay, what is total payroll?
You might have subcontractors working for you.
You might have W2 employees working for you.
People that are commission only.
People that require workers' comp, people that require
payroll taxes to be taken out.
If you're in one of those glorious states in the, in the us uh, people
that take, you know, just everything.
If you're contributing to employee benefits like in a 401k or retire
other retirement field, you know, funnels and things like that,
this is all part of the equation.
When you look at your total payroll, I am talking about every cent that
goes towards your labor force.
I am talking about paying Uncle Sam paying into their retirement paying commissions.
Everything should not exceed 30% of net sales.
So that means you sell a hundred dollars, $30 of it is complete labor, where $20
of it was, was the people that were relating to the the, the product sale.
Yep.
So that's the difference is that you have a $10, or in this case a 10% increase
for all of the other fluff, for all of the other items, for all of the other
people that you have on your staff.
And what that essentially means is.
Give it.
Let's put some real numbers behind this.
If you are doing $3 million in revenue, your labor force should
not exceed your total payroll, your labor, your hourly wages, your
commission, your salaried employees yourself should not exceed $900,000.
If you're doing 3 million.
If you're doing 1 million, listen, I think that're total payroll, that's
a, an eyeopening thing when you sit down and stare at it.
Right?
Man, let tell you something about this.
When you're in the day-to-day grind of a sign shop.
When you're in your, okay, so I'm talking about Jason from Idaho.
Here we go.
Here, I'm, we're going back to you, Jason, from last episode.
Jason, I don't know who you are, we've never met, but I'm, I'm sure that you
are involved in your sign shop and you have employees that ask for raises,
employees that are working overtime.
Perhaps, um, you might be asking yourself, man, should I hire another?
Salesperson, should I hire another installer?
Should I hire another INS fabricator production, vinyl production specialist?
Man, should I hire an inbound CSRI?
In every single one of my weekly coaching calls with my clients,
these questions are being asked.
And if they're not being asked of me or asked to me, they're being asked
internally with that sign shop owner.
And I think I'm just trying to lay, create a new workflow.
My designer should not be taking orders.
No, they shouldn't.
Does that mean you need to hire a sale, an order taker?
Maybe, maybe not.
But these questions are asked hundreds of millions of times around the
country multiple times a year, and my advice on all of this is use this
sixth commandment as your measuring.
Stick
the North star as the,
yeah, use this as your guiding light.
You can look at last month's p and l statement, year to date revenue, and
where you're at in payroll to determine if that answer is even possible.
You know, if you have room in your, much, in your budget, because your o
your total payroll is maybe sitting at 24, 23, 20 4%, you have 7%.
Left in that budget, but with the expectation of, and this is where your
comment can comes in, Brian, is how much more revenue is this employee going to
help us make by hiring this employee?
So whether you have one employee or a hundred, the number of 30%
doesn't change because in theory, if you hire another designer.
That designer should be able to produce more output, which means more revenue,
which means the revenue per employee is, which you brought up earlier, is aligned.
Okay?
Sure.
If you're having a log jam and not being able to produce as much work in
a week in a works week because you're.
Always, you know, clogged with larger jobs.
And it's hard to get smaller jobs across the finish line 'cause there's no time.
And you hire another production guy, okay, how much more production
in a week can they produce?
And that's where that formula makes sense.
And I'm a huge believer in it.
But you can't operate that way without knowing what the
total number is in payroll.
Because if you're over 30% and you have these problems, which is very common, you
may not actually have the right people.
You may not have the right people in the right seats.
You may not have them in the right role.
That's what basically what that means.
And you may not be getting the most amount of output out of
a high performing employee.
Maybe a $40 an hour employee is producing the same amount of work that
a $25 an hour employee can produce.
But he's been with you so long, you've given him raises because he's a nice guy.
Well, the day in and age of doing that is over because you now have
commandment number six, which is.
Your total payroll should not exceed 30% of nest sales.
Is that a, was that a, was that a, did I leave anything out that I think, I
think we kind of hit on all of those points there, but I could be wrong.
Yeah.
I mean, to me, like this is a, this is a great metric.
This is a probably of my, of the 10 Commandments.
This is probably right up there in my top two or three.
My, my absolute favorite is the advertising one because I, I, I, I
go to bat with that all day long.
Uh, but yeah, you know, labor is a, is number two.
It's probably number two for me for sure.
Um, you know, it's talking about total payroll and not necessarily just
direct labor because it's so easy to look at total payroll and say, okay,
but how much of that is directly towards completing a project and.
That's why that there's two KPIs here.
That's why that there's two commandments that you want to really just look at
individually because you might have a great designer and he's putting out great
work and you know he is on a salary, okay?
And he's making those direct labor numbers.
But maybe your total payroll number is off.
Maybe it's higher than 30% and it has, but it has, that's an easy way of
looking at this and saying, it's not really related to my direct labor staff,
because that's, that's at or under 20%.
So it might be coming from maybe you are taking too much money or
maybe your general manager's making too much money, or maybe there's
something being spent more in the, uh, support labor side that it shouldn't
be, and maybe you can cut back and reallocate some dollars elsewhere.
Or we're not pricing high enough, or we're not advertising or making enough sales.
Yeah, that's the other side of that coin that really we just, damn, damn
it, damn it for bringing it up, Brian.
That damn it.
That'll
be, that'll be the next mini series that we have to do.
Right?
Because when you're looking at all of these commandments.
You're saying 30% of net sales or 60% of net sales, whatever the KPI is, net
sales is an inval, uh, what's the word?
It's a variable.
Variable, okay.
It's the, it's a variable.
Meaning did you sell that project for a thousand dollars or $1,200?
'cause if you have the same labor and the same cost of materials
and the same marketing dollars.
That percentage changes based off of what you sold that project for, right?
A hundred percent.
So the other way to look at all of these commandments so far is to
also look at your pricing, which we're not here to discuss pricing.
Okay.
We're here to discuss what are the KPIs of your business, of your profit and loss.
Perhaps the way to fix it all is to raise your pricing.
I'm not saying that it isn't.
Okay.
Perhaps I haven't looked at your pa profit and loss to know,
which leads us into commandment.
Okay, number seven.
Good segue.
Love it.
Your average invoice.
Should equal or exceed $600.
So we're kind of getting into a little bit of the pricing world here, right?
If you start looking at how many orders you produced, you
know, and, and I gotta say.
This is still subjective here.
So I wanna say this with an asterisk.
This is put together for a shop that also is a vinyl shop.
Okay?
So this is not a fa uh, we're not talking about an exclusively like a fab shop.
Somebody that's like building channel letters all day long, or awnings, or,
yeah,
vehicle wraps all day long.
You know, we're talking about.
Yeah, if you're at $600 there, you're, you're hurting.
Correct.
We're talking about your average run in the middle shop that does both
vinyl and a little bit of fab and.
Ultimately, you know, you're not turning, you're not turning down
DOT letters, you know, you're not turning down those window graphics,
the door graphics or the neighborhood
sign shop.
Exactly, exactly.
So we're, we're really speaking to that type of shop.
Your average invoice.
Should equal or exceed your $600 mark.
Now, what is an invoice?
I have to start there because there seems to be some confusion of what?
Yep.
You get it?
Yep.
Yeah, because I'm not saying quote, I'm not saying order.
I'm saying invoice.
Okay.
I didn't say your average quote.
I didn't say your average order said your average invoice.
That means.
Done and paid.
Done.
Completed
and paid.
Okay?
Okay.
That's what an invoice is.
Your average completed job should equal or exceed $600.
You know, so when you think about like, a customer could walk in and
buy a banner or a couple of a-frame signs, or maybe it's a real estate
office that's buying some lawn signs.
Our shop minimum is a hundred dollars.
Sure.
The shop minimums a hundred dollars.
Those, those types of conversations need to go outside the, you know, throw,
toss that conversation out the window.
Okay.
We need to.
Focus on $600 or more in order to be profitable.
Okay?
If our invoices and shop, Fox and Corbridge, and every other basic
POS system will tell you this, how many invoices have you done?
What's the total make the simple division, and you have your total average invoice.
Here's a very interesting point to that.
I said it should equal or exceed $600.
Most shops are exceeding $600.
So I have to say that with a giant asterisk, if you're in this world
of sign shops, you're, you're kind of living in around the seven, $800
world for your average invoice.
So if you see your average invoice in the five hundreds, maybe in the
six hundreds, you're not necessarily, you're still in a critical mode.
You're still in an area of which it is important for you
to, to increase that number.
Yeah.
The way to increase that number again, Brian, take a look at your pricing.
Take a look at your material costs, take a look at your markups,
take a look at your hourly rate.
Make sure that you're charging the right amount.
'cause if you are, and your hourly, which we'll get to here in just a minute, and
your hourly rate should be what it is.
Most projects don't take one hour and most projects take a couple of hours.
So you should be seeing your average invoice go up.
Yeah.
Alright.
It's
low hanging fruit.
Yeah, like if, if you are concerned about raising the price, go watch.
Uh, forget the episode number.
It's with Paul Gardner of Sign Enterprise.
Dude came back after getting some good advice, doubled his pricing.
Did not see any measurable decrease in business, so I was
just gonna, we'll hang that there.
We'll move on
Now.
Earlier we talked about my favorite KPIs and advertising being one,
total payroll being number two.
This is like two A.
Two A.
Okay.
This is like two A.
All right.
You want me to do that thing?
Should I?
Yeah, go ahead, please.
Yes, please.
Okay.
Let's talk about sign shop commandment.
Number eight, lead conversion.
Most people aren't even tracking this, so this is, this might be
like, what does that even mean?
Lead conversion to a quote should equal or exceed 80%.
Okay, let's start with square one here.
If you are not documenting your leads, start doing it today.
They're in my inbox.
Pete, what are you talking about?
If you are getting an email with the questions of how much can you, will you
or I need, that is a lead people, okay?
If you're getting a Facebook message, and some of you do that, some of you
don't, I don't think I ever really did that, but if you're getting a phone call.
If you're getting a walk-in customer, some of you, some of you get walk-in
customers, some of you don't.
If you're getting a walk-in customer, the moment they walk through your
threshold lead, there's a lead.
You paid for that person to walk through your door in your rent
expense, so you better be freaking reporting this information.
An email from a, from a customer, a repeat customer.
It doesn't matter what it's, if you are not documenting this start
today, how do you document it?
Well, it depends on how, what you know, what you wanna do.
If you are using Shop box, take a look at, take a look at the lead function.
Add.
Add a lead.
Simple.
You know, if you're using corbridge, do the same.
Yeah, do the same thing.
If you're not using any of those and you're like one of
those shops that are using like.
QuickBooks and spreadsheets and whatever.
Then you need some form of like intake form.
You need to be able to quantify how many people asked you these?
How much can you, I need questions.
Okay.
Or statements, I guess I need is a statement.
Throw it on a Trello board at the very least, like whatever, like
find some way to like track this.
I mean, obviously like it, there's CRM solutions that are like, handle this.
And that's like for a different day.
Obviously we've got like the, the shop spotlight series going on right
now through the end of the year.
Um.
God.
It's like, yeah, I, I'm with you.
Like, if, if you're not tracking the incoming leads, what are you doing?
What are
you, what
are you
doing?
What are you doing?
You know, you're just quick to say a hundred dollars for that banner.
Like, no.
Where is the consultative nature in this?
Where is the outreach?
Where's the emails?
If you are not getting that name, email address, phone
number loaded into some CRM.
You are so far off from doing what you need to be doing, and I'm sorry
to say it like that, but start.
Start today, okay?
You are not actually succeeding as an owner if you are not doing that.
Now, many of you are, I'm not talking to you.
To those that are quantifying your leads is an incredibly valuable tool that
you need to start doing as a business owner, as a sign shop business owner.
So you get, let's just assume that you are, how many of those
leads are turning into quotes?
That's what that means.
Lead conversion to a quote.
Should equal or exceed 80%.
So let me kind of back up here and just go, if a customer asks you a
simple question, gimme one, give rattle one off here, Brian, let me, let's,
let's role play here a little bit.
I need a birthday banner for my wife.
She's turning 40.
Cool.
How much is that gonna be?
It, let's just assume that that's an email.
Lemme make it really, really simple here.
Yeah.
Let's say you sent, you say, Hey, you came highly recommended.
I have my, what'd you say?
Mother's 40th birthday coming up?
No, no.
Grandmother's, whatever.
My, my wife.
Your wife's Forti birthday.
I don't hear.
Yeah, that would be pretty possible.
Hey, come on.
This is West Virginia, but Lou, come on.
We have standards here,
bro.
Come on.
Okay.
Your wife's, uh, your wife's birthday coming up and you need a, okay.
So I respond in that email and I say, absolutely.
Happy birthday to your wife.
What size banner are you looking for?
And what would you like it to say?
Then it goes dark, then it goes dark.
You hear nothing but crickets.
You send a follow up email.
Hey Bryant, this is Peter again.
Did you get my last email?
I sent you a couple of questions and I would need to know, uh,
before I can give you a price,
go start.
Nothing, nothing, nothing.
That is a, that is a lead that did not make its way to a conversion.
Okay.
To a quote, conversion to a quote.
I think that's to a quote conversion.
When I first read this one.
We, we will talk about the other conversion metric in Yeah.
Down the pipe, but down the pipe.
This is like, hey, lead comes in, does this make it to a
quote that we can then track?
Correct.
So you would get somebody to ask you.
You, you would think that like that.
Bryant's a great customer, you know, but by, you know, he might be like,
I don't know what I want to say.
I don't actually know how big, so I need time to actually think about that,
measure my ceiling in my living room, whatever, and figure out a sign size.
But at the end of the day, Bryant might also go on Vistaprint and order it
himself, go to Staples and get it himself.
Or maybe, you know what?
I actually just walked into a random sign shop and they were able to give me
a price, and I just pulled the trigger.
So that could be a lost lead.
So the goal here is to quote 80% or more of the leads that you get in.
You want to, you want to have something trackable.
You wanna be able to say, here's your quote, and then be able to
have something to follow up on.
Right?
So eight out of every 10 is what I'm trying to say, is the minimum
you're going, if you're quoting six outta 10, you are screwed here.
Okay.
You're not doing yourself any good, any good service.
So eight or better if you're, I have shops that are going
10 for 10, a hundred percent.
Every lead is getting a quote comes through
the door quoting.
Nice.
Yeah.
This is, that's a gold standard.
And now like the, I, I think like the questions that I have here, and I love
that this is on here because it's, to me, it's indicative of, it could be
indicative of a couple of like problems that you've either got like in your
sales funnel or your communication or you know, just a lack of systems, but.
Um, like lead conversion to quotes.
This one, I, I don't know, like if shop box is tracking this for you, or some of
these other systems are tracking mm-hmm.
Like.
Ah, man.
Like this is a, this is a good one.
I lost my train of thought there for a second, so it's all
right.
That's all right.
We're gonna get to the nick.
We're gonna get into the, the nitty gritty here in just a minute,
but the goal here, track your leads to quotes, conversion rate.
Okay.
If you're not doing anything, like shop box, whatever, do a Google form.
It's free and.
Google keep track of how you know how many and how many you converted.
Very simple stuff.
80% or better.
Number nine.
Getting there.
We're getting there towards the finish line.
So let me preface number, uh, sign shop commandment number nine here By
saying this, most of you are starting to figure out what this number is.
You're not naive anymore.
You're not green to it.
You're not making up numbers outta nowhere anymore.
We have talked a lot about this.
We have done shop classes, mastermind classes on this.
Every single one of my coaching clients starts by filling out this tool.
You need to know what your hourly billable production rate is.
Dun, dun, dun.
And most of you are finally catching up.
All right, so if there is a significant improvement in the industry that I
have seen is that there are a lot more of you that are understanding the
importance of this and are starting to pick up the fact that this is
actually a game of selling hours.
We're not selling signs here, people.
I know how silly that sounds 'cause you are selling signs, but are
you selling your signs profitably with the correct amount of hours?
Are you selling what?
Give it to me dude, you're teasing me.
Like let's, okay, so here it is your hourly billable production rate.
Again, we preface this by saying what type of shop are we talking about here?
Okay, so this is, again, you're a run of the mill neighborhood sign shop,
vinyl shop that does some fabrication.
Less than 2000 square feet around that number.
You know, half a dozen employees, whatever your billable production
rate should meet or exceed.
1 25 per hour.
Yeah.
Some people might be looking at their like hourly rate and
saying, I'm charging one 50.
Good for you.
I still don't know if it's right.
We still don't know if it's accurate.
I.
You might be charging a hundred dollars an hour and you might be
like, wow, okay, I want, I need to just simply raise that to 1 25.
No, just don't do that right away.
Look at your real data.
If you're not sure what your data is, ask me, email me.
I'll give you a hourly rate calculator and you could use it.
And figure out what your true to the penny hourly rate is.
Because let me tell you something here.
There's a lot of people out there with some fake ass formulas, okay?
Total hours divided by total employees.
Boom, hourly rate, wrong, not even close.
What is your billable production rate?
Is the correct term, how many hours are you actually able to sell?
Not every employee is working full-time here, guys.
You guys know that 40 hours a week is not what you're, you're
paying somebody 40 hours.
They're not working 40 hours, okay?
So you have to take into a, into account certain factors of downtime and things
that you just simply cannot charge a customer for hourly billable production
rate should meet or exceed 1 25 an hour.
It.
I wanna just take a minute on this.
I, I, i, I won't go too long 'cause I know we only have about
10 or 15 minutes left here.
For those listeners out there that are really dialed into their hourly production
rate, like they know what it is, I'm going to challenge you here because you
should be fluctuating that rate based off of the capacity of your schedule.
Okay, let me, let me explain what that means.
Whoa.
Okay.
I see where you're going.
If you are at one 20, let's just say you're a shop.
You're at 1 25 an hour and you're busy.
Okay.
Busy ish means like, I'm busy, everybody's working, I'm still
taking orders, et cetera.
How much rope do you have left before you're at maximum capacity?
How many more jobs can you take on before you can, you gotta
say, I can't take anymore.
And I know that's an interesting problem to have.
'cause almost none of you out there are saying no.
And if you're not saying no, man, start trying.
Start trying to say no.
That's my biggest piece of advice here.
Because not every job is worth taking.
Every a a vinyl job can disrupt a very large production channel editor job.
The banner that a window perf sign that comes in off the street can disrupt your
workflow If you're not realizing that.
Get to realize that.
Talk
to ton of shop owners that that's the case.
Yeah.
Like, Hey, these little jobs are eating us up.
Yep.
But there is a point where if you want to say yes.
How are you saying?
Yes.
Okay, so lemme, let's just say you're at 80% capacity,
but in order to really fill in the, the, the 10 or or 15% more that you have on
your rope, I'm raising that hourly rate.
I'm raising that not to, not, not keeping it at 1 25, I'm gonna
raise it because I'm gonna be near danger zone on my production rate.
I'm gonna be tearing my hair outta my head.
My team is gonna be.
You know at it on its wits end.
Yeah.
Plea, you know, crying wolf, whatever it is.
And I need to charge more for that because I am needing to be profitable,
at least if I'm gonna go into critical mode and put and overwork my staff.
Yeah, makes sense.
But there's an opposite side to that.
There's an opposite side to that.
And what if you're at one 50 an hour or $200 an hour and you're slow and
you have more on your plate, you know, your, your, your advertising budget is
not converting leads the way it should.
Well, now I'm gonna drop my, my, my rate a bit.
I'm not saying to, to a certain dollar amount, but you know, within
reason to account for more capacity.
So your hourly rate.
This is where people get the hourly rates wrong.
I'm so happy that we're catching up to this because we are talking
about like real numbers now.
We're no longer in the world of like my hourly rate's, $65 an hour.
Like that's just, that was like seven years ago.
We're in the 1 25 now.
Range inflation, cost of goods, the cost of living is increased.
You.
Rent is going up, wages are have increased.
You know, you have to, you have to, at this point, your marketing dollars have
gone up, cost of materials have gone up.
You have to be in this area 125 or more.
But even those shop owners that are dead set in their like number, that
they're confident that that is accurate.
Are not looking at their hourly rate in this, like, floating scale ca way.
Well, it's like they're not looking at it from a week by week basis.
Yeah.
I, I love that view because it's, you know, when you think of it, like, we
talked about this in the pricing course, like we're not selling rubber docks
that are the same every single time.
You, you estimate how much it's gonna cost you in time and materials, right?
So we have to know what to charge for that time.
Now, that's not to say that, Hey, we, we shouldn't be trying to always get
more, even if it's the same job, like it, obviously clients have, uh, different
values associated to maybe the same sign, but like this number is the basis for.
For estimating and your pricing is, is critical.
Uh, but it like having it flexible.
Even more critical.
Uh, yeah, you have to look at your, you have to look at your production schedule.
Like if you're not having the, I love this term, by the way, I, I picked this
up from my Canadian client, your JSM meetings, your job status meetings.
I love that.
I, I've never heard of that before, but your production meetings or
your JSM meetings, I love that js.
Okay.
If you're not having those meetings where you could say like, okay, this
is what we're working on this week.
You probably need to start there where you can understand, like if I'm mapping
this out on a schedule, like think about like, um, think about like bar owners,
restaurant owners that are creating a shift schedule for their staff, right?
Yeah.
They could see every time slot for every individual who's working
and who's working When, I mean, we've lived in that world forever.
That's not going away, but when you're in the sign industry, you can.
Look at your jobs in the same light.
Like this is what we're printing.
This is when it's printing, this is when we're fabricating it.
This is when time for sales.
This is the next
available slot to do this job,
right?
You could visually see how much capacity you have, and if you say,
wow, we can, you know, what is this guy working on on Thursday?
You have more capacity.
You have.
Additional capacity.
So what does that mean?
Okay.
We need to, we know what our break even number is on the hourly
rate, so we can't go beneath that.
I'm gonna lower some of that desired profit margin on that hourly rate to
accommodate for additional capacity to give some more aggressive competitive
pricing to get more orders in that are still profitable, but to bring
on, uh, additional work due to the capacity of our production schedule.
So if you're not looking at your hourly rate in that way.
You should, you should be.
Um, this was one of the reasons why I did like so many hourly rate calculations
with Chatbox back in the day because I was always like, busy, super busy, super slow.
You know, what, what's the lowest that we can go down here?
Then you, you also give your, like your sales reps.
They autonomy there is like, hey.
We can knock the price off if we can get this order committed and into
production because we've got, uh, you know, we've got a free slot, we've got
four hours to fill on Tuesday, et cetera.
Whatever.
Yeah, yeah.
Uh, as part of my shop policy, I would, I always had like a dry erase board,
and I would always write in the top right corner of the dry erase board.
Like this is this week's hourly rate.
Like it would go down, it would go down $5, $10, $20, whatever it was.
But it would always change.
So people were conditioned to look at that hourly rate and always say like,
okay, now I know kinda like how many hours to charge for at that rate based off of
where we are in the schedule and who has closed and who has sold something and been
added to the production schedule or not.
So very interesting dynamic if you're not looking at it that way.
I'm not necessarily saying that you should or you have to.
Uh, but just staying in the black and white world of, no,
my, my hourly rate is one 50.
And, and leaving it alone is probably not such a good idea.
Probably not such a good idea.
And then finally here guys, look, side shop commandment number 10.
Finally here
we gotta talk about your conversion rates.
Okay?
Now we, earlier we talked about lead to quote, this is the next
one, down that path, quote to order, quote to sales order.
Okay?
Conversion rate for quote conversion.
To sales order should equal or exceed 65%.
What that actually means is, is this, you quoted 10 of them, 6.5
of them have said yes, that's it.
Why is
this number so low?
Pete?
That's me.
Why is the
number so low?
That's me playing devil's advocate.
If, for, for the listeners who can't see my face right now,
well, I actually don't think that this has anything to do
with the sign shop's behavior.
Okay.
Pricing, I think this is, has everything to do with the buyer's mentality.
Okay.
If you are a shop, and when you send out a quote, I hate to tell you this, but
you are not selling 100% of your quotes.
If you are, call me.
I wanna be a partner.
Oh,
that's simple.
That's not really disagree with you, man.
I wanna invest in your business.
If you are quoting and selling 100% of your quotes.
If you need an investor, you call me.
That's a, that's a symptom to me, my friend.
No, if you,
if you are earning, if you're selling a hundred percent like you
convert, you send a quote, converts over at a hundred percent rate.
Pricing too low.
A hundred percent.
Oh, oh, oh, oh.
I didn't know where the heck you were going with that.
I'm like, wait a second, here
you are pricing too low.
And that's, that's why I love this number.
It used to come up all the time, uh, because this was one of the ones that's
on that Shox dashboard and it, the dashboard of all the other like softwares
and CRMs, you could see, okay, how many, how many did we win out of this?
What was the percentages?
Yeah.
So let's, let's, let's back up a minute.
Okay?
Yep.
Alright, let's back up a minute.
Assuming that this is the first time that you've heard about all of these
10 Sign Shop Commandments, most shops are not performing well in all of them.
They have some, they have rooms for improvement to be made here.
Um, maybe their average invoice is under $600, which is to your point.
Why their conversion rate would be so high, but if their hourly billable
production rate is at 1 25 or more, maybe there is something to that.
But if it's not and you're converting at a higher rate than 65 or.
If you're closer to a hundred, you are probably underpricing your jobs and you're
not selling them at a profitable level.
Because if you are closing at a hundred percent, why are
you listening to this podcast?
If you are making 30%, 40% profit and you're selling every
job, why are you listening?
'cause you're not doing that because you're not close to doing that.
So the average shop will take eight out of 10 leads and quote them.
And then out of those eight, they are selling 65% of them, and it's due to
a, in large amount of the con of the buyer's behavior and the relationship
that the buyer has with the company and the person that they're talking with.
The reason why it's also 65% is, is to also account for those sign shops
out there that are transactional with their pricing and not.
Mm-hmm.
Consultative with their pricing, you're, if you are black and white, you know,
I have a client, I have a client, I, I won't mention him by name, but I have a
client who is extremely transactional.
I mean his, to a flaw.
His biggest flaw in his sign shop is I.
I don't have the bental capacity to be consultative or even
bandwidth to be consultative.
So it's just order taking.
It's just nothing but order taking the door.
Yeah,
get it in, get it out, get it in as quickly as you can and follow
up with them, uh, on it later on.
Like, can you price me for a three foot by six foot max metal
sign on installed on posts?
Man, if you are not consultative with that, you are screwing yourself.
But if you are in a world where it's like, sure, three by six, enter it
into my formula, single sided, two wood posts, $750, and the customer
says, yeah, the price is too high.
You just lost the lead.
You just lost a sale because you were not constant.
You didn't ask questions.
You don't, you didn't develop the relationship a hundred percent.
So there is a, you have to take into account a couple of factors here.
65% is because of transactional behavior of the sign shop owner, but
it's also about a buyer potentially saying, okay, I got a price.
Let me go shop that around.
Lemme go see if I could get a better price or validate the
price that I was just given.
So you're not selling yes to everything.
And if you are, that's why I made that comment.
If you are, I wanna be your partner because, uh, assuming that
you're doing all of these items, these 10 commandments correctly.
You're closing that much man.
You got yourself an operation that is cooking.
I wanna be a part of it.
Okay.
All right.
And I wanna be part of it.
Ill that.
But if you are not cooking in any of these particular KPIs, uh, well this is, um,
you know, look, I I would also say this.
I've bought sign shops in the past.
I built sign shops in the past.
I've sold sign shop to sign shops in the past.
These are also the, the 10 things that I look for when evaluating
a purchase or an acquisition.
I'm looking at these particular 10 items and saying.
How well is your shop performing?
And if I is a
healthy shop, like Yeah,
if it's a healthy shop or not.
Uh, I don't the, let me say it like this.
When you're putting together a profit and loss statement,
where does your eye go, Brian?
Like when you finally get it from your accountant, your
bookkeeper, where do you go?
Straight to the bottom baby.
How much money did I make?
Yeah.
And honestly, you have to de train yourself to do that as a sign shop owner.
I recently did a financial audit with one of my clients in Miami, Florida,
and he was like, here's my, here's my year to date p and l spread, you
know, every month, you know, he put it into my spreadsheet and I'm like, bro.
Are you realizing that your shop is like performing a hell of a lot better
than how you're presenting it right now?
And he was like, how do you figure I'm only profiting?
I forget what the number was.
It was like 9%.
He was netting 9%.
I'm like, your shop is actually netting 21%.
And here's why I'm able to pinpoint all of these areas of which like
inaccurate accounting or, you know, if these are owner discretionary
expenses that you're referring to here.
And you start eliminating things and getting to the, the meat and potatoes
of, of what these 10 KPIs are.
Man, this guy's shop was like, dude, your shop's performing
like at a 21% net profit margin.
Your cost of goods percentage is slightly high, but you're on pace
to be doing X amount of dollars.
Which if that happens in the end of the year, you're going to
see this, you know, get to that market level of, you know, under.
Whatever it was, 17%, 16%, whatever his cost of goods weren't.
Sure.
So, you know, you could look at a profit and loss very differently, but we are
trained to look at it from a professional and account and a bookkeeper and think
that it's the gospel, but it's not.
I've teach, I've taught you some things here on how to look
at your numbers differently.
A closer attentions to the per to the percentages and.
Little tip, ask your bookkeeper, ask your, uh, accountant that when they do give you
that, uh, profit in loss statement, to also add the column percentage of income
so that you can look at those percentages and not so much the dollar amount.
Okay?
And do the manual calculations yourself, because if you're looking
at this month by month, you're gonna see this up and down, up and down.
If you look at it once a year, you're already too late.
You can't make any improvements, you can't make any, you can't do
anything with the profit and loss.
So look at it monthly.
Pay close attention to these 10 Sign Shop Commandments because if you
are, you're a healthy sign shop.
If you're performing really well in all of these areas, you're a
sign shop that has value, you're a sign shop that can be sellable.
You're a sign shop that can be profitable, and you're probably a sign shop owner.
Sitting on Tahiti somewhere, sipping some margaritas, thanking
me for saying, yep, that's the validation that I was looking for.
Now I can, uh, you know.
Gear myself towards getting, getting on another margarita
or going on another vacation.
So I hope you've enjoyed the 10 Sign Shop Commandments here.
Whether you're aiming to increase profitability or achieve sustainable
growth, these commandments, these laws, these KPIs, whatever you wanna call
them, they are essential rules for your sign shop's financial success.
Boom.
Mic drop.
Pete's out.
What do you think?
Like it?
Cool.
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Thanks for listening.