Basic Pricing Strategy for Startup Heat Printing Businesses

A Starting Point for Startups

Disclaimer: There is so much to say about pricing, especially for home businesses generating thousands (or even tens of thousands) annually. Some even hit six-figure marks—and more power to them! However, this guide is meant to be a starting point for startups: businesses not yet making massive revenue and with minimal overhead beyond equipment and materials. For simplicity, we’ll use custom t-shirts as the example product in this guide. You can adjust the principles as needed for other items.

Step 1: Figure Out Your Cost to Produce

Before setting a price, you need to know what it costs to make your product. Focus on the materials and labor directly involved in each job:

1. Materials: Include all consumables such as:

   • Transfer media (DTF film, sublimation paper, HTV, etc.)

   • Blank item (e.g., t-shirt, hoodie, tote bag)

   • Ink or toner estimate per job

   • Waste (materials used for testing or errors)

   • Packaging materials (poly bags, boxes, tissue paper, etc.)

   • Shipping materials and postage, if applicable

2. Labor: Make sure you don’t forget to account for your time! Break this into:

   • Setup time: Designing, cutting, and prepping the item.

   • Production time: Operating the heat press and finishing the product.

Note: For this beginner guide, we’re not factoring in equipment costs, depreciation, or utility expenses as part of each product’s cost. These fall under your general overhead.

Step 2: Figure Out Your Price

Your price lies at the intersection of three key factors:

1. What It’s Worth

2. What People Will Pay

3. What You Need to Make

Let’s break each one down:

1. What It’s Worth

Start by gathering comparables (or “comps”) to determine the market rate. Look at other businesses offering similar products, including their:

• Product type and quality

• Turnaround time

• Shipping costs (if applicable)

Use this range to gauge what your product is worth. For example, if custom t-shirts in your market cost $17 to $26, that’s your baseline for pricing.

Pro Tip: Customers rarely care about your production method (DTF, HTV, sublimation, etc.). They’re primarily concerned with cost, quality, and turnaround time. Keep this in mind when justifying your prices.

Also, remember the quality-price matrix: the higher the price, the greater the expectation for premium quality and service. Pricing too low may lead customers to assume your product is inferior, while pricing too high sets a luxury expectation.

2. What People Will Pay

The willingness to pay varies based on location, demand, and competition:

• High competition: If you’re in a densely populated area with many t-shirt shops, customers have more options, which can drive prices down.

• Low competition: In smaller towns or underserved areas, you may have the freedom to charge more.

Example: In Southern California, competition is fierce, so pricing is often lower. However, small-town businesses with less competition can often price higher while still attracting customers.

Additionally, online sales introduce a new layer of competition. Presentation and marketing will significantly influence how much people are willing to pay.

3. What You Need to Make

Your profit margin is the amount left after deducting the cost to produce:

• Sale price - Cost to Produce = Net Revenue (Margin)

Your margin should cover:

• Overhead (e.g., utilities, software subscriptions, ad spend)

• Business growth (saving for future investments or emergencies)

Here’s how to test viability:

• Estimate how many t-shirts you can realistically produce in a month.

• Calculate your profit per shirt.

• Multiply these numbers to see your potential monthly earnings.

If you’re only pocketing $200 a month for countless hours of work, it’s time to reassess your pricing or production capacity.

Step 3: Understand "The Middle Areas"

Pricing isn’t always perfect. Here are common pitfalls and how to address them:

1. Not Worth It for You

This happens when what it’s worth and what people will pay meet outside of what you need to make. The result? Your profit margins are too low to justify your effort.

• Solution: Move on to a different product or raise your prices, even if it means losing a few bargain-hunting customers.

2. Not Worth It for Your Customers

This occurs when what it’s worth and what you need to make meet outside of what people are willing to pay. Customers see the value, but the price is simply too high for their budget.

• Solution: Explore ways to reduce costs (e.g., bulk buying materials) or modify the product to appeal to your target audience.

3. Fine Until People Find It Cheaper

This is when what people will pay and what you need to make intersect outside of what it’s worth. Customers may initially pay a premium for novelty or exclusivity but will eventually switch to cheaper alternatives.

• Solution: Save the extra profit and prepare to adjust your pricing when the market shifts.

Step 4: Be Prepared for Market Adjustments

External factors like inflation or supply chain issues can impact pricing. For instance:

• Blank t-shirt costs may rise.

• Shipping rates might increase.

Build flexibility into your pricing strategy and regularly reevaluate your costs to ensure you’re staying profitable.

Step 5: Use a Simple Pricing Calculator

We’ve created a pricing calculator to help you estimate prices and margins quickly. Access it at heat.press/pricingcalculator.

Here’s how to use it:

1. Open the read-only Google Sheet and make a copy.

2. Enter your values in the yellow boxes (e.g., cost of materials, labor time).

3. The formulas in the gray boxes will automatically calculate your total costs and suggested prices.

Example: A t-shirt with $5 in materials and $2.50 in labor might need to be priced at $20 to meet your profit goals.

Final Thoughts

Pricing is both an art and a science. This guide provides a solid foundation, but you’ll need to adapt as you gain experience and your business grows. Take the time to test, evaluate, and adjust your pricing strategy to find what works best for you.

Good luck, and happy pressing!