Success Stories Ep 38 - "The Secret to Maximizing Profitability"

I have a quick question for you?  Are you in alignment with your customers that help you maximize your profitability?

That’s the topic of conversation on this episode of Success Stories.  Shawn LaFave with North Georgia Promotions in Alpharetta, GA will help decode the mysteries surrounding this idea.  He’ll give tips on what you need to do to change your business to make more profit.

If that is something you feel that you need to hear, then stay tuned to this episode of Success Stories!

Transcript

Marshall Atkinson 
I have a quick question for you. Are you in alignment with your customers that help you maximize your profitability? That's the topic of conversation on this episode of Success Stories. Shawn Lafave with North Georgia Promotions and Alpharetta, Georgia will help decode the mystery surrounding this idea. He'll give us tips on what you need to do to change your business to make more profit. If that's something you feel like you need to hear, then stay tuned to this episode of Success Stories. Hey, Shawn, good morning. How are you doing today, buddy?

Shawn LaFave 
I'm doing great. How about you Marshall?

Marshall Atkinson 
I'm doing fantastic. And I can't wait to get into this with you. But I just want everyone to know that we've known each other for a little bit of time here. And we work together on some stuff. So it's really exciting to be talking with you today. Well, thank you. Right, are you ready for some questions?

Shawn LaFave 
I am.

Marshall Atkinson 
Alright. So let's start with just the discussion today on some background information on North Georgia. So what do you do? And what are the markets that you serve?

Shawn LaFave 
Well, our story is a lot like everybody else's story that starts out as a small business in their house, we started out making screen printed shirts, or actually contracting out screen printed shirts and hats and embroidery for Boy Scouts of America because my child was involved in that and we had a market that we could go into and actually do some sales that grew to where I wanted to buy my first single-head embroidery machine. And then after we got our first order of 100 hats, we realized that we can't do it with just one head. So we bought a six head and brought that into the house. And then guess what happens after that boxes get everywhere and nobody's happy at home. So we had to get a retail location. But about a year after moving to that we actually outgrew that because we brought in large format, digital printing. And we were still outsourcing our screen printing out the time, we've had the same heartaches that every other business owner that does his business has had. And that's finding quality subcontractors that will appreciate your timeframe and your expectation of quality. We have the ability to be able to buy our own equipment and do that type of stuff ourselves. And we weren't happy with the quality that was coming back from our contractors around here. So we moved into a 5000 square foot facility. We currently have six heads of embroidery, there are another six heads on order, which should be coming in the next couple of months. And then we also have a 1012 automatic screen printing press as well as a six for manual gas curing oven. And I say that because it's we had to get that based on the type of ink we wanted to run. So we wanted to run water-based and discharge prints. So that works a lot better with that. We also do see our hard good sublimation, large format printing, we're looking at a laser possibly to expand but we're looking at adding more equipment just like everybody else's right now that will help offset the hiring issues and the staffing issues and not having anybody to be able to do all the labor that's typically involved with processes. So yeah, based on some of the prior conversations we've heard in past webinars, we're doing the same thing everybody else is trying to do.

Marshall Atkinson 
Right, and your wife works with you.

Shawn LaFave 
She does. Unwillingly she came in and started working with me when we went to the retail location. But she is our embroidery queen, she knows everything up and down on that her attention to detail is just unbelievable. So she will sew something out five or six times herself after she edits the files to make sure it's going to be correct for the client. And that's what we're known for the quality of the work that we do. We've got great quality, our customers appreciate it and they keep coming back.

Marshall Atkinson 
And your customers are who, small businesses and stuff?

Shawn LaFave 
Yeah, we do a lot of business to business. We do quite a bit of school. We don't do a ton of small-type business. Like when we first started out we were super involved in the Chambers of Commerce and business associations. But we found out real shortly that those businesses are small entrepreneurial businesses that the only thing they can really offer to a business our size is a referral to somebody who's larger. So we've refocused our marketing efforts. to different groups that will expose us directly to those groups rather than trying to get a referral to.

Marshall Atkinson 
Oh, I see. And how did you do that?

Shawn LaFave 
There's a ton of landscapers out here in Georgia, I mean, every one of them has a logoed shirt, or a jacket or a hat. We aligned ourselves with those professional associations for those businesses in our area. And as started marketing through them, so now we're the look at a person when they see something they see us. We also have incentive programs with the other companies or contractors that we already use set up for them to remember us when they're having those conversations with other companies.

Marshall Atkinson 
Okay, cool, right? So today's show is really about profitability. So when we think about changing our business to make it more profitable, what should we be focusing on?

Shawn LaFave 
The first thing that always comes to my mind is, you got to know what it costs to do business, you got to know what your overhead is your utilities, your rent your services, like, like cleaning crews, that could be an extra $300 - $400 a month, internet monthly subscriptions, whether it's for your art programs, or your production management, or CRMs, all that stuff adds up. And it's a constant expense. And you have to try to include that so you know what, your overall cost of doing business is. And then in addition to those costs, we actually include our salaried employees. So we've got three people who are salaried. And we include those wages in that fixed expense of doing business, we do not include the hourly staff that is typically production, because that's included in the job calculations because that's the variable cost exactly, then we bring it down to a per hour cost. And that helps us determine how we're going to price our orders. So we use an Excel spreadsheet calculator, and all we have to do is, let me get it pulled up here. So I can take a look at it the same time, all we have to do is put in the quantity of what we're getting. So for example, embroidery, the first location is it 6000 stitches or less, or whatever the stitch count is, it'll give us a draw calculation of what that actual cost to embroider is, that's the part that includes the labor and the thread and partially backing, we also have nonstandard thread colors. So if by chance, they're having to go to a thread color that's not on the machine, they'll get charged with not a charge for that. Or if there is a color change during the job between colors of garments, they're going to get charged for that. Because all that's just labor.

Marshall Atkinson 
So if we go from you know, using black or white or whatever to like metallic gold, you're gonna have to switch the Kona thread out, and you're charging a little extra for that labor?

Shawn LaFave 
Correct. Or basically, it's great, it's not considered a constant. Because it's something special for that. It's like having to change your pallets from the regular pallets on the auto press to a youth pallet or a sleeve pallet. That's an additional labor expense that's typically not included in your calculations.

Marshall Atkinson 
And of course, your customer doesn't know that because they're just getting the final cost.

Shawn LaFave 
Correct. Yeah, we compare everything combined. We don't lie now. Because, boy, if you ever thought somebody was going to just charge you to death, I think screen printers embroiderers can do that because there's a charge for everything.

Marshall Atkinson 
Yeah, well, I think you see this a lot of times on like, the Facebook groups and stuff about people line item being their costs, you know, how much of this How much for that. And then their customers come back and go, why can get that little bit cheaper? Why are you so high there, it's typically better just to say, hey, it's gonna cost you $9.83. And then that's it. And nobody knows how that price was calculated. And I think that always works better, don't you?

Shawn LaFave 
Oh, most definitely. And we even round-up on everything we're gonna round up to the next quarter. But we also include specialty backing. So in our pricing, we have a standardized backing cutaway. But if we have to go to a performance packing or a no show because it's on a white garment, that's an additional cost that has to be included, then any puffs or metallics or locations and, and then bagging. Then what it does is it takes the cost of the garment, the cost of the embroidery, then the markups, any add ons, we also have a shipping and handling and then it gives us a per piece price, either on cash payment or a credit card payment. So we'll know that the schools are going to pretty much check payment all the time. So we're going to be able to give them a little bit better pricing because we don't have to absorb that credit card fee. Okay, whereas if so, for instance, we'll get a $5 garment at six to 15 pieces with a one location embroidery. That piece is $30.81 with a check payment, but 30 to 35 With a credit card payment, so we're adding a 5% fee into that so that that's not eating away from our profits, because it's the expense of doing business that we can't calculate upfront on the merchant fees.

Marshall Atkinson 
So the spreadsheet that you've built for each little chunk, you've gone in and looked at what that costs, and then marked it up a little bit, or whatever. So everything that's in there, you know, because you've measured it, it's a number, you've quantified it, you put it into the spreadsheet. And that's how you can easily build out your pricing is because you've already done the homework to make sure that the numbers fit. And they're your numbers, right? You're not like averaging all the shops around you and pulling up a price. These are your numbers and your math. Am I correct with that?

Shawn LaFave 
You are and that's exactly right. It does no good to try and sit there and match somebody else's prices in the community or online or anything like that because you're not comparing apples to apples. Everybody says they have the best quality product. Everybody says they're always on time, your actions prove what is it? What is the Shirt Lab motto, "Actions Reveal Priorities"?

Marshall Atkinson 
Yeah, there you go. Come on, Shawn, you know that!

Shawn LaFave 
But people realize when you are good at what you do, and they will come back to whether you're $1, or $2, or $4, higher than the guy down the road or the lady. That's the key is don't think that your pricing is something that should be variable, because somebody asks you to make it variable. If you cannot make a job, a certain level of profitability, don't do the job. Because the calculations that we make, that's over I mean, we've been in business, this is our 11th year coming into our 12th year, that's 12 years of data that we've stored and kept and refigured and updated so that we can continue to keep getting our correct profit margin. And every time I see something that comes in below, let's say a 15% profit margin, we evaluate that, and we do that on every single order. And we need to find out why we do exactly what you've mentioned before. And I think Alli does it as well with that time cube, we don't have the cubes. But we'll go ahead and we have timesheets on the bottom of our invoices. And they'll mark down how long it took to get a job done. And if that labor part is the issue, we try and figure out, Okay, what's causing it to go over when let's say it's only a six thousand-stitch logo, you should only take 15 minutes max per run on that, but you're taking 25 minutes or 30 minutes per run on it, what's causing the glitch to have you become unprofitable and then we rebuild it back out and try and take care of that. So magnetic hoop is a biggie. Right?

Marshall Atkinson 
So I think what really the lesson here is measuring, understanding what your costs are to the penny, and having a system in a process to include that math, in your pricing. And it's built on hitting the profit goals that you want to make. Right. And that is what works instead of just inventing your numbers and just like making them up, which is I think a lot of shops do that. Right?

Shawn LaFave 
Yeah, I mean, don't go out to an online order site and see what they're charging and be five cents less. You're either gonna make a ton of money because they overcharge or you're gonna fail really quickly and horribly. And it's going to be very painful.

Marshall Atkinson 
Right? We want to avoid pain.

Shawn LaFave 
Yes, at all costs. So like I said about the magnetic hoops. I mean, that was a $2,500 investment for six heads, which we're gonna have to do that repeated on every hoop size. Because those hoops make it so much faster to do the job that you can't be without it. So yeah, there's going to be some upfront costs that will ultimately make us more profitable as jobs go through.

Marshall Atkinson 
Oh, how I like to say it is you know, you're paying for it either way, right? You're going to write the check and buy better stuff, or you're going to pay for it with increased labor over time. And then it's just an anonymous slow death that you don't really see. Yeah, but either way, the years costing you money somewhere, right?

Shawn LaFave 
Yeah. And nobody has the extra labor right now to do those things if you don't have to.

Marshall Atkinson 
Right. Okay.

So how could someone do a better job of aligning their customers with what they do best? So what do you guys do here with like, problem-solving and you know your awesomeness, your rocket sauce? How do you line that up with your best customers with what you do best?

Shawn LaFave 
You can't get along with everybody. But the people you can get along with are great. And I find that my clients are very similar to me. If they understand the process, we usually can gel a lot quicker in the beginning process of a relationship. And we understand where everybody's coming from and what their desires are for. But if we're in a different language of communication, where they're always talking, we need the best quality, we need the best the fastest time, but they're always wanting the cheapest price. That's not our business model, we will get it done as quickly as possible. But we're not going to jeopardize any of the quality issues for cost or time. And so we align with clients that have very similar mindsets as us a lot of the business owners are very successful entrepreneurs or executives within big companies. I mean, we go anywhere from a small business all the way up to international companies. It just truly depends on the relationship you build with them. So I don't try to go out and build relationships with somebody who's going to order 12 pieces two times a year or three times a year. That's just not our business model. And, and honestly, there's no way for us to really price that appropriately, to be profitable, as profitable as we would need to be.

Marshall Atkinson 
And so are you center religious around Alpharetta, which is you know, outside of Atlanta, or do you go anywhere in the country? I mean, who was your most of your customers?

Shawn LaFave 
As I like to say we go pretty much everywhere except California. But that's that prop 65 things so sorry, California. Yes, sorry, California. And then we've got family out there. Sorry about that. We're probably about 95% of our business within a 20-mile radius. So we could deliver most of our product to our clients. We do have some that are out of state. We do have some national companies where we're shipping up and down the East Coast for different reps for them. We've brought in a little bit of e-Commerce just because so much of it was brought forward within the webinars that we've been attending and Shirt Lab talking about it. It's not the easiest thing on our side, just because software is something that I think is one of our weakest links right now. Yeah, it's affecting our profitability. But if we get that dialed in and we figure out how we can combine two or three different programs, we'll be paying less per month most likely, we'll be spending less time accomplishing the steps Some processes that we need to have done, and which is ultimately going to make every job that much more profitable, without us having to increase prices. So that's the biggest thing that we're going in 2022 on is to try and get all that flushed out and acting a little bit better.

Marshall Atkinson 
Okay, cool. And so what types of conversations are you having shown with your customers that really help you reinforce your value?

Shawn LaFave 
We do have a concierge service that we offer our a-level clients. And if you don't have a level of clients, ours are top 20%. And everybody knows the 80-20 rule: 20% of your clients is going to be 80% of your sales or your profitability, however, you want to word it. But it is amazing how well that comes out pretty much in every situation. So what we're doing is we offer a concierge service to those level clients, where we'll go in and sit with them one or two times before the new year and say, Okay, what's going on each and every month of the next year? All right, what do you expect from that? What are you looking to have for that? So if they're a company that does a lot of recruiting, they're probably going to have six to eight recruiting events per year. And each of those they're expecting at least 500 people at and they want to give a giveaway that's memorable, that's going to be better than whatever other company is going to be at that event. So we talked about what they wanted, we write everything down, and then we schedule it in our system. So that two months prior to the event, we can reach out to that client and say, Hey, is that event still going on? Are you still traveling for it? Are you expecting the same amount of people is that same item still good for you? The quantity is good, great, let's go ahead and get that rolling for you. We'll send over proofs and you'll have them before the event. So we're the basic reminder for them to do what they've got to do. So we're taking that off of their plate, which I believe is a tremendous value on their side. And that keeps you pretty busy if you do it to your top 20. And honestly, we're probably hitting only about 10% of them right now that actually take this service.

Marshall Atkinson 
And that's something that you charge extra for or is that a?

Shawn LaFave 
That is built-in because of the fact that they are a concierge-level client. So if they say they want to sit down and do it, they're giving me the time that comes in and do it or the salesperson will come in and do it. To me, that's a commitment of them to buy everything they need for those items or for those events through us. And then we basically will put a caveat on that it's got to be at least 25,000 a year in product sales, just so that we're not messing around with somebody who thinks they're bigger than they are. And they really aren't, but they just don't know it yet. And we'll know beforehand, based on their prior years spend like that if they're gonna qualify.

Marshall Atkinson  
And so it's really a question-based sales system where you're, you're asking questions, you're getting in there and digging around and finding out what they need. And then you're solving that problem proactively for them, which is bringing you the value. That's what they think of you the value for them. Because it looks like you're really on top of things because you're really building everything out in advance and making sure that things are going to happen, especially with the supply chain issues that we've been having. Right? And is that kind of sum it up?

Shawn LaFave 
It does. And I'm glad you brought that supply chain issues up that --

Marshall Atkinson 
Well, I'm not happy I had to bring it up, you know.

Shawn LaFave 
 That is... it's not been as bad of a headache for me only because I took the advice of some people that I've heard online before talking about, if you're not prepping for it now you're going to be in big trouble later on. I might even be talking to him right now.

Marshall Atkinson 
Hey, I've only been talking about that for a year.

Shawn LaFave 
But we were very proactive with it, we put a piece on our signature line and all of our emails talking about issues with inventory and things like that. We've actually sent out emails and reminders to customers at every turn. Look, now is the time to order, even if it's four months down the road because you're you might be three months out before the product even gets there.

Marshall Atkinson 
So our customers come to you with items that are not available. And then you're recommending something else because maybe we can't get you to know, a trucker hat but you know, this beanie is available instead. Right? Are you trying to work that way?

Shawn LaFave 
Yes and no. If there's a competitive product out there, that would be a good replacement, then yes, but I'm almost making them come to the realization you know what, you waited too long. There's no way you're going to get this filled in two weeks. Want a specific tap color and quantity. And they're understanding that. So they're actually probably changing from that. I've got a lot of clients replacing it for that event that they currently have a need for, but also placing the order so that they can get it when it does come in so that they're not going to be short-handed the next time. So it's not preventing them from placing the order. We're just trying to find another way to supplement it or get them through the first issue. Because customers still don't know what's going on with the supply chain. And they haven't experienced the delays in shipping until they start sending out their holiday packages. And they don't get them until January or next year. They're not going to understand it.

Marshall Atkinson 
Yeah, well, I think if there's going to be a benefit of this supply chain outage, is the fact that people are using different products. And then in some cases, they're even liking the new thing better. And yeah, they would have never tried it because they like that particular, you know, whatever it is, and they've always used it, and it's just in their brain, hey, we always use this. And now they're having to try something else or like, wow, this is softer, or this fits better or whatever. Have you had instances of that happening?

Shawn LaFave 
Well, we've got a showroom in our facility where we have a lot of apparel on display. So we have our clients, we tell them to come on in and actually check this piece out. It's very similar to what you're looking for. But we have stock in it in these colors. If you want to stay with a full zip hoodie in 30 Plus singles, this is the high only basic item I could find that has that. So they can come in and try them on and feel them. And but most of the time, they're like, as long as they fit the same. We're good. Let's take it.

Marshall Atkinson 
Right. Right. And I know a lot of folks have been not using brands when they quote, so instead of a particular brand, they'll just say it's 100% Cotton, 5.5-ounce shirts in black. And then with the agreement with the customer that we might have to source this in multiple styles to be able to hit that and multiple manufacturers right to hit that. And in most instances, people are okay with that. Have you had instances like that?

Shawn LaFave 
Luckily, we've had to do it. But we've been able to get the same product, we've given them a warning that they're coming from several different warehouses. So there may be a dialect issue, they may be slightly off, but it's the same product, they don't seem to be overly concerned about it just because by that point, their first five to 10 choices have already been out of stock, and now they're desperate. Right. Okay. And one of the things you mentioned earlier about, you know, going online, how do people value us as a business? Right? We've had several of our good clients, call us up, ask for something that is just completely impossible for our business model at this point, because of stock issues they don't you know, they're not there. So they go to an online company that markets real heavily on TV, and they're like, Sure, pull, order your stuff up and get it there and do all this. And then they find out oh, no, they can't get it in time because they don't have the product. So the big thing is, is all of my customers that I've been talking about, where they have something specific and they've got to get it, I tell them, we get the product from the same people, everybody else does, whether they're online or in the shop next to mine. If they say they can do it, I would be very leery of that. And you just don't have the stock. So don't put yourself in a position where you're waiting a week beforehand, you still don't have your stuff, and now you have nothing. And I've actually had two clients calling back this week who didn't heed that warning, and now have nothing for an event on Friday.

Marshall Atkinson 
Right? Well, it's really about those conversations more than anything. And that's what drives that engagement.

Shawn LaFave 
Exactly. And that's the conversation thing. I'm a big proponent of calling to I know, in this day and age text messaging seems to be the way to go or just DM and IM but to me, nothing gets the ball moving faster than a quick phone call, or even a video added to the email. Just saying hey, look, here's where we're at. How can we get this moving? And email and text? It's going to be back and forth, back and forth. And it's going to be a pause because someone went to lunch or had a meeting. And then so you're taking something that can be resolved in three or four minutes and spreading it out the entire day and never and then losing the opportunity to place your orders before the cut-off.

Marshall Atkinson 
Right. Yeah, I'm a big fan of videos in the email. I use Soapbox.

Shawn LaFave 
Yep, we use that as well.

Marshall Atkinson 
All right, well, hey, well, thank you so much for sharing your story of success with us today, Sean. So, if someone wants to learn more about what you do or how you can help them, what is the best way to contact you?

Shawn LaFave 
Either email at shawn@ngapromotions.com or by phone at 770-710-0467.

Marshall Atkinson 
Awesome. Hey, thank you so much, Shawn. Appreciate you, buddy.

Shawn LaFave 
You bet Marshall. Thank you, and for everything you do. I appreciate it.