When we started in business and first got an accountant, a lovely lady who carried lots of files around in a small cardboard box, she told us, very disapprovingly, that the first thing new businesses do is buy 'an expensive motor car' before they've even started earning any money.

Probably good advice. From long experience I would offer my own advice.

The moment you start in business, or even before the doors open, you should have a very clear idea of 'accounts', not in the sense of what you show to the taxman, he's of secondary importance, but in the sense of what you are actually spending in order to produce what you hope will earn you a living.

What I'd like to do here is give you a very basic insight into my experiences advising a startup printing business. Printing is, after all, fairly basic and widespread, but more importantly, the principles involved are universal. Same applies to the fact that nowadays, printing is much simpler since so much is done digitally. But again, principles remain the same.

The story was that a local small printing business was near to drowning, and being a friend, retired, with business experience, I was asked to come and help them out.

The company went through the usual print stages, artwork, films, plates, printing, collating or folding. The boss accounted for every stage. Good. But not good enough.

He would charge for films and plates for example, but not for the time and chemicals involved in processing them.

He would charge for printing at so much per thousand. But no allowance for setting up, wastage, and cleaning the machine afterwards, or indeed interim cleaning when two or more colours are involved. The cost of ink had somehow got overlooked, though at least paper was costed, though no allowance for the time involved in ordering and making payments.

Also no allowance for 'overheads' - an account's word that covers a multitude of sins... rent, local rates and taxes, building maintenance, write-down of any capital investments, electricity, heating... you name it... and make sure you account for it.

I also worked for a printing/publicity firm in Beirut, Lebanon. There, costing was even more important, not just to ensure you have a profit at the end of the day, but also to get around the perennial problem of haggling. Give the client a price and inevitably there will be a reaction of feigned amazement, that you can charge so much more than 'other printers I've been to'... all in the game of course.

So what we did was to itemize.

We produced a form to be filled in for each job. How many hours artwork at so much per hour. How many films, how many plates at so much each. In each case, the unit price printed on the form would be our purchase price plus 10% for ordering, accounting and wastage, as well as general overheads like rent, electricity etc. Since the client would not know the prices of films and plates, this was not an area in which even a Lebanese could haggle.

Printing time must allow for setup, as well as cleaning the machine after each colour. Machine time must be very carefully costed, allowing for original cost, any on-going payments if bought on credit, plus an estimate for writing-down the machine's value. Ink, cleaning fluids and all the other incidentals must also be accounted for. Post-print trimming was also included - an obvious necessity, as well as folding. Not one of these minute details could be argued as being dispensable, and the price per unit or per hour was seen as a technical detail, a fact of life, rather than a price to be disputed.

So far so good. Every detail had been accounted for, every bought-in item, plus time involved in ordering, accounting etc. If the total was what the client paid, the firm would make a profit - just. But at least we'd still be in business!

Now for the coup de grace, the final blow. We total it all up, then add 15% profit.

Our Lebanese customer had been thwarted because he could not argue the 'technical details' of any cost so far incurred, but now... 15%??!!! No way! So come the protestations on both sides. From the customer: '15% is way too much', or ' surely 'for me you can offer a better price...' Then from the printer's side: 'we have to stay in business, we have eat, do you want us to be gone tomorrow... I have a family to feed, a wife and three young children... we have costly overheads to cover... rent to pay...'

Eventually the 15% comes down to 8%... 'my last word' from the exasperated printer. And you keep it quiet, it's a special price for you.'

So we've covered all our costs comfortably, and added an additional 8% for comfort. And it all comes down to two vital elements.

ONE: cost everything, right down to the smallest item, the inconsequential yet vital small things, the time in ordering, accounting and paying, processing, chatting to clients, machine cleaning... everything you can think of which contributes in any way to the process of doing business. OMIT NOTHING.

TWO: add a haggle margin. Add your 10%. Probably in 'the West' there won't be a dispute, but for a good client, or those with the prospect of becoming one, make a gesture of good business. Having reached the final figure, you look at, mutter a moment to yourself, look at the figures again, then say 'we could probably knock a bit off for a good client' with a smile.

OK, there's a certain amount of theatre. But the essentials remain essential.


And for each item costed, add at least 5% for admin and general overheads... and your holiday fund!

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