Embroidery machines make money; that’s their job. Your job is to keep them running! This is where we run into a dilemma; the more time you spend in front of your single head machine, the less time you spend in front of current customers and prospective clients. However, you need to spend time selling, to keep your embroidery machine stitching. Finding the right balance is the key to unlocking the profit potential of your business.
If you are the owner of 1 or 2 embroidery machines, you are most likely a very small business. It may be just you; possibly with the help of a couple other people. Everyone wears multiple hats, and usually has more than one thing going on at the same time. This is the nature of a small business, and how you remain profitable. You want to maintain a healthy cash-flow, and still experience growth. You may feel stuck on top of a fence; you are unsure if you can afford to invest in another embroidery machine, yet you know you need another machine to increase production and have the ability to fulfill larger orders. What is the right move to make?
The answer to this question can be simple. If you know that you can earn more money with an additional machine, get one. This sounds almost ridiculously simple, but it’s true. If you own a single head machine, and it cannot keep up with your orders, you are losing money. There is even business you have lost, and not even realized it. Someone else offered to deliver it faster, and cheaper. How? Because they can afford to, your competition had the right amount of embroidery heads to balance production properly. If a project takes you 3 hours to complete, and you profited $225 from it; you have earned $75/hr. If you doubled your production capability (added another embroidery machine) you now completed that same job in 1.5 hours and made $150 per hour. Another thought, what would you do with that extra 1.5 hours that day? Maybe try to contact that prospect you have been hoping to close, or work on a new flyer, or take some time to learn something new to offer your customers? Now, you are not only increasing the amount of profits you generate per hour, but also giving yourself the opportunity to grow your business in new ways.
What if the answer isn’t so simple? Sometimes you don’t know you will earn more money with an additional machine. This most often happens to the smallest of businesses. It may have taken you a long time to ramp up your business; you may have just recently gotten comfortable with your cash flow. Now you really need to evaluate your time, especially if embroidery is a 2nd job for you. The above example still applies, if you spend ½ the time standing in front of your equipment, you can devote more time to increasing your sales and overall profits. The fact remains, if you increase the number of sales calls you make, you will increase your sales. There is a quote from Jim Rohn, a famous American Entrepreneur and Author, “To succeed in sales, simply talk to lots of people every day. And here's what's exciting- there are lots of people!”
At this point, you may agree with me; yet conversely thinking, “I don’t have a spare $10-15k for an additional machine.” This, naturally, poses a problem with business owners. I want to expand; however, I have not saved enough capital to make a further investment. There is an answer to this, equipment leasing and financing. Business owners are often leery about accumulating debt for their business, and rightfully so! I would not advocate anyone getting over their head in payments, nor putting yourself in a position where you can barely make monthly payments. The risk of going into a negative cash-flow would be dangerous. Nevertheless, refusing to finance anything (even when it’s an obvious benefit to your business) could be considered a bit stubborn. No one likes paying interest, yet consider this. If you could lease a machine at $300 per month, to earn an additional $2000 a month in profits, wouldn’t it make sense? Expanding these numbers over a 5 year term, you would pay $18,000 in machine payments to earn an additional $120,000 for your business. Yes, you will pay $18,000 for a $12,000 machine; however, isn’t there a point where that cost is justified? Also, that $18,000 in payments will reduce the bottom line on your taxes. Thus, you have a fantastic tax deduction, increased production, and increased profits.
At this point, you still may hold some reservations about leasing your embroidery equipment; with good reason. Making a financial commitment isn’t always an easy decision. Consider the following points to determine if leasing is right for your business.
- Lease companies will look at business and/or personal credit. They will have minimum requirements just as an auto or home lender.
- The lease expense will not show up on your credit report as a debt therefore not decreasing your personal credit score.
- New businesses, even brand new businesses, can lease equipment. Often times up to $25k with a minimal down payment.
- Leasing offers important tax benefits that reduce the cost of obtaining equipment. Depending on the type of lease, the lessee may be able to write off the entire monthly payment as an operating expense.
- The payment is fixed, you can budget this payment into your monthly costs of operation without any ambiguity.
The choice to lease your equipment should be properly thought out and justified. I do not advocate leasing without proper planning, but as said above, refusing to lease just because of the negative connotation given to debt, can be an equally poor decision. Taking pen and paper to this decision can be the best tool for your business. Answer the following questions on paper: How much is the total cost? How much is the lease payment? How much faster will production be with the new equipment? If this new machine produces the same amount as my current machine, how much will my profits increase? At this point the choice should be fairly clear. Also, a long forgotten idea is just talking to other successful business owners, what do they do? Triple Olympic Champion, Jean-Claude Killy said, “The best and fastest way to learn a sport is to watch and imitate a champion.”
All too often business owners are turning away orders, taking too long to fulfill, or not spending time learning techniques to increase their product lines. This single head stagnation can and will put business owners into a rut of working all night, and not making enough money. A single head machine is a fantastic way to get into the embroidery business; you can easily earn profits and start a new business with minimal risk and capital. However, it is best to see it as a means to an end; rather than just the end. Your embroidery equipment supplier has packages to help you expand your business, take the time to determine when it’s right for you, and I am confident you will be glad you made the move. When it comes to stagnation, I always thing about one of my favorite quotes from Success Coach and Motivational Speaker, Anthony Robbins, “If you do what you've always done, you'll get what you've always gotten.” What are you going to do different this year?
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