Posted on Wednesday, December 1st, 2021
“So what do other shop owners charge for their hourly rate?”
We often hear that question from users of the online Sign Pricing Guide and our web app, SignQuote Pro. This Reader Survey gave us the opportunity to put together realistic data on what others use as their shop rate. Many thanks to all those who helped make this a success.
Over 350 readers responded to the survey, and it was a seasoned group of professionals. 90% were shop owners. 64% had been in the business for 20 years or more, and only 10% had less than 10 years of industry experience. 72% were over 50 years old.
So what do others charge?
The survey asked for the shop’s hourly rate by a range. The three largest groups were the $50 to $65 range, the $70 to $85 range and the $90 to $105 range:
Interestingly, one-third said that they have a rate that is $90 or more.
How they determined their rates
How did these sign business owners arrive at their hourly rate? 55% said they calculated it using their overhead and labor costs. 40% said they estimated their hourly rate (often based on what they felt the market would bear) then adjusted it to find a workable rate. Several remarked that what they believed their market will bear influenced their rate the most.
About their businesses
Most have a shop that is between 1,000 and 3,000 square feet:
…and most have between one and three full- and part-time employees:
80% have a digital printer in-house, and 33% have a CNC router. 16% said they have a laser engraver/cutter, and nearly every one had a vinyl cutter. Here’s the breakdown of the type of work that they do:
Finally, the size of their market, which was divided fairly equally among the four categories:
Don’t miss the comments readers shared below, too.
Know thy overhead
For most sign businesses, the hourly shop rate is an essential component of the estimating and pricing process. Without knowing that number, it’s difficult—maybe even impossible—to accurately price a sign project profitably. With a little research and recordkeeping, though, you can find a rate to use as a starting point, then make adjustments to fine tune it.
What goes into your hourly rate?
First, every stitch of overhead for the month, which is absolutely every monthly cost for space and equipment—rent, payments on equipment, advertising, utilities (including internet access and cell phone), insurance—plus 10% for what you might have overlooked. If you use your personal truck for shop use, include a portion of its cost in your overhead.
Next comes labor costs—what you pay your staff and what you pay yourself per typical month, including unemployment compensation, your share of withholding, any benefits, etc. Even if you work alone, you should include what it would cost to “hire yourself,” including the benefits you would get if you worked elsewhere.
Add the monthly overhead and monthly labor costs and you’re almost there. All you need now is to estimate your “billable hours” per month.
Estimate your billable hours
The point of having an hourly rate is that you can estimate the time involved in any project, multiply that by your hourly rate, then add your material costs (including markup) to get a selling price.
To arrive at a realistic, accurate hourly rate you need to know your average monthly costs and the number of hours you work per month that you can actually charge customers for. That number is called your billable hours.
Few, if any, sign people can bill a customer for every single hour that they work. A certain amount of every day is non-billable time: calling a supplier, picking up materials, stopping by to check a sign site, talking to customers on the phone or fixing a piece of equipment, answering email, doing invoices and other bookwork. But you still must cover this time in your estimates and pricing, so you divide your total monthly overhead and labor only by the number of hours you can actually bill for.
How many billable hours do you average per week? Keep track of it for a few weeks and you’ll likely be surprised. Years ago, several SignCraft readers did it and decided that for a one-person shop, 20 billable hours per week was average, and 25 hours was tops.
If you have an employee or two, you must also estimate their billable hours. Again, every minute of their time cannot be billed for. If they pick up materials, clean up the shop, take a break or wait to be told what needs done, that is non-billable time.
Now for the number
Let’s say your shop’s overhead is $4000 per month. You have one part-time assistant, and your average monthly labor costs are $7000 per month. That totals $11,000. If the two of you average 30 billable hours per week, that’s 120 hours per month. Divide $11,000 by 120, and you get $92 per hour as your hourly rate.
If you want to make a profit, which is money you deserve for taking the risk of being in business, you need to add that percentage to the basic hourly rate. If we add 10% to our $92 rate, we’re at $101 per hour.
That’s on the low end of what other trades charge—like mechanics, appliance repair and HVAC service companies. These vary somewhat with the size of the market and region, but it is still a fairly common rate for those businesses.
What they had to say about hourly rates
There were a lot of thoughtful comments on the issues of pricing and hourly rates. Be sure to read through them to see what fellow sign business owners think on this subject:
“Pricing is a BIG issue. I know shops who have spent hundreds of thousands of dollars on equipment, and work more hours each week because they charge prices from five years ago! And I know small shop owners who have other jobs, but just want to make a few bucks doing signs.”
“The sign business has been a fun way to make a living, especially for the artistic types. It’s a way to release some of the creativity. But as I wind down, I would like to remind everyone to make an exit plan early in your career. Retirement is going to get interesting.”
“Stick to your guns and sell your value.”
“We have been holding our hourly rate down but it has to go up due to rapidly rising costs. Employees also need higher pay for their needs.”
“I came up with my hourly rate by talking to other owners in my area and asking what they charged.”
“I recently revised my pricing due to the examples set forth in the SignCraft Sign Pricing Guide. Thank you for that extremely useful info—I had not been charging the right amount for several years.”
“I began with a student rate of $35 per hour and have worked up from there. I still feel like I am undercharging at my current rate.”
“I charge $75 per hour for regular shop work and $100 per hour for hand lettering/pinstriping.”
“It has been my experience that signs have a greater value than the combined cost of materials and labor. The expertise and equipment to produce even simple signs is considerable. There will always be someone around who will try to beat your price by a nickel to get a job, but stick to your guns and don’t be swayed by customers who are trying to save a buck. Do good work, treat everyone fairly and pay close attention to the paperwork. I believe this will ultimately lead to success.”
“Your hourly shop rate is so important. However, many don’t see it that way and just ‘wing it!’”
“Our shop rate is a minimum. We often increase the rate based on what we are doing. Hand lettering, for example, is at least $150 per hour.”
“I feel my hourly prices are too low compared to other trades in the area, but don’t feel the market will bear much more yet.”
“I add for inflation of materials and cost of living increases. We should increase our prices to have more money for newer equipment. We are located in an area with a population of 130,000 and growing fast. We are the major sign shop in our area and have been making signs since 1948.”
“Love the online Sign Pricing calculator!”
“This rate of ours is just for in-shop work. We also do a lot of sub work for out of the area sign companies, and then we charge by overhead plus a percentage of that total. Pricing is a real challenge due to competition that work out of their home, out of their garage, are unlicensed, etc.”
“In the beginning I chased sign jobs and shopped competition and adjusted my pricing. My sign work is established now and customers pay for MY quality work. I no longer pay attention to the quantity of jobs that come in, and if price shoppers go elsewhere, that is fine.”
“I’m still trying to find a good solid price point that is balanced with my experience level yet pays a specialty artist wage. I’m going higher with each job and choosing more clients who are willing to pay real prices.”
“We have recently done the math and raised our rate based upon current costs. This also reflects adjustments due to supply chain issues with associated costs and inflationary costs of utilities.”
“Great idea to do this survey and thank you! I’ve been in biz for over 35 years and have watched a lot of sign companies come and go over the years. All the cheap low labor rate companies are now out of business because they didn’t understand labor rates and overhead. The hidden costs kill!”