Episode 169 – How To Figure ROI

Custom Apparel Startups

Episode 169 – How To Figure ROI

https://customapparelstartups.com/wp-content/uploads/2022/04/CAS-Episode-169-How-to-Figure-ROI.mp3

This Episode

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Mark Stephenson & Marc Vila

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customapparelstartups.com

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CAS Podcast

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ColDesi

You Will Learn

• What is ROI
• How to Calculate ROI
• What is Cashflow

Resources & Links

• Colman and Company Blog
• ColDesi Learning Center
• Leasing Equipment

Episode 169 – How To Figure ROI

Show Notes

Those letters – ROI – are thrown around a lot in almost every business.

Technically, it’s Return on Investment – but just what does that really mean?

What is an ROI?

When you put money into a business endeavor, ROI helps you understand how much profit your investment has earned. Looking at potential ROI numbers, and going back to review them over time helps you to make solid business investments.

So WHY should you care? Why figure out ROI at all?

Businesses look at ROI a few different ways, and they’re all helpful in figuring how profitable your business might be based on how much money the equipment cost.

ROI – How long will it take to make in profits what your equipment cost you?

• For example : let’s say you bought at $10,000 t-shirt transfer printer
• And you project you’ll make $10 for every shirt you sell using it
• Sell 200 shirts per month and you’ll make $2,000, which means your machine is “paid back” in 5 months
• Sell 500 shirts per month and it’s paid back in 2.

If the expected life of the printer is 5 years and it pays for itself in 5 months – that’s a great investment! Because that’s 55 months of owning the equipment outright and making $2K per month. You spend $10K and make $110K.

The number everyone is seeking is the net return: I want to make $$$$ to put in my pocket. That is your net return.

In other words, if you spend money on something, how much could it potentially make you in profits?

The Financing ROI

This is how you might do some math when you are financing your equipment. One of the concerns people have is “this machine costs $X a month, is this something profitable or something I can afford?”

Let’s do the math above, but talk about payments.

Payment = $300 / month
Sales = 100 shirts a month
Profit = $10 per shirt
Net Profit is $1000 a month – $300 payment = $700 net, or $8-9k a year. And that’s running a machine for maybe a day or two a month!

One could say if you sell 30 shirts a month you can “afford” a payment

What is a Net Return? (for comparative investment costs)

A net return is the investment’s return after costs.

You purchase a $10,000 machine and sell 1000 shirts a month for $20 each. That is $20000 a month. If you run the machine for 5 years that is $1,200,000 in revenue.

However, that is not your NET return. Your net return should deduct costs like:

• Cost of printer
• Cost of shirt
• Cost of supplies for each shirt
• Cost of doing business (state fees, credit card fees, website
• etc.

So the net return above would be more like:

$1,200,000 Revenue
– $10,000 machine
– $600,000 in shirts/supplies (at $10 per shirt for shirt, ink, etc)
– $5,000 in business fees (yearly cost to do taxes, register with state, etc)
– $30,000 in credit card fees
= $555,000 Profit

Now of course this is SIMPLE math and there are other fees to consider, or your costs could be much less, or profit much more. It’s important to consider these numbers as you make plans, goals. etc.

How to calculate a SIMPLE ROI when determining your next business investment? or your first investment? In other words, are you considering buying your first machine or an additional machine? You will need:

• Cost of Equipment
• Estimated profit per piece
• Estimated number of sales
• Estimated cost to run equipment
• Estimated life of equipment

Once you have some of these numbers, you can crunch them to determine what your potential ROI is, and make a choice if its the right decision for your business.

So you are thinking, “Do i want to buy an embroidery machine, or a DTG printer?”

Embroidery:

Cost of Equipment – $10,000
Estimated profit per piece – $15
Estimated life of equipment – 10 years
Estimated sales – 40,000 units (4 pieces per hour, 4 hours a day, 20 days a month, 10 years)
$15 profit x 40,000 units = $600,000 or $60,000 per year

DTG:

Cost of Equipment – $15,000
Estimated profit per piece – $15
Estimated life of equipment – 5 years
Estimated sales – 55,000 units (12 pieces per hour, 4 hours a day, 20 days a month, 5 years)
$15 profit x 55,000 units = $825,000 or 165k a year
In this example we can see how the DTG printer is a better business based on how THIS business operates.

Here is a COMPLETELY different example, same machines.

This business might have a lot of customers willing to buy high end shirts, and SOME customers wanting to purchase embroidery.
Embroidery:

Cost of Equipment – $10,000
Estimated profit per piece – $100
Estimated life of equipment – 10 years
Estimated sales – 12,000 units (4 pieces a day, 25 days a month, 10 years)
$100 profit x 12,000 units = $1,200,000 or $120,000 a year

DTG:

Cost of Equipment – $15,000
Estimated profit per piece – $10
Estimated life of equipment – 5 years
Estimated sales – 40,000 units (8 pieces per hour, 4 hours a day, 20 days a month, 5 years)
$10 profit x 40,000 units = $400,000 or 80k a year

In this case the business should go with the embroidery machine. They are more likely to sell high-end expensive embroidery, compared to their customer base not really being interested as much in high end shirts, and not near the volume.
Further… this business owner might say LET’S DO BOTH!

Another Example:

You invest $10,000 in a business. This could be a printer, supplies, etc.

After one year this business grosses $50,000.

Your Net Return = $50,000 (Gross Return from investment) – $10,000 (initial investment) = $40,000 Net Return.

Then $40,000 (Net) / 10,000 (Initial) = 4 x 100 = a 400% Return on Investment.

This was an amazing investment for your business, especially considering it’s not just a one year return, but this equipment could be 3, 4, 5, or more years in return.

Transcript

Mark Stephenson: Hey everyone, and welcome to what I think is episode 169 of the Custom Apparel Startups Podcast. This is Mark Stephenson.

Marc Vila: And this is Marc Vila. And today we’re going to talk about how to figure out ROI or return on investment when you’re looking to purchase some equipment.

Mark Stephenson: Yeah. And we’re using that term kind of specifically, because that is the term that finance people and bigger business people use to talk about the money that they make when they invest in equipment. What you may be asking is, “How much money am I going to make? How much money am I going to make in my business? If I buy this, how much cash am I going to put in my pocket? How quick can I pay it off?” Those are more common terms.

How to figure an ROI, that return on investment is something very specific. We’re going to talk about what it is technically. And we going to review a little bit on what that means for cashflow if you finance it, but most of the time it’s going to be writing a check or investing in a piece of equipment, figuring out how long it takes to pay it back.

Marc Vila: Yeah. This also goes into, “Can I afford this piece of equipment?” That’s kind of a concept in any business, cashflow has to deal with it. And if you’re a startup or you’re a particularly small business, mom and pop type of a thing, you will look at investing some of your money or bringing on a new payment, kind of as another bill. And, “Can I afford to add this bill or can I afford to take this money out of savings or profits or borrow it?” Whatever you want to call it, and this can kind of help you comfortably do that math on your own. So you can look at it and then just comfortably say, “I clearly can do this.” Or say, “Okay, there’s a risk involved.” Or, “This is a good idea.” Or whatever outcome you get based on some good math.

Mark Stephenson: Yeah. And also, if you’re in a position where you are looking at borrowing money or getting local investors, maybe asking family if they want to invest or going out to a wider circle of friends, maybe you know a money guy, you’re going to say, “Hey, I’ve got this business idea. Here’s what I’m going to need to start it.” The next thing you’re going to say or talk about or write about is going to be, “Here’s the ROI on the money that I’m going to spend.” And a big chunk of that is going to be probably your biggest expense when you first get started, is going to be whatever you’re going to use to make your custom products.

Marc Vila: Yeah. And this could get really complicated and convoluted. And when we’re talking about investing, investing in stocks and bonds and things of that nature, there’s a million more things to talk about, but we’re going to break this down for just anybody who’s kind of regular out there. You’re pretty good at math. You can do some math. You want to try to get an idea and you are trying to explain this to yourself, your business partner, or like you said, somebody who might be willing to invest, or even a local bank that you might be borrowing from, this will give you a really great educated way to speak about it without having to be any type of a financial analyst.

Mark Stephenson: Right. Okay. So Marc, why don’t you start it off and talk about just why should you care and why should you figure out the ROI?

Marc Vila: Sure. So when it comes to business and return on investment, as I mentioned, there’s a lot of different ways is to discuss it. And what does it mean? And there’s a lot of terms. But really, it’s how much money are you going to spend on something? And we’re going to talk about equipment, but this could be advertising dollars, it goes for a lot of different ways. You could do this-

Mark Stephenson: A building.

Marc Vila: Yeah, a building. There’s a lot of different ways, but we’re going to talk about equipment. So how much am I going to invest in this piece of equipment. And then, how much will that make me, how much is that going to turn into profit for my business. Right away, over time, how quickly will you ramp up. That’s a lot of what we’re going to be covering with this.

Mark Stephenson: Yeah. And how maybe how long it takes for it to pay for itself.

Marc Vila: Mm-hmm (affirmative).

Mark Stephenson: So you’ll know after. That’s kind of what I think one of the big advantages of writing a check for a big purchase like that, whether it’s Digital HeatFX or a DTG printer, or even one of the direct to film printers that we’ve got, is if I write this check for $30,000, and I’m going to make $2,500 a month in profit because I own it, then it’s going to pay for itself in a year. That means year two, it’s all profit. Year three, it’s all profit. Year four, it’s all profit. So that’s another good way to look at what you’re looking for, for ROI, is, “How long is it going to take me to pay back the money that I borrowed or used in order to buy it?”

Marc Vila: Yeah. Something that a lot of folks listening to this will be familiar with, and if you have you ever been pitched it or made the jump to do this, is something with your home. Solar or windows are big on their kind of turn on investment pitch. And what does that mean, is that this solar roof, I’m just going to use numbers that are wrong, but $10,000. The roof for the windows are going to cost you $10,000, and it’s going to save you on your electric bill. “Well, how much?” “Okay, well, it’s going to save you $100 a month or $1,200 a year.” Somebody looks at that and says, “Gosh, it’s like eight years before I pay it off. I don’t want to do that.” And they’re not interested.

Compared to $5,000 and 150 a month, now that time… “Oh, okay. Well, now it’s just in a few years, then my electric bill will be lower for the next 10 years I plan on living here. And I’m going to save $10,000. So I’m going to go ahead and upgrade my windows now and start getting ready for that money to get back in my pocket.”

And I think that’s what you’re talking about there, Mark, is that initial investment, if you think it’s going to take you five years to get your return on a piece of equipment, you might not think that’s a good investment for your business. It’s just way too long to get that money back.

Mark Stephenson: Yeah, I like that.

Marc Vila: Compared to if you’re going to pay it off in a few months.

Mark Stephenson: And I’m just going to throw in one more thing, just to make it a little bit more confusing and that’s, you want to do your ROI calculation to figure out if that’s the best thing that you can do with your money right now. If you are starting a business and you have $20,000 in the bank and you’re buying $18,000 worth of equipment, is that the best use of that money? “Okay. Let me see. Let’s do some math. See how long it’ll take me to replenish that bank account.”

Or if you’ve got that 20 grand in a shoebox under your bed, versus taking out a home equity loan on your house, or partnering up with somebody or borrowing it from somebody, then all those things, you can’t make a good decision until you know your ROI, which is what we should probably get to.

Marc Vila: Okay. Let’s do that then. So maybe, do you want to start to talk about… You mentioned something that I find to be one of the most intriguing things when it comes to ROI, and that’s, you buy a $10,000 printer and you paid cash, whatever, however you did it. You’re not doing a long term lease, you’re doing something short term, a credit card or cash. And about how quick till you’ve paid it back and it’s kind of all profit per se.

Mark Stephenson: Yeah. While a lot of businesses will just write a check for a piece of equipment, is it affects your depreciation, first of all. It’s when you can take depreciation for it, et cetera, that you should talk to a tax pro about it.

But more importantly, if I buy something for $20,000 and I’m going to pay it off in two years, that means that in year three, everything that I produce with that piece of equipment is going to be profit. In year four, everything’s going to be profit. In year five, everything is going to be profit. So the idea behind buying a piece of equipment, and then looking at your ROI when you get to replenish that money that you took out for it, is how quickly you get to a super profitable business. You don’t really have to worry about things monthly. Write a check for $10,000, you make $1,000 a month from it. That first 10 months, you put all that money back in the bank. And now, you’re at zero. Now, that equipment is free, except for maintenance and labor. So now, everything that you make, every time you sell a shirt, you have a much more clear and easily decipherable profit, because you own that piece of equipment.

Marc Vila: I like this. You’ve got $20,000 in the bank from your business, and you decided to take 10 of it and buy a printer or an embroidery machine. And then now, you have 10,000 in the bank and an embroidery machine.

Then you start making money with the embroidery machine, and you put $1,000 back in the bank. By month 10, you’ve got your $20,000 back and you own an embroidery machine. And then by month 20, you’ve got $30,000 in the bank. And month 40, you’ve got 40,000, and so on and so forth. And then at the end of it, you may have $100,000 in the bank, and then the embroidery machine is maybe retiring at that point in time. And so, there’s kind of the return on that cash that you made as you grew your bank account by taking some cash directly out of it and investing in a piece of equipment.

So following this, we’ll talk about kind of how you can do some math on those numbers before and after you make the investment.

Mark Stephenson: Yeah. And if you’re a finance pro that’s listening to this, try not to cringe. We’re trying to use the simplest version of all these calculations and make it clear. And everything that we tell you is useful. We promise it’s very useful to go through all this. It may not share the same vocabulary as someone, if you’re talking to a financial planner or something like that, they may use different words for all these same ideas.

Marc Vila: Mm-hmm (affirmative). For the finance pros or folks that know about this or are really good with this stuff, so I just Google searched, 93% of Americans experience some level of math anxiety. 17% suffer from high level of math anxiety. This is according to Yahoo!

Mark Stephenson: Okay, they know.

Marc Vila: Yahoo! Finance.

Mark Stephenson: Wow. Okay.

Marc Vila: So saying that, that’s the reason why this is an important episode. So if you’re part of the 7%, then we applaud you and we know you’ve done this. But if you’re part of that 17%, that has a lot of math anxiety, this episode’s clearly for you. And if you’re somewhere in the middle there, I think it’s only going to help.

And I remember, Mark and I have had these conversations back and forth about equipment. And I know over the years I’ve learned so much just by us having these thinking and talking conversations in a simple mode, not in finance pro mode.

So where do we step into next? We should start doing some math, I think, unless there’s anything else to go before we get into the scary part.

Mark Stephenson: No, why don’t you start doing the basic math and then we’ll talk about the difference between what financing ROI looks like.

Marc Vila: Okay. All right. So again, this is simple. This is almost in your head or pencil math, simple stuff you could do on a calculator.

So you’ve purchased a $10,000 printer. And everything that needs to go in it, you spent about $10,000. And you’re-

Mark Stephenson: By the way, we did a great episode on how much things cost.

Marc Vila: Oh, yeah.

Mark Stephenson: Your printer, there’s a wide selection of t-shirt printers that you can get from ColDesi for $10,000.

Marc Vila: Yeah. You can get started from anywhere, from a couple thousand dollars. Honestly, less than $1,000, all the way up to $50,000, depending on what your production and needs are. But a very common number is about 10-ish thousand. The most amount of people are kind of getting in that range. It’s a very powerful piece of equipment. It does a lot. It’s full commercial, so it’s just very common. The payment’s affordable, things like that.

Digressing, so you’ve done some math, that you can make about $10 a shirt.

Mark Stephenson: And we’ve helped with that because we’ve surveyed our customers and found that to be a very low, reasonable profit. Most of them make a little bit more, but a lot of them make 10 bucks a shirt.

Marc Vila: A lot of them do. And most people over many years of surveying and asking, are saying that 10 is a clear number that they do. And some folks in the screen printing business, they’re only charging $5 a shirt. But that is a different business than we’re talking about. We’re talking about digital printing. We’re talking about higher end type of shirts. And that’s what most people who are looking at our equipment are looking to produce. They’re not looking to mass produce 10,000 shirts at a time for four bucks a piece. They’re looking to do orders of 50 or 100 shirts that might be 20 bucks a piece.

Mark Stephenson: Okay.

Marc Vila: Okay. Just saying that too. So let’s say you’re going to make $10 a shirt, and we don’t have to get into the numbers of what you’re selling it for, but just for fun, we’ll say all your business costs, the t-shirt, the ink, running the business, the accountant, the electricity, all that stuff costs you 10 bucks a shirt.

Mark Stephenson: Okay.

Marc Vila: And then you charge 20. So you’ve got 10, you put in the bank. That’s the simple math we’re going to do. If you sell 200 shirts a month, you make $2,000 a month. 200 times 10, you just add an extra zero for the, whatever word you would use to be afraid of math, people. Times 10, you add a zero at the end. So $2,000 a month. That means your machine is paid back in five months. So 2,000, 4,000, 6,000, 8,000, 10,000.

Mark Stephenson: So I just want to stop and say something remarkable here.

Marc Vila: Sure.

Mark Stephenson: 10 bucks a shirt in profit is not a stretch.

Marc Vila: Yeah. No.

Mark Stephenson: Selling 200 shirts a month, it’s 10 orders of 20 shirts. It’s 50 shirts a week. It’s not a lot of shirts. So we’re talking about paying off a commercial t-shirt printer in five months, not doing a lot of shirts, not spending a lot of money. It’s a remarkable ROI. Talk to somebody who’s buying a Subway franchise.

Marc Vila: Yeah, it’s a good point. And also, if you’re doing like 10 shirts in an hour, I’m just going to do all zero numbers, just so the math is easy.

Mark Stephenson: Yeah, we’ll get to…

Marc Vila: But if you’re doing 10 shirts in an hour, 200 shirts, we’re going the opposite way. So we take a zero off, is 20 hours. That’s five hours a week. If this is a side gig thing, and you’re looking to do 10 hours a week is what you want to put into your side gig, you got five hours to do the business stuff and sales and talk to customers, five hours to do production. There’s your 10 hours a week and that’s $2,000 a month. That’s a side gig that a lot of folks are doing in this business.

So going further with the math, if you’re selling 500 shirts a month you’re paying it back in two months. So that’s kind of how you’re kind of doing some of this math on what this return on investment is. And we’ll extrapolate on this further.

Mark Stephenson: But the sentence that you can say at this point is that if you’re doing your back of the napkin business plan, and you’re saying that, “I’m going to spend $10,000 on this piece of equipment. I’m going to invest in it. And I think I can sell 200 shirts a month at a minimum. My ROI is five months. I will have this paid back in five months.” If you’re talking to an investor, that’s a pretty strong statement. That, “After five months, I’m going to take your $10,000 and now we’ll be in profit mode,” which is pretty impressive.

Marc Vila: So I find all this stuff to be pretty interesting because you can play with all of these numbers. And you can get deep into the math and you just start writing them down. “What I’m looking at, I think I could sell my shirts for more. I can sell them for 15. What does that math look like?” “Well, I’m not trying to work that many hours. I want to work much less. What if I only put eight hours into it?” There’s a lot of math. There’s a lot of fun math you can do once you get used to it.

So now, let’s talk about financing, I think, unless there’s anything else you want to cover there?

Mark Stephenson: Well, you made a little note here about life expectancy of the printer.

Marc Vila: Oh, okay. Yeah. I apologize. You’re right.

Mark Stephenson: I think that’s good to talk about at this point, because your equipment is not going to last forever, it just won’t. This laser printer I have back in the corner, I think it was made in like 1978 or something like that. I print with it five pages a month, maybe, on average. You’re buying a commercial piece of equipment that you’re going to use all the time. If it’s an embroidery machine, it’s going to be running for days or hours, every week. It will last for a long honking time, but it won’t last forever. You should plan in on it becoming obsolete in X number of years, so you can work that out in the long term math for your business. So you’ve got a great life expectancy of a printer, is about five years.

Marc Vila: That’s great. After we talk about financing too, we’ll kind of jump into some other ROI stuff. We’ll talk about that long term number at the end, and how long you expect it to live. So we can talk about how much money will I make over time. So right now, we talked about a quick ROI, meaning how I invested this much money, how soon till I get that money back in the bank.

Next, we’ll talk about financing, which is going to be… “This is my payment. How much work? How much do I have to sell to be able to make my payment for me, where it’s break even?” Because a payment of $300 costs you $300 out of your pocket every month until that equipment is making you money. And you’ve got $300 that the equipment made you. Now, you’re at break even and so on. And then we’ll talk about the life of your printer. So that ROI over time, how much did it make you total in the end? And then, that becomes a case for reinvesting in a new one-

Mark Stephenson: Decision making.

Marc Vila: Yeah.

Mark Stephenson: Okay. So I like that. So financing an ROI is cashflow. And that’s my favorite thing. I love cash. I like to keep it. So if I start a business, I’d be less likely to write somebody a check for the pizza oven if I’m starting a pizza business. I’d be much more likely to be the person that tries to figure out what’s best financing deal I can get, so I get a low monthly payment, because as you can see, when you look at that $10,000 purchase for a printer, then it gets paid back in five months. But in that five months, if all you’re doing with that $2,000 that you make, if that’s what you make, then you are not taking any cash yourself. You’re not taking anything back. That’s putting everything back in the business.

You don’t have to do that of course, you can extend it out. But if you finance it then it’s really reasonable… Marc Vila has got an estimated payment here at around $300 a month, which is super high, but it’s easy to figure. Because you figure right now you could probably get a $10,000 piece of equipment for around 240. So at $300 a month, now you’re not dealing with that $10,000 that you’re looking for necessarily as your return on investment, you’re dealing with that on a monthly basis.

So what’s my monthly ROI? What’s my monthly cashflow? That’s when that financing people are flipping out a little bit, because it’s not ROI. It’s positive cashflow. So when I think personally about ROI, I’m thinking about, “I’m spending this much a month and I’m bringing in this much a month.”

Number two has got to be higher than number one. So if you’re doing $300 a month in an equipment payment… What was the math you used? You’re making $10 a shirt?

Marc Vila: Mm-hmm (affirmative).

Mark Stephenson: So that means your break even is it 30 shirts every month. So now, if you are selling those 200 shirts, you’ve got 170 shirts that you get to keep that $10 a shirt. So you are putting 1300 bucks in your pocket right away. Selling the same number of shirts, using the same piece of equipment, selling the same customers, it’s just to different way to use the money.

Now, the number won’t look as good in the end because you’re paying interest on that loan potentially. The way I think about the finance ROI too, is if you only have $10,000 in the bank and you want to buy a $10,000 piece of equipment to start your business, is it really a good move? And this is up to you, is it was a really good move to empty that account and invest in that equipment and not have enough money left over for a bad month, or something happens at your office, or you get sick and you can’t work, or you don’t have that cash buffer?

Marc Vila: That makes a lot of sense. And there’s the concept of looking at the interest that you’re going to pay over time because you see that. And especially, if you’re new to doing this for business, you will look at that because you’re used to looking at that for your car loan and your home loan. Like, “Gosh, if we’re going to buy this $30,000 car, it’s going to cost me 50 grand in the end.” And that’s how folks will look at a piece of equipment. “Oh, I can’t believe this $10,000 equipment’s going to cost me 15,000 with interest.”

But you make a good point. It’s the risk and reward, but really, and this was something that was a conversation that we would have a lot with folks when I was in equipment sales, because I’d have folks that would decide to not do it because of the interest. It’s going to cost. And that’s when this kind of math here comes up, is the payment’s 300 a month, like we said, just doing easy numbers. You sell 100 shirts a month, at 10 bucks a shirt, means you make $1,000 a month. You have a $300 payment. You’ve netted 700 a month. If this is your dream and this is what you want to do, you’d get over the fact that the bank profited all of that.

Mark Stephenson: Yeah. I’m not going to say the interest doesn’t matter, because it’s important. But how many months do you have to not start that business before you make up for that? So in other words, if I’m going to make $1,000 next month before I financed it, and at the end of the lease, it’s going to cost me an extra $5,000 for a $10,000 piece of equipment, then in five months, I’m already in a better space. Because you’re not going to do anything next month. You’re going to decide not to do anything because there’s a less than attractive interest rate on the equipment. So okay, you’re not going to make 700 bucks next month. And then the following month, you’re not going to make 1,000 bucks because your business would’ve gotten better. So it’s not an easy decision.

Marc Vila: Yeah, it’s not, but if you do this math and you consider it, that’s where it becomes easier to know what’s right for you. And by the way, all these numbers we’re making up, it’s all fictional stuff. There’s 0% interest finance out there. We have folks that do stuff on a credit card, that’s 1% or 0% for years. There’s leasing. There’s tons of stuff. We’re just using numbers just to visualize, rather than just abstract.

Mark Stephenson: Yeah, nobody take notes and say, “Mark Stephenson said it was going to be 15%.”

Marc Vila: Yeah, exactly.

Going back to the example, just wrap this up, is a $300 payment. We already said, if you’re making 10 bucks a shirt, you need to sell 30 shirts to be able to make your payment without going negative at all, which is wonderful. Then if you sell 100 shirts a month, 10 bucks a shirt, that’s $1,000 a month that you bring in net before your payment. Because we’ve already said that the 10 bucks is after the cost of the shirt, the cost of running the business, all that stuff. So you’ve made $1,000 a month, after your payment that’s 300. You now have officially netted 700 because we’re siloing out this payment as an expense just for conversation. So $700 a month. If you stayed flat at that number and never sold more than 100, that’s about $8,000 or $9,000 a year, running a machine for a couple days a month because that’s how long it would take to make 100 shirts.

Mark Stephenson: So if you were in the internet marketing business, you’d say that the machine’s not costing you anything.

Marc Vila: Yeah.

Mark Stephenson: It’s paying for itself and handing you 700 bucks. So that’s another way to look at it. But you can see the difference. Imagine you’re sitting down in front of somebody that you’re talking about starting your business and you want them to invest, or you’re just explaining the numbers to make sure that you’ve got a good idea and everything works. You’ve got two choices. “I can either take the 10 grand that you’re going to give me, and here’s what the ROI is like, the payback is like. Or I’m going to finance this 10 grand, and here’s what my monthly cashflow is like. Pros and cons to each one.”

Marc Vila: So then we can go into kind of a net return type of a thing. So a net return on investment, and this isn’t super technical, again this is just layman, is how much money you’re going to basically make when the whole thing is done. That’s what we’re going to return. And finance folks will talk about this in making some long term investments and stuff like that. And that’s kind of what we’re referring to it as that.

So you buy a $10,000 machine and you’re selling 1,000 shirts a month at 20 bucks a piece. So you’re making $20,000 a month. After five years, it’s over $1 million in revenue. So this $10,000 investment over the five year life, created you $1 million in revenue for your business. And that’s how especially big businesses and small businesses alike are looking at something.

We don’t have an e-commerce store. We think we’re missing out on $10,000 a month in sales, if we start up an online store. The online store is going to cost us $20,000 to make. And that store, before we have to rebuild it again is going to be good for five years. That means all of this money is going to be made by spending this little bit amount of money or a lot amount of money now, seemingly. Were you going to say something?

Mark Stephenson: Yeah. So here’s what I like about this, I like something about every way of looking at this idea. And in my personal business life, I look at it in every one of these ways. It’s a good way to check your decisions. But what I really like about it is it highlights the difference between the people that start and the people that never get started.

We see a lot of comments, especially on the embroidery machine and the Digital HeatFX. People just getting started, they’ll say, “Wow that 300 bucks, that’s like a car payment. I could buy another car for that.” Yeah, but you’re going to add up what you spend on that car over five years, and you’re going to add up what you make with this printer over five years, and the difference is going to be $1 million. This is really kind of the reality of the situation. So if you’ve got these net return numbers and you have the wherewithal to look at what your business might be like after five years, then you get a much better perspective on, “Oh, man, that paper’s expensive. How much does it cost to replace the white toner? I need a reciprocator. I’ve got to have somebody come out to my business and help reset up my embroidery machine, because I dropped it off the back of the truck.”

These things take on a different perspective if you have all of these numbers written down and like, “Oh, it’s okay. It’s hard now and that sucks. But my net return after five years, if I keep this up, is this.” And you should be excited by that no matter where you are in the process.

Marc Vila: Something that you mentioned there is kind of the big picture thinking versus like small picture thinking. “So how much does it cost for ink or toner, to buy a set or something like that, or a box of paper?” or whatever it might be, is a reasonable and valuable question to know. You should know all of that, but it’s much less important to know how much does it cost to replace an ink cartridge than it is to know how much does it cost me to make each garment, each piece each month. That’s much more important to know, because that’s going to be a lifetime thing. If you are charging the right amount of money and doing your math correctly, because you know how much it costs to make, then you’re going to know how profitable you’ll be. And when it comes time to replace those things, like ink or something like that, you’ve earned the money to do it because you’ve been charging enough per garment to add up for that cost, whatever it might be.

Mark Stephenson: And it’s tough because it is a change in thinking. So we have this kind of frustrating conversation with people all the time, where it’s Digital HeatFX in particular. Let’s say that a sheet of A and B is $4. Let’s say it costs you $4 for 11×17 sheet. And people think that’s expensive, that’s very expensive. And they may not make a decision because of that. They may have decided against it because of that. But if you’ll notice, we didn’t qualify that $10 profit in the t-shirt when you sell it. It’s $10 a shirt. It may be 11, it may be 15, it could be nine. But most of the time, it’s $10 a shirt. That includes whatever you’re spending to make the shirt.

So why does what you’re spending to make the shirt matter if the numbers work at $10 a shirt? Because there’s always a trade off. You mentioned, Mark embroidery a few times, it may cost you almost nothing for thread and backing, but it may cost you 15 minutes to make a polo, where with Digital HeatFX, it may cost you $3.50, $4 or something for the A and B paper, but it takes you five minutes to make a shirt. It’s just this wide range of things that go into making the point of this is how much I’m going to profit.

Let’s say I told you that you could make $1,000 on a transaction. You can sell a shirt to me for $1,000, but you’d have to spend 500 bucks to make it. Would you take that deal? If your answer is no, you should probably not get into the business. Because I just said that you’re going to make 500 bucks, but all you can think about is that you’re going to have to spend this money to get it. And I think that’s a fundamental difference in the way business people think, versus regular consumers that just have a job.

And it shows up, or it should, if you are thinking that way, don’t give up, listen to this again. Look at the notes and see if you can’t convince yourself by actually reading the math on these things, that spending money to make money is good.

Marc Vila: All right, I’m on board on that.

Mark Stephenson: I think I got a little big picture there. I got a little-

Marc Vila: We did. And you mentioned something I think is just worthy of commenting on, it’s a little bit off of this net return number we’re going to talk about, but it does have to do with it, is costing $4 to make a shirt versus 50 cents to make a shirt, versus pennies to make a shirt. These are all very, very relative things, depending on what’s being delivered. So if you wanted to do a left chest logo, like I’m wearing on this, how much was this with the DTF printer? Do you remember?

Mark Stephenson: Gosh, I think it’s like four cents a square inch.

Marc Vila: Okay. So it’s like a nickel.

Mark Stephenson: 50 cents.

Marc Vila: Yeah. Okay. So on a Digital HeatFX, for example, I did some math on this recently, but if we’re saying it costs like five bucks to print a sheet of paper, I’m just doing a high estimate number, and you can get 25 of these on the shirt. It’s five divided by 25, that’s 20 cents to make. So the DTF one is probably closer to a quarter of that. So it’s 25% of the cost to produce it with one technology versus the other. Flip that, if my business is on demand printing, medium to small quantity, I’m not going to go to our DTF printer to make one shirt.

Mark Stephenson: Exactly. Good point.

Marc Vila: It’s a little bit of a thing. It’s a process, because you’re doing production and with the Digital HeatFX style printer, if you just want to make one shirt for one customer, five minutes, you’re done. With the DTF, you might be setting up for five minutes just to get it running, and you wouldn’t want-

Mark Stephenson: At least eight minutes before it makes its first print.

Marc Vila: Okay. So eight minutes. So there’s a difference in that. So depending on the business and what you’re doing, some things make more sense than others. So that is part of this equation when you’re considering all this math, and we’re going to get into some comparisons, I think after this.

Mark Stephenson: Yeah. Okay, good.

Marc Vila: I’m going to digress back to the net return. So I did some quick math up here. You bought a $10,000 machine and on average, you’re selling 1,000 shirts a month, at 20 bucks a piece. That printer’s going to last you five years, you do that math across it, that $10,000 printer has earned you $1.2 million in revenue, gross, before you take out any costs. So now, this has happened. So we’re looking at the machine, you’re going to retire that machine today. So you’re going to do the math on what’s happened over the past five years. So you have your big number on top, 1.2 million. You take out the cost of your machine, 10 grand. Now, you’re going to take out the cost of… Because we didn’t talk about profit, we talked about gross. A million bucks ended up in your bank.

Mark Stephenson: Different conversation than what we had before.

Marc Vila: Yes. Correct. This is how much money has literally got put in the bank, when you look at deposits only, not withdrawals. Now we’ll start taking out some withdrawals. So you withdraw the 10 grand, you withdraw $600,000 in shirts and supplies. And I did that math at 10 bucks. Can-

Mark Stephenson: So the only thing that I would change there is the cost of the printer, that you paid the 10 grand, or whatever the sum of your financing was.

Marc Vila: Yes. Okay. Good point. So yes, if it was that 15,000 before that you said, then it would be 15,000. If you bought it with cash, it’d be 10,000 even. If you did whatever it might be, 0%, you might be 10,000 even too.

Now, we have $10 a shirt in cost because we have… And for the sake of our math, we’re doing $10 cost, $10 profit, $20 shirt. Just to be clear. Just to make the math simple, to say out loud. So you have $600,000 in supplies. That’s ink, transfer belts, paper, t-shirts, all your supplies. Then I just said $5,000 in business fees. I just mean just stuff. You pay a tax guy a couple hundred bucks a year, you pay the state 100 bucks a year, whatever it is. I said 1,000 bucks a year in fees, just to give some room.

And then, maybe there’s some other business fees you didn’t factor in, like credit card costs. So you do that too. You add maybe 30 grand to the credit card for that 1.2 million.

Visa’s cashing in, right?

Mark Stephenson: Yeah.

Marc Vila: Side note.

And then you could have other things that you pull out of this. And if you have one piece of equipment, it’s kind of easy because everything relies in this one piece of equipment. If you have multiple, it gets complicated. But in the end, the 1.2 minus, minus, minus everything I just mentioned ended up about $550,000 profit over five years. So with this simple math, you’re doing over $100,000 a year in profit for this business, based on that $10,000 piece of equipment that you invested in.

So this quickly becomes a case that it’s clear I replace this printer. Because I want to do that $100,000 a year again, continue with that. And that’s kind of how you can look at all of your different pieces of equipment over time, is you kind of do some of this math for each of them.

And if you have five pieces of equipment, you can start looking at, “Well, the spangle machine is my best net return by itself.” Meaning of percentage wise. “But my DTG machine is the one that brings in the most cash.” And then you could determine, “Well, I probably want to invest in a second DTG machine, so I can up that production. The margin is not as good. The percentages are not as good, but I’m bringing in the most cash.”

Conversely, you could say, “I should just get another ProSpangle machine because the investment’s just simple. I know I can produce more. I can make more. I can sell more. And that’s got a super fast ROI and the net in the end is huge for the investment.” And this is part of the decision making process.

Mark Stephenson: Yeah, I love that.

Marc Vila: So we’ve looked at three things now. One is just you’ve wired someone money, how quick till you get that money back, and then your bank account grows.

Then we looked at the financing ROI. You didn’t wire money. You borrowed money and you have to pay it back at X amount of dollars a month. So every time you sell more than 30 shirts, 20 shirts, whatever the number is, that’s money that is for your business, towards your profit.

Mark Stephenson: Kind of a cashflow arm.

Marc Vila: Cashflow, that’s right. And then we had the net, “At the end, this is what happened at the end. I spent this much on machine. I spent this much on this. In the end, this is how much that one piece of equipment has earned my business.”

Mark Stephenson: Yeah. And that’s the ideal situation, if you have the benefit of hindsight and a complete investment cycle of five years. But what I’m excited about is what I’m reading here on the notes, and figuring out a simple ROI in advance, to kind of figure out what’s the best investment for you.

Marc Vila: Yeah. This is a challenge because somebody may be, “I’m thinking about getting a sublimation printer and I’m going to spend a couple thousand dollars with everything. Or I’m also thinking about getting a transfer printer, that’s going to be 10,000. And I’m also thinking about a DTG printer, that’s going to be 15,000, 20,000.” So this is where you could do all of this math to help you decide what’s best for your business. So you go up above. But one of the things you consider as part of the math is, “How many shirts do I have to sell?” And the payment, and all that stuff.

But the next one is really the net one. In this future that doesn’t exist yet, “How much it is going to cost me for this equipment? How much do I think I could sell shirts for? How long do I think it’s going to last? How many shirts do I think I’m going to sell?” And then in the end, I’m going to make some sort of prediction that this printer or embroidery machine, or whatever it is, is going to give me a net number of $500,000.

Mark Stephenson: Yeah. And I think one of the interesting things to insert in here, because you’re going to go through some different examples, is that there is more than just these numbers to figure out what the best printer or best device is to power a customization business. There’s a lot more than just these numbers.

There’s what do you like, what are you going to enjoy doing, what kind of stuff do you anticipate selling, how are you with maintenance, how good are you with software. There’s a lot of things that influence in the end the decision that you make, once you already know these numbers. That’s the way I’ll say it.

Marc Vila: Yes. And the other thing is, you touched on it in there, but there’s your niche market too. If your niche market is you are… A lot of people into motorcycles, so you have street racers, and you have cruisers, and you have clubs, and stuff like that. You’re a going to find that market is going to like certain products versus if your niche is kind of cheerleading, and dance, and ice skating, and stuff like that. That’s a different market. They want different things. So that’s a part of it too.

Mark Stephenson: I think that’s a great example, because you mentioned sublimation printing, which I think is amazing, especially for, let’s say 2500, 3500 bucks. I can’t think of anything that you could sell a motorcycle club. They don’t wear light colored polyester shirts often, but if you were doing maybe team sports, that would be perfect.

Marc Vila: Yeah.

Mark Stephenson: “So I want to start my business. I want to serve motorcycle clubs. I want to serve some kind of specific business employees. This is my market. This is what I love. These are the designs I like.” That is going to help you pick which pieces of equipment that you can choose from. So you can make the products that you want to sell.

Marc Vila: Yeah. And this also will give us some of that value of money over time, and things like that, based on what you know. So this is one of those things where if someone asks, and we’ve said it, we’re guilty of it, “What’s the most profitable machine?” And there are answers to that, that are real. But also, there’s always, it depends. But I figure, we’d talk about a couple examples quickly.

Mark Stephenson: Sure.

Marc Vila: So one is, I didn’t think of a niche market for these, but I think maybe it will help for visualization, since it was brought up. So maybe in this first example, you’re kind of selling to, I’m going to say local business, local party events. You’re just doing a lot of local stuff and it’s fairly diverse. Your niche is like, “I’m the person here that can make shirts for the town.”

Mark Stephenson: You’re the Westchase, custom business.

Marc Vila: Yeah. You’re just within the area. You’re the closest one with an X amount of miles. So people are going to come to you for parties, for events. They’re opening up a restaurant, you’re fairly diverse. So now, you’re trying to decide, “Do I want to get an embroidery machine or a DTG printer?”

Very different. But they both can produce for this set of people. And this is this one person’s example, this isn’t everybody’s. This is just literally one business. So the cost of the equipment’s $10,000 for the embroidery machine. They’ve done the math and they think they can make $15 a piece, probably mostly doing hats. And they think this machine’s going to last them a decade. Does that sound right to you?

Mark Stephenson: Yes. All sounds right.

Marc Vila: Okay. And based on how much they’re going to work, how much they think they can sell, the availability of the market based on just kind of some… You have to do some educated guessing. They’re going to do four pieces an hour, four hours a day, 20 days a month, for a decade on this machine. So they’re going to sell 40,000 hot hats over 10 years. So we’d take that math, $15 a hat times 40,000 units over the decade. It’s $600,000 or $60,000 a year.

And then the machine’s retired. And that’s assuming a lot of flatness in this, but-

Mark Stephenson: Yeah. I just want to highlight that four pieces an hour is a reasonable production rate for a single head embroidery machine.

Marc Vila: And for a hat, yeah, I think so.

Mark Stephenson: And for a hat. So when you think about this, how many pieces an hour are you going to produce, how much you’re going to make per piece, the technology influences, what your productivity can be.

Marc Vila: Yeah. And I say for this, they kind of feel like producing 16 pieces a day, is kind of what they feel they’re going to be able to sell. “And I’m going to work five days a week, so I’m going to sell 80 units a week. I think I’m going to sell 80 hats a week to this market. It seems reasonable to me, between the businesses, and this, that, and the other. I’m also going to do polos. I’m going to say the math is the same.” So that’s one investment they can make.

Now the second investment is they’re looking at the DTG potentially. Now the equipment cost is 15, more money. We’re going to say they could still make 15 bucks a piece for this case, because they’re going to sell good quality shirts, higher end, and they know this market has some money to spend on that. Now the estimated life of a printer, we’re going to say is like five years.

Mark Stephenson: Right. Because it’s a digital printer, uses liquid inks. In most electronics, if you look around your house, you look at your phone, look at your computer, they’re rarely over five years old.

Marc Vila: Yes. That’s just true. In general, you’re right. Anything electronic in your house is… Unless it’s super simple electronics. So five years. So now at first, one might say, “It costs more, a lot less, less.” I think I said that right.

Mark Stephenson: Right. Like-

Marc Vila: Am I close enough?

Why would I want to do that? Well, now we do the math. Now this can produce faster. So now they’re going to say, “I can do 12 pieces an hour. Also, people burn through shirts faster than they’re going to burn through polos and hats. Because t-shirts don’t last as long. So I’m going to sell more.” So now, “I’m going to do 12 pieces an hour. I’m still going to work four hours a day and I’m still going to work 20 days a month, but for five years.” That’s 55,000 total units, $15 profit.

Mark Stephenson: I just want to make sure… You’ve got different numbers in your… Oh, I was in the wrong section, I see.

Marc Vila: Okay.

Mark Stephenson: Got DTG down there twice.

Marc Vila: We do have notes on this. I wrote all this down.

Mark Stephenson: I’m on board.

Marc Vila: That’s what Mark’s looking at. So 55,000 units times 15 bucks is 825,000, that you’ve made over five years. So now, this is 165,000 per year.

So in this case, this business owner might be looking at these two things and say, “Gosh, that printer, it’s a bit more money. And I know that I’m going to replace it sooner. But the net return I’m going to get is significantly better in the short term and the long term.”

Mark Stephenson: Yeah. And I love the way that it forces you to look at the difference in price of the equipment.

Marc Vila: Yeah.

Mark Stephenson: Because do the $10,000 and $15,000 seems significant when you look at the net ROI over five years at all? No. If you’re going to make $165,000 a year, does the extra $5,000 or $10,000 you spend in the beginning matter? No, it doesn’t. So this is just a brilliant way to look at it.

Marc Vila: After a handful of months, it didn’t matter anymore, because then the percentage becomes so small. But it is important to look at this stuff.

Now, Mark, you mentioned some great stuff. DTG sounds terrible to you. You’re not interested in it for whatever reasons, and you look at the embroidery numbers and you can still say, “Listen, that’s a nice profitable thing. Maybe I can just get two machines. Or maybe I’ll have something else on the side to bring in some more money.” Because again, you might have a goal of making $150,000 a year. So then you look at the embroidery machine, you say, “Okay, here’s 60 of it, 90 more. Okay, I’ll just get three machines.”

Mark Stephenson: That’s a great way to look at it. And you could also hedge your bets and get one embroidery machine, and maybe the smallest Digital HeatFX printer, or do a combo and add things up that way.

Marc Vila: Yeah. Definitely, this can get really complicated and interesting, but if you sit down and you focus on it and think about it over time, the decisions jump out at you, I think, in my personal opinion, with everything I do.

Mark Stephenson: I feel like there’s a group of people, although they probably didn’t make it to the end of this podcast, that feel like there’s some slight of hand going on because the numbers look so good. We are not trying to sell you anything in particular. We’re trying to you to take an objective look at the numbers in the business, in the simplest way possible.

Marc Vila: And the other thing is when I went back and I did this math, like four times, and that’s where I said, “I’m going to work 20 days a month, off on weekends.” I’m doing production four hours a day, which means half of my eight hour work day is doing other things besides production. And by the way, we’ve done other stuff. When your embroidery machine is running, you can do other things.

Yes, you do have to sell this, but you’ve got four hours a day to sell. So we’ve tried to do our best to make it real. And some of these numbers are way low for some people. And some of these numbers can be way high for others. We’re just trying to help you learn what to do, but all this stuff is not unrealistic. And especially when I come to ColDesi a few weeks ago, and there was a guy stopping by looking at a piece of equipment in his Porsche.

Mark Stephenson: Yeah. Right.

Marc Vila: I think he was looking at a G4 DTG.

Mark Stephenson: Sure.

Marc Vila: I think he’s doing pretty good selling t-shirts.

So anyway, I think we want to do just one more separate example, just to kind of show some converse. I’ll go through it a little faster, if you don’t mind.

So this separate example is going to be… I mentioned a motorcycle type of a person, that they have an in with some clubs or they’ve known people, they’ve been riding for 20 years and they know a lot of people. So this is their niche. Their embroidery is different. They are going to do long production things. They might only be doing four things a day, because they’re doing big jacket backs, complicated designs, bags, stuff like that. But they’re profiting 100 bucks a piece per.

So saying that, over 10 years, they’re going to do like 12,000 pieces over 10 years, conversely to 40,000. So they’re doing a lot less, but the profit’s much larger on each. So this person, 100 dollars profit a piece because they’re doing things that cost a few hundred bucks to buy, and they’re going to do 12,000 units over a decade, a little over 1,000 a year. So they’re making $1.2 million or $120,000 a year on their embroidery machine. They do very high end embroidery.

We just spoke to somebody earlier today, Mark and I, that they work for a company that sells rugs that cost over $10,000 a piece. So we can back up that it’s not unreasonable somebody would pay something that’s $100 in profit for embroidery.

Mark Stephenson: No. We have customers that sell specifically leather motorcycle jackets and other things, I’m thinking about the… I wish I could remember the business. He does Buffalo Soldiers. He’s one of our success stories that sells jackets for hundreds and hundreds of dollars.

Marc Vila: Yeah, and there’s a market for it. But that’s this person. And we’re talking about this person, not that this is your business, or this could be your business. This person deciding what equipment to buy.

Then they look at a DTG printer. Same thing, costs 15,000 instead of 10,000. But for t-shirts and that crew, they’re not really interested in expensive shirts. They’re not interested in anything that fashionable. They want a nice, simple cotton t-shirt, 10 bucks profit a piece is all they think they’re going to get out of it. They’re not going to get as much as the other guy who was selling locally in a higher income neighborhood, where he’s going to make 15 a piece.

The life of that equipment’s the same, five years. But they only really think they’re going to sell about eight pieces an hour, four hours a day, same as before, but they can’t sell as many as the other person, just because of the volume, of the amount of customers they have, the potential volume, the work and wear through this apparel. They’re going to produce and sell less. So they’re going to do $10 profit at 40,000 units over five years. That’s $80,000 a year, because of their market and what they can sell for and how much they think they can sell. In this case, it’s fairly clear that in the investment for them in the embroidery machine, is a significantly better investment. Three times better.

Mark Stephenson: Yes. Agreed.

Marc Vila: So they would go with embroidery because they have a particular niche that they could sell high end to.

The last bit that we kind of said before, is your example might be both, is the right answer.

Mark Stephenson: Yes.

Marc Vila: Your example is an embroidery machine and a $5,000 printer, or a DTG printer and sublimation as well. You determine what math works out right for you.

Mark Stephenson: But even with these two, with the embroidery and the DTG, and you’re in the high end leather jacket and less expensive custom t-shirt business, then with both machines you’re doing 200 grand a year, and you’re spending maybe $25,000, $30,000 on the equipment. It’s pretty good. It’s pretty compelling story to tell.

Marc Vila: This is what a lot of business is really. A restaurant you mentioned earlier I think, Subway, you mentioned. At a Subway, besides the actual building, they do have to invest in a nice oven to bake the bread and stuff like that, I assume. Which is reasonably expensive. But gosh, Subway sells so many sandwiches with that one oven. But I don’t know how or why, that’s a separate question.

Mark Stephenson: Well, the other thing I’ll say about this particular combination that you brought up, because it is a good example, is embroidery, you’re making four pieces a day and it takes a lot of time to make each one of those pieces, where the embroidering machine is doing all the work. So it’s not like you’re spending twice the time. You’re not adding the time that you are embroidering to the time that you are printing with DTG. You’re printing the shirts, whether it’s DTG or sublimation or whatever, you’re making those shirts while the embroidery machine is also working. So you could be working just about the same amount of time per day, or you could be at work the same amount of time per day. And you’ve pumped up your income for 200 grand because you decided to do two things.

Marc Vila: Yeah. We just did kind of a case study with some ice skating stuff that we produced.

Mark Stephenson: Oh, yeah. That was great.

Marc Vila: And it came out great. And the jackets took an hour and a half each to make. They were long.

Mark Stephenson: The jackets.

Marc Vila: They were embroidery.

Mark Stephenson: Beautiful embroidery. Very high end.

Marc Vila: Beautiful embroidery. And in the time we did the jackets, while the machine was running, this took place over like a day and a half of work days. The embroidery machine was running, I’m answering emails, writing podcast episode, we sublimated some key chains and some headbands. The embroidery machine’s running. We ran a ProSpangle machine and put transfers on t-shirts.

Mark Stephenson: Right. I forgot that.

Marc Vila: And the embroidery machine is running. And what else did we make? We made stickers on a Roland BN-20. We printed stickers. Embroidery machine, it is running. And I don’t remember if there was something else, I forget now, but we did all that. The embroidering machine was going and all these things were being produced while I’m conducting business.

Mark Stephenson: Now you said we, all those things could have been done just by one person.

Marc Vila: Yeah, I pretty much did it alone. But I have to shout out to Hannah and Jes, if you’ve watched ColDesi videos, you’ve definitely seen both of them. They definitely helped out with all of this away, but really, they helped because we were shooting video. And so, we all participated to help out to make sure the video was done. But realistically, all that would have been done by me in a couple days.

And then, I think we talked to Scott and a few other folks around in the business, who have been in this industry a long time. And they’re like, “This is a $2,500 to $3,000 order easily for it to be produced, all this stuff.” And it was stuff that we did in a couple days. So it kind of goes back to that ROI, to say that it would’ve cost us this much, in a couple days we would’ve profited about $1,500 in theory, or something like that. I don’t remember.

Mark Stephenson: Yeah, I like it.

Listen, I think that I’m going to say my piece and then let you wrap up.

Marc Vila: Yeah, wrap it up.

Mark Stephenson: I think that this is so important for you guys to do, to at least give some thought as you’re considering getting into the business and what equipment you’re going to buy, or you’re considering adding a piece of equipment, is take this kind of realistic look at whether or not you should invest your cash in it, whether or not you should finance, what the ROI looks like, the value of supplies versus the total amount of money that you’re going to make. The how to value your time, when you’re talking about this technology and the amount of money it’s going to make. The phrase ROI, return on investment, has a lot of different practical applications. And I think the things that we’ve talked about here will give you a really good leg up on having a successful business if you understand them.

Marc Vila: Yeah. No, thanks. I think that was great. I’ll say, if you go to customapparelstartups.com and you go to podcasts and you find this episode, in the notes, we’ll have all the math that we did. And the purpose of this math is not what you are going to do or anything like that. The purpose of this is to help you get into this thought process, and to get you thinking about it with us virtually, and then think about it on your own.

The reason why our numbers are fairly simple is the number… I do e-commerce stuff with our Colman and Company store and other things like that. And numbers are a rabbit hole forever. They’re forever a deep rabbit hole. And you can make any numbers sound like almost anything when you really dive deep into them. But the important thing is to start thinking this way, start doing some math. And you do have to guess a bit. And you’ve got to estimate, you guesstimate, predict. You can’t predict everything in the future, but you kind of do some of that basic map. And you say, “What can I sell a shirt for in this area or in this niche? What does it sell for? How much does it call to make?”

All right, there’s a basic number. I get that there’s some electricity costs. Do I really think that’s a crazy number, probably not. I’m not going to do it for the sake of this simple math. To register with the state, I mentioned, that’s like 100 bucks a year. These aren’t massive things, for me doing nice and simple math. You do some basic math and you begin to have an understanding. And then you say, “Okay, am I going to make a half a million? Maybe. And make 300,000? I feel pretty comfortable with that. That’s way less. And make a million? I don’t know, maybe.” But you kind of get in this range and then once you’re there, then you start to be able to look at, “Am I not going to do this? Or am I going to do it? Am I going to invest in one, or the other, or both?” And then you get to actually make a decision that’s not based on impulse or fear.

Mark Stephenson: Or what other people say.

Marc Vila: Fear is the number one killer. Number one killer is fear. This reduces your fear because you have a nice, comfortable feeling and it also helps you to not jump ahead of yourself and make a poor decision. Because some people will say, “I couldn’t make any money with an embroidery machine.” And then it’s like, “Well, in your niche, you maybe should have invested in something else that would’ve been a little bit easier for you to be successful in. Change your niche now, because you own an embroidery machine.”

Mark Stephenson: Or it was you and not the niche.

Marc Vila: Oh, yeah. I mean, I was going to not insult-

Mark Stephenson: It’s you, it’s not me. It’s you.

Marc Vila: No, it’s true.

Mark Stephenson: All right, listen.

Marc Vila: This was great. Thank you, Mark. This was great.

Mark Stephenson: This has been Mark Stephenson.

Marc Vila: And Marc Vila from ColDesi.

Mark Stephenson: You guys have a great, well figured out ROI, kind of a business.

Marc Vila: All right. Thanks.

The post Episode 169 – How To Figure ROI appeared first on Custom Apparel Startups.