Does an Investment in a Commercial Embroidery Machine Make Sense?

A question we get asked a lot is how does a commercial embroidery machine pay for itself and pay itself off. To give you some ideas we’re going to use two examples. The first is a simple hat, and the second a more expensive, higher-end polo shirt.

It’s going to get a little number heavy, but hopefully you’ll be able to follow along, and it’ll help you see how an embroidery machine can be profitable for you and your business.

Commercial Embroidery Machine ROI - When does it make sense to buy and embroidery machine?

A basic hat is about $2.95 wholesale, and the thread would be about $0.03. If you’re wondering where we get the $0.03 from, a cone of thread is about $8 and you can get about 2 million stitches from it ($0.000004/stitch). The embroidery on the hat is going to be about 5,000 stitches, which comes out to $0.02, an we’ve just rounded it up to $0.03 for a little extra wiggle room. We’re also going to need the bobbin thread, and that’ll be $2.75 for a box of 50, and we’re going to need about 5 stitches from it. So the thread for the bobbin is about $0.02 for the 8×8 square. You’ll also need the backing, which is about $0.06. So in total, you’re looking at about $0.11 for the stitching and backing. So your cost margin is really good on this type of embroidery.

Let’s break those numbers out:

Hat: $2.95
Embroidery: $0.11
Total material costs: $3.06

As far as time goes, you’re looking at about 5 minutes per hat – 1,000 stitches per minute. So you can get about 10 done per hour. Daily you could produce 80 garments. In a month you’d produce 1,600 and that’s giving you just a 20-day month (with weekends off and two extra holiday days).

A few other considerations you’ll want to factor in: the average hourly rate you’re paying yourself or someone else (probably within the $8-14/hr range), the machine cost which is $9,995 + shipping (for the GS1501), the electricity, oil and needles for the machine is about $300/annually. And you can purchase the embroidery machine with no down payment, and pay a lease of $300/month.

All of these estimations assume you’re using a commercial embroidery machine, which operates faster and more reliably than even a high end consumer one.

 

We’ve estimated out that we can sell a hat for $17.50, and the cost for materials, machine, wage, etc to be about $6.50/hat, so we’d get a profit of $11/hat. By making 1,600 items a month, your total month profit is $17,600. Even after the lease payment on the machine you’re looking at $17,300/month. So let’s say you decide to put off purchasing the machine for 6 months – you’d be losing out on $103,800 (and that’s after your $300/month lease payments).

Again, let’s pull those number out to help you see them better:

Total cost: $6.50/hat
Selling Price: $17.50/hat
Profit: $11/hat
Monthly profit: $11 x 80 hats x 20 days = $17,600
Minus lease payment $300 = $17,300
6 Month profit = $103,800

Even if you run at 6 hours/day, (and a COMMERCIAL embroidery machine is designed to run 2 or more shifts) your machine is creating a profit of $110/hr (10 garments x $11), $660/day. So you’re looking at an income of $3,300 a week. Let’s say you give yourself a couple weeks vacation a year, working 45 weeks per year, that annual income is $148,500. So realistically you can pay off that machine in about 15 days, and at least in about 28 days. The embroidery machine ends up paying for itself when you sell about 900 pieces.

Working 6 hours/day, 45 weeks/year
Hourly profit: $110 (10 x $11)
Daily profit: $660 (6 x $110)
Weekly profit: $3,300 (5 x $660)
Yearly profit: $148,500 (45 x $3,300)

Let’s go to our second example of polo shirts.

A high-end polo shirt is about $30 wholesale. Using the same numbers as above for the stitching, we’re going to use about $0.11 for the stitching. If you do a really good job, you can sell those shirts at $50/each. Again using the same production numbers, if you decided to do $200/month payments on your machine your profit per shirt is $15.70. So your profit per month is $25,120. In this example if you decide not to purchase an embroidery machine, in a twelve-month period you’re looking at a loss of about $300,000.

Shirt cost: $30
Materials: $0.11
Wage: $1.4
Rent/Lease/etc: $2.79
Selling price: $50
Profit: $15.70/shirt

Monthly profit: $15.70 x 80 shirts x 20 days = $25,120
12 Month profit = $301,440

If you decide to just work 5 hours a day, at a per hour profit of $157 ($15.70×10), your daily profit is $785. Again putting in that 5-day workweek, you’re looking at $3,925/week. And even with just working 40 weeks per year, you’ve got $157,000 in profits (and this is all with a $200/month lease payment). In two weeks you’d have your commercial embroidery machine paid off.

Working 5 hours/day, 40 weeks/year
Hourly profit: $157 (10 x $15.70)
Daily profit: $785 (5 x $157)
Weekly profit: $3,925 (5 x $785)
Yearly profit: $157,000 (4 x $3,925)

So hopefully we were able to show you how adding a commercial embroidery machine to your existing custom apparel business can be profitable for you, and how the embroidery machine can pay for itself within a short period of time. But keep in mind the key to all these numbers comes down to marketing. Your machine can produce a lot of embroidered garments, now it’s up to you to get out there and make those sales.

Here’s a basic definition of embroidery: https://en.wikipedia.org/wiki/Embroidery

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