In a preview companion article for the soon-to-be-released first episode of the “How Do I?” Podcast, guest Mark Coudray discusses how to ensure your decorated apparel business remains a healthy one—and how to identify if and when it’s not.
Keep an eye on this space for the soon-to-launch podcast itself!
A few years ago, during a shop production floor walk-through, I noticed something unusual. The accounting team had just gone completely digital. That was a smart move. What wasn’t smart was moving 10 empty filing cabinets out onto the production floor. They didn’t have room for them, and the production floor had open space, so that’s where they landed. For months, the entire production team had to constantly walk around this metal island to do their work.
Not one person moved them because it wasn’t anyone’s job.
That’s the type of thing I wanted to dig into with Mark Coudray on the first episode of “The How Do I?” podcast. Mark has been teaching at Impressions since 1978, and has spent 54 years in this industry. We started the conversation with a simple idea: you can be busy and broke at the same time. Business health shows up in how you produce orders on the floor, the cash in the bank and the customers you say, yes, to.
What follows is some of what we talked about as part of our conversation.
What Does a Healthy Shop Look Like When You Walk In?
A well-run and healthy shop is orderly. With this in mind, Mark says one of the first signals that flags an unhealthy shop in the industry is simple housekeeping. Disorder on the production floor or office means disorder in the organization, whether the owner admits it or not.
Mark uses the comparison of a greasy-spoon diner and a Michelin-starred restaurant. The Michelin kitchen is spotless, because they clean as they go, their crew is well-trained and knows what to do, and they stay organized.
This isn’t just a screen-printing production problem. Mark says he has seen embroidery shops with thread cones scattered across boxes and tables, which meant they were reordering thread colors they already owned because they couldn’t find them.
The usual excuse is that the shop is too busy to clean up. Mark’s reply is that the best shops are never too busy to keep up. You make the time for it.
How Much Cash Should a Healthy Shop Keep On Hand?
In answer to the question of cash reserves, Mark sets a benchmark: your shop should have at least 1 month of overhead in the bank. For example, if your monthly overhead is $10,000, you want that sitting in reserve. Less than one week puts you in the danger zone.
A recent study by the JPMorgan Chase Institute based on data from 1.4 million small businesses, found that half were operating with fewer than 15 days of cash. Only 40 percent had more than three weeks.
Mark says a common problem is when a shop buys equipment and hires more people but doesn’t have the revenue to keep up with payroll. He says he has seen owners run their businesses with only one or two days of cash, using customer deposits to cover expenses, rather than being financially stronger.
His fix goes back to a presentation he gave in Phoenix in 2017. I was in the room. It’s a simple one. Collect 100 percent of the order revenue when it is placed. Stop acting like a bank for your customers.
This idea is further strengthened by the framework outlined in Mike Michalowicz’s book Profit First. Mark is a “Profit First” advocate, and so am I. One of the tenets of the Profit First approach is that you set aside a percentage of your revenue in a two-signature savings account. This makes it harder to access, while still being available if and when you really need it. During COVID, shops that adhered to the Profit First system weathered the downturn far better than those without a reserve.
Which Orders Are Making Your Shop Sick?
Mark calls small, complicated jobs that can fill your schedule without really feeding your business “Junk Food Orders.” An example could be an order with $25 to $50 in margin that ties up an automatic screen-printing press and three people for two hours.
The trap is believing every order is a good order. Mark says fear drives it. Shops take these jobs because they need the revenue to cover payroll or other expenses. However, that low-value work crowds out the high-value production time that could actually make the shop healthier.
To move away from these types of orders, Mark suggests the following:
- Use lead time as a buffer. “We’re booked eight weeks out. If you can wait, I’ll get you in.”
- Set a floor. Set a minimum order value, such as $250.
- Refer them out. “I’m so sorry, I totally understand. Let me see if I can refer you to someone who might be able to help.” You then refer that low-value, low-profit job to your competition and let them handle it.
Mark says one of the ways he transformed his own business was to move his junk food orders off the schedule and onto other shops,. He then he called his best clients and told them he had open time for orders their size. It transformed his business.
Is ‘One Big Customer’ a Strength or A Risk?
Mark says big customers can become a risk to your business once they pass 10 percent of your revenue. He learned this the hard way.
At one point in the early 1980s, his shop was doing about $4 million a year, handling mainly rock-and-roll tour merchandise. One client, a management company with several acts, provided $2 million of that. Everything was going smoothly until the client’s company dissolved over a dispute between the owners. Half of Mark’s revenue disappeared overnight.
His advice: No client should account for above 10 percent of the total revenue. If you have some big clients, sit down with a pad of paper and dissect your relationship with them. How did they find you? What type of work are you doing? What do they spend in a year? How many years did it take to grow?
Now use that information and go find 10 more like them.
Why Do New Customers Cost You Money?
In his consulting business, Mark has analyzed over 300,000 customer-years of decorated apparel buyers and found 1) that 70 percent of new customers never place a second-year order, and 2) more than 90 percent of first-year customers don’t break even.
Why? In answer he cites the fact their art takes longer, their approvals take longer, and they often need more handholding and care, as they might not know what they want.
The customers who come back for orders in year two are where the money lives. Across 35,000 customers, Mark has found that customers who came back spent 3.6 times more in year two than in year one. That growth hides the losses from the new customers who never return, so the shop thinks it’s doing better than it is.
With this in mind, he offers a fantastic referral move: ask every new customer, “Who referred you?” This approach sets the expectation that you work with referred, qualified clients. You are not turning work away. You are simply choosing the work that fits.
What Five Numbers Should You Check Every Monday?
Mark say there are five things every shop should check weekly to ensure they are is running a healthy business. These include:
Cash: The amount you needed last week, and the amount you will need this week and the next. Build toward a 13-week forecast.
Sales: Survey the past 13 weeks by day, so you can see your weekly pattern and level out the peaks and valleys.
Labor as a Percentage of Sales: Week on week, this should remain steady within a couple of points. Track contract and direct work separately.
Pipeline: Who ordered a year ago, 10 weeks out from today. Call them now.
Materials Flow: Review how stock is being checked in, staged and moved so production doesn’t stall.
Bonus Idea to Track
Something else to keep an eye on is production capacity per machine. Do you have equipment that is underutilized? What type of sales effort are you making to get orders booked for that machine?
Your Assignment This Week
To finish of our conversation, Mark gave everyone a homework assignment. Pull your top 10 customers and dissect each one on paper. How did they find you? When did they start? What was their first order? How far apart are the orders? Do you actually enjoy working with them?
Use these traits to build your “Dream 100,” a concept pioneered by business coach and best-selling author Chet Holmes. These are the 100 clients that you want to work with that match your ideal customer profile.
Other Top Tips:
- Count how many weeks of overhead you have in the bank
- List last month’s junk food orders
- Check whether any customer is above 10 percent of revenue
- Set up your five Monday numbers
- Dissect your top 10 customers on paper
Again, watch this space for information on when full podcast launches in the near future!
Marshall Atkinson, host of the “How Do I” podcast, is a veteran designer, custom apparel decorator, business coach and principal at Atkinson Consulting, (marshallatkinson.com). He is also the publisher of the “Midjourney: Elevating Print Creativity” online newsletter (midjourneyexperience.com), which covers the latest in generative AI, and author of the online book “2026 Thinking: How Businesses Will Win, Stall, or Fail in 2026.” To download a copy of the book free-of-charge, click here.
