Business plan for jewelry designers

Jewelry Discussion
1

Hi,

I’ve been trying to get a business plan written for a few months now.
I even hired a consultant to help at one point. The problem that I am
having is making financial projections. I can’t seem to find any
showing numbers for similar businesses. I tried joining
jewelers of America to get access to thier reports but they said I
have to have a physical retail location to be a member. Boooo. Any
suggestions on how to get this type of Anyone with a
store willing to share thier business plan? Anybody know a good
consultant who knows the jewelry and fashion industries well?

2 
I've been trying to get a business plan written for a few months
now. I even hired a consultant to help at one point. The problem
that I am having is making financial projections. I can't seem to
find any showing numbers for similar businesses.

Try your local district SBDC (Small Business Development Center).
They do a lot of free marketing surveys, which will have the
for which you’re looking. They can also help you with
business plan projections, again free.

3

I have done my own business plan and have been able to project to
three years in the future. Rule of thumb as the bank says is the
first year should be the same as 2008, projection for 2009 should be
up 10% plus any extra revenue (such as taking on more shows) and the
third year should be projected to be 20-25 % more than the second
year. Hope that helps. I know it is difficult as when I did mine I
had just signed up for a 30 week show that I did not expect to get
in so I had to redo my financials to include the new show also.
Leslie

4 
The problem that I am having is making financial projections.

This is the toughest part, no doubt. Without any track record of
this particular business or owner in their proposed market, its truly
a guess or wishful thinking. Comparisons to other similar businesses
would not help all that much because there are just too many unseen
variables. I’ve started up three times and acquired once. They were
all different animals. Each one of my incarnations had its own
peculiar behavior despite that it was all the same owner in similar
situations.

If this Biz Plan is to raise some capital, any institutional
investors would already know to disregard your projections. If its
privately financed, (family, friends etc) they may be relying solely
on your sayso. If your ‘Angel’ is rich Uncle Louis who loves you to
death no matter what, hey why not then.

If you are developing this plan for your own use…my suggestion
would be to assume you make almost no money during the first,
critical phase of several months. I would look at outgoing and total
those for maybe 3 months and see if you have the idle capital to pull
you thru. If you have to rely on sales the first few months, you put
yourself and your endeavor at extreme risk. Its goes beyond that
“they will either buy or they will not so its 50/50”. There is zero
momentum, its more likely that unless acted upon effectively, they
will not buy.

I look at business as being very inertia sensitive. Its not like
Monopoly where someone hands you dice and you roll a 12 and you’re
off to a great start. You have to apply enough force to move a heavy
object that is sitting dead still. That force is money(usually) Once
it gets going, its own inertia helps provide sales which fuel the
beast. That is not to say that a bump in the road won’t bring you to
a grinding halt but once you get your pace you have something to work
with. On Day One you already have a negative cashflow.

But you’re asking (I think) how to quantify sales/expenses that
haven’t occurred yet. Expenses are easy, just add em up and don’t be
too shocked. Sales? I’ve read that a good response rate in
advertising is like 2%. So if you reach 100 people you may expect two
of them to come in and MAYBE buy. How much are they really likely to
spend? If you are big ticket and brand new I would be very
conservative in the estimate. If your items are more impulse
oriented and easy to buy you could be more generous.

I’ve also read that an Ad budget is healthy at 7% of total sales.
You might figure form there. Spend $1,000 on Ads and if it is an
effective campaign you might get $15K in sales. I say might because
of that momentum thing. The first batch of sales will be expensive to
promote and probably not profitable. Its possible your first go round
with promotion will yield negligible results. But if you succeed in
gaining momentum you can make it back in time. You have to train the
public(or whomever) to come to you.

Projecting income you are much better served to be overly
conservative. I don’t believe there are ‘standard’ numbers to plug
in.

5 
I've been trying to get a business plan written for a few months
now. I even hired a consultant to help at one point. The problem
that I am having is making financial projections. I can't seem to
find any showing numbers for similar businesses.

You are taking it too seriously. About financial projections. You
should be able to estimate what place in overall economy your
business would have. It is reasonable to assume that normally run
business would change in accordance with overall economy. It is
called
“beta” in some circles. If your beta is 1 and economy grows by 10%,
so should your business. If you beta is 0.5 then 10% increase in
economic activity would result only in 5% increase in your business.
Focusing on particular demographic can refine the estimates. Some
demographics have beta greater than 1, so targeting these groups
helps insure faster grows.

A shortcut is to find the company which is publicly traded on stock
exchange and similar to yours. Reading analytics about the company
should give you the idea of how it is done.

Leonid Surpin

6

Hi Annie,

There is a wonderful book on the very question you pose. It is called
"Profiting by Design: A Jewelry Maker’s Guide to Business Success" by
Marlene Richey and published by the MJSA Press. It came out last
autumn and is a quite a gem! It is in the Rio tool catalog on page
573.

Nel

7

In the US, the Small Business Administration (SBA) is a branch of the
federal government and houses SCORE, which is a a group of volunteer
(usually retired) business people. One of the things that they do is
to assist small businesses prepare their business plans. Many years
ago when they assisted me, there were no fees involved. The only
negative was that I had to tolerate incredibly old (the same age that
I am now :wink: men with too much time on their hands. In retrospect,
they were very tolerant and patient with me.

Good luck,
Jamie

8 
Rule of thumb as the bank says is the first year should be the same
as 2008, projection for 2009 should be up 10% plus any extra
revenue (such as taking on more shows) and the third year should be
projected to be 20-25 % more than the second year.

I’m not sure where you’re getting this rule of thumb from but if I
were writing a business plan, especially right now with what is going
on in the economy, I would always project the worst possible
situation. In other words, if sales fall 25% would you still be
profitable and how would you go about making it so? But I think the
original posters’ problem was that they didn’t have any clue of what
their starting sales would be since they had no actual experience
with it. 10% of nothing is nothing. 25% of that is still nothing. You
need to have some basic idea of what to expect to begin with before
you can actually project future sales.

Daniel R. Spirer, G.G.
Daniel R. Spirer Jewelers, LLC

9

i think a biz plan to project the the potential income for jewelry a
designer would be very difficult to do. the jewelry business is
unlike any other not many people understand the jewelry biz it is
very different than any regular business it closed to the conceptual
state of mind for most accountants and cpa’s !

i think the part of the plan that includes money spent or equipment
cost is doo- able but if you stop to think about a product like
jewelry which is based on " percieved value " emotion, you make it
then you have to wait untill someone thinks its “cool enough” too
spend thier hard earned money on. its not like farming where you
plant it grows and you can say i will take the known estimate
projection of bushels per acre to the commodity auction for x amount
of $$ per bushel. and then if a big storm comes and washes all the
crops away you collect on the insurance that you included in the
plan when you borrowed the money from the bank to plant that year.

Some designers can project thier income due to popularity and a
demand for retail goods, but for someone just starting out i think
its a pay your money and take your chances and if the backers want
projections keep the estimates at cost, and if you are desperate to
convince someone add 2% and pray really hard you make 2.5% by the
end of the fiscal year.

You are entering in to an area where you are going to have to learn
to think for yourself and hope you put enough time into academic
studies such as math science and business! you know ?? the boring
stuf most young folk, ( myself included at the time ) who in thier
own greatness convinced themselves they would never use that
! what ? - goo

10 
Try your local district SBDC (Small Business Development Center).
They do a lot of free marketing surveys, which will have the
for which you're looking. They can also help you with
business plan projections, again free.

I don’t think the SBDC division of SBA will help until you have a
solid year or two under your belt as a small business owner. But do
contact the SBA (www.sba.gov) for your local chapter, and ask if a
mentor from SCORE could help you on this point.

Lorraine

11

Hi,

When i did my business plan a year ago i just added my expenses to
how much i would need to live off (Survival Income) with a 10%
profit for the business.

Providing you dont project a loss their usually happy!

Check out your local council for an Enterprise trust/Princes Trust
that can provide a grant. They helped me with writing my business
plan and i got 2k towards setting up my business!

(Not sure how it works in the U.S, but their must be something
similar)

Good luck, Jon

12

A business plan, the way I have been explained (and, I could be
wrong), is that it is a plan determining how much you have to make
to meet expenses and determine when you are making a profit. I am
just an artist, so my jargon may be wrong here, but I will do my
best to give an example of my plan.

Let’s say that I need $600 a month to make the note on my cabin,
electricity, gas, and to pay the squirrels that power my Internet. I
need $400 a month to keep my kids clothed in burlap, fed, and gas
for the truck. That’s $1000 a month to stay alive. Sort of :o)

The price I need for each piece is something entirely different, but
I triple my supplies bought with credit and double cash expenditures
to determine what I have invested into each piece. This isn’t the
actual business plan, but part of it.

I estimate the cost of broken burs, blades, and spent lap disks. And,
let’s say that i have learned that I spend $100 a month on these.

Then, I plan for new equipment to either replace old, or new that i
really want. Lets say that I want new bellows for the forge and a
new apron for this upcoming year; $200. Yes, I know; I dream big.

Then I divide my years expenses by the hours that I work to
determine an hourly rate. $12000 a year to stay alive plus $1200 in
stuff that breaks, plus $200 for my wishlist. That is $13400 divided
by the 3100 hours I will work this upcoming year. That is at least
$4.50 an hour that I have to add into the price to bring in $1215 a
month, minimum.

Then I list the ways that I bring in income; wholesales, repairs,
trading squirrels. I then list my venues for sales; galleries,
walk-ins, Squirrel-mart. And, I look to see where I can boost sales
to meet or exceed my projected needs. And, where I could cut
corners. (maybe I don’t need the apron?)

I cannot exactly predict sales, but I can predict how much I can
produce. I can control my prices. And, I can control the squirrels
:o) (sometimes).

I can then use this to help me set my prices. If a piece cost me $50
in credit bought materials, and $20 in cash. I start with $190. And,
it took me 5 hours to make, so add in $22.50. The work has a
starting value of $212.50. But, I may not sell all of my work
immediately, and it is very pretty (bling value). So, I set the
price at $300. This gives me room for wholesaling cuts.

The plan can also help me decide when I need to beat a drum to get
folks into the shop. If I drop below $1215 a month. I either pray
very hard, or I have to dance naked in the street. Well, maybe not
that. But, I will worry none-the-less.

Of course there are other things to add into the plan, such as
unexpected holes in the roof or a storm blows my outhouse away.
There’s also packaging, taxes, cardboard, whiskey, and bribes to the
local officials. But, maybe this will help you get my drift :o)

Michael of Cosmic Folklore Studios
http://cosmicfolklore.ganoksin.com/blogs/
http://cosmicfolklore.deviantart.com/

13 
I don't think the SBDC division of SBA will help until you have a
solid year or two under your belt as a small business owner. But
do contact the SBA (www.sba.gov) for your local chapter, and ask if
a mentor from SCORE could help you on this point.

Maybe it’s different from state-to-state, or even from the pool of
people working. Here, SBA wouldn’t give me the time of the day
because my projections were under $100K/yr. SBDC worked with me as a
newbie, helped me to craft my first business loan, and I had access
to a counselor, by email, phone and weekly visits in a nearby town.
So with SCORE, SBA, SBDC, and any other programs that are for
“disadvantaged” entrepreneurs, one will surely work.

14

Micheal, Your business plan complete with squirrils is down-to-earth
and gave me a big smile!

The bottom line is to convince the stakeholders that you will pay
their interest and not go under.

Convincing outside stakeholders is a very good exercise in seeing
the whole picture.

If you are the only stakeholder and if that is the only way, then
have faith in yourself to deal with the scenario as it unfolds. Go
slowly and progress while keeping a sharp eye on the squirrels.

15 
I can then use this to help me set my prices...I start with $190.
And, it took me 5 hours to make, so add in $22.50. The work has a
starting value of $212.50.... So, I set the price >at $300. This
gives me room for wholesaling cuts.

A simple formula that has worked for years for me to determine
wholesale and retail prices is this. Total all of you costs for a
piece, materials, labor and overhead, then multiply that by 1.7 for
wholesale and by 3 for retail. This is a good quick way to determine
prices. I don’t use it for everything, like expensive gemstones are
less and incredibly difficult or complicated work is more. I use
several formulas and charts (developed over the years) depending on
what it is I’m pricing. But the simple one I mentioned works pretty
well for most of the work and lots of people buy the work…so it
must be working.

A note about the labor component. Don’t undercharge for your labor,
that should be a living wage. Too many people cheat themselves and
charge too little. Charge enough for labor, then after you combine
that with materials and overhead and mark it up, you are making the
profit you need to stay in business. The idea isn’t to only pay
yourself, your business is an entity that needs to make a profit as
well. Remember, you’ll never go broke making a profit (I have a
friend who’s mother always said that).

The plan can also help me decide when I need to beat a drum to get
folks into the shop. If I drop below $1215 a month. I either pray
very hard, or I have to dance naked in the street.

Dancing naked in the street has never increased business for
me…quite the opposite, maybe it’s the way I dance?

Mark

16 
Maybe it's different from state-to-state, or even from the pool of
people working. Here, SBA wouldn't give me the time of the day
because my projections were under $100K/yr. SBDC worked with me as
a newbie,

I think that’s probably right. While SBDC is a program under SBA,
it’s very likely that with a presence in every state, assistance may
vary by state.

In the state I live in (MD) I was told that SBDC didn’t want to get
involved until I’d been in bsuiness a year or two, and that SCORE
voluteers would mentor me thru the startup orocess.

http://www.sba.gov/aboutsba/sbaprograms/sbdc/aboutus/

"The U.S Small Business Administration (SBA) administers the
Small Business Development Center Program to provide management
assistance to current and prospective small business owners.
(...) The program is a cooperative effort of the private sector,
the educational community and federal, state and local
governments."

Lorraine

17 
I can then use this to help me set my prices...I start with $190.
And, it took me 5 hours to make, so add in $22.50. The work has a
starting value of $212.50.... So, I set the price at $300. This
gives me room for wholesaling cuts.

On labor. Most people wholesaling are charging $65 an hour for their
time, or more.

That’s EASY. Charge $65 an hour. What gets people into trouble is
TIME.

As you may know, I have a repair and custom design pricing book. I
found outyears ago TIME was my big problem, not charging per hour.

So when figuring time I found out that:

  1. Jewelers lie
  2. Jewelers play

No one is ever 100% honest on time and majority of times under
estimate time, not over estimate.

If you spend 5 hours making something, what happened to the other 3
hours? Talked on the phone, looked for a stone on the floor, wrapped
a new emery stick. The customer pays for that.

So on time, after you say “It took me 5 hours”, add 25% MORE to your
TIME for down time. So 5 hours now is 6.25 hours.

Multiply THAT by the $65 an hour. $22.50 (or $43) is too low.

I found this secret out from an accountant who was a watchmaker. He
showed me the secret to repair/custom pricing. By the way, if we pay
an employee, we added 25% to His/Her gross wages. Why? Matching
Fica/Medcare/Vacation.

So if a job took 1 hour and the jeweler is paid $20 an hour, you’d
think cost is $20. Wrong:

Time: 1 hour. Added 25% for down time = 1 hour 15 minutes

Cost: 1 hour at $20 = $20. Added in 25% more for matching taxes &
benefits = $25

NOW COST: $25 an hour total cost times 1.25 hours = $31.25 true
cost, not $20 as previously figured.

That’s a 36% difference. Before I was taught this in 1987, I had
declared bankruptcy to save my store. Then I met the
watchmaker/accountant. We instilled this system, turned the company
around in 90 days, withdrew the bankruptcy and continued on in good
stride. Last year I owned the company (1999) we did 1.8 million, 75%
of it from the shop. If it hadn’t been for this “secret revealed” I
would have never made it to 1999.

Hope this helps many folks.

David

David S. Geller
JewelerProfit
www.JewelerProfit.com

18 
A note about the labor component. Don't undercharge for your labor,
that should be a living wage. Too many people cheat themselves and
charge too little. Charge enough for labor, then after you combine
that with materials and overhead and mark it up, you are making the
profit you need to stay in business.

Could someone please suggest an hourly wage range for a novice? I’m
coming to jewelrymaking after 35 years in an entirely different
field, thus I have no accurate frame of reference for calculating the
cost of my time to add to the total price of a piece.

Thanks,
Lorraine

19 
"The U.S Small Business Administration (SBA) administers the Small
Business Development Center Program to provide management
assistance to current and prospective small business owners.

Small business (as in the SBA) is defined as one with under 1,000
employees. Certainly me and my wife qualify for that number. You’ll
find the SBA to be more energetic towards companies more up to that
size, though. Not that they won’t be helpful, but they are geared
towards larger enterprises than most here envision for themselves.

20

Here is the link for the US Small Business Administration:
http://www.sba.gov/index.html

If you are a small business in the US, it is worth your while to
browse the site every now and then. Lot of useful and
links to resources.

Even if you are outside the US, lots of the on how to
organize and run a small business would still be applicable.

Beth Wicker
Three Cats and a Dog Design Studio

http://bethwicker.ganoksin.com/blogs/