Can you discount custom work when needed and still make a great amount of profit?
A jeweler on a Facebook page mentioned today that a custom wanted a necklace
custom designed, was unhappy with the price and asked for a discount.
The jeweler told the customer NO and let the customer walk.
While most jeweler responses were "Let'm walk" and "don't discount, stand your ground",
this is my answer. You might be shocked as well. But you'd be richer if the time arises.
You're going to find I will disagree with the masses on this.
Most people think custom work is the same as selling merchandise and it’s not.
Many people are offended if a customer tells them on a custom job they need a lower price.
If someone says I need a lower price on a custom job the FIRST thing to see is if you can help them by lowering the price by
• Using less diamonds
• Using smaller diamonds
• Lighter metal weight
• Changing design to a simpler one, less costly design.
Same profit margin but lowering what the customer gets but still some type of custom piece.
But what if the customer says “NO! Same design, just charge less for it!”
Many craftsmen take offense.
Don’t take offense, take money and here’s how to do it profitably.
Notice on the picture, this is my design pricing sheet we used in my store; it’s near the back of chapter 1000 in my book.
Price the custom job with this form, labor on the left
(cad/wax/cast/setting/heads and set)
On the right side list material (casting grain/loose melee/loose colored gemstones)
If you sell a center diamond that is priced separately and may not be on this form at all. Major diamonds are priced like a car with a trailer. It’s the trailer; an add on. You don’t make that much on loose center anyway, don’t put it here.
So labor on left, material on right, subtotal and add total custom job on bottom.
So let’s get into some number crunching. Let’s PLAY.
Let’s say the labor to create a ring/cast it and channel set 20 diamonds (just labor) is $1200.
On the right you’ve listed the casting grain and 20=3pt diamonds. Total retail is $2000. Let’s also assume that you get keystone on the $2000. (Cost = $1000)
Total job is $3200.00
The customer wants a discount on the $3200 and you’re offended.
Question: If it’s January 3rd and you put a $1000 cost necklace in the showcase, when would it sell?
A GOOD jewelry store would sell it once in a full year. It would sell 12 months later in December for $2000. Gross profit?
Got it? Stock sells once a year and makes you $1000.
Now let’s talk custom design. How long would it have taken you to DELIVER that custom pendant? 3-4 weeks? Probably
So January 3rd you take a custom job in for $3200 ($1200 in labor + $2000 in material)
You deliver this job on January 25th. How much did you make in the month of JANUARY on the $2000 grain and diamonds material? You made $1000 gross profit on material in one MONTH! Holy Cow!
February 3rd you take in another $3200 necklace, deliver it on February 20th. The material made ANOTHER $1000!
How many months in a year? >12<!!!!!
So in January you buy $1000 for material and you sell it once a month and reorder every month then your $1000 investment in January will make you
(Ready for it)
$12,000 in profit doing a custom job a month over 12 months!
Meanwhile the $1000 cost necklace selling in December it ONLY made you $1000.
Therefore because of TURN (custom has a turn of 12 while good stock has a turn of one) you can discount material ONLY!
That’s why you use the form. To show the customer how much we can’t discount (labor).
You can’t discount labor because labor doesn’t have turn, it has TIME. Jewelers can’t do 12 jobs in the time to do one. They can't work faster nor can you lower their pay. No one discounts labor to customers:
• Electricians don’t discount labor
• Plumbers don’t discount labor
• Car repair mechanics don’t discount labor
• Painters don’t discount labor
Consumers know labor is not discounted. But because of turn you can discount the MATERIAL only.
Here’s how to sell it, show he the paper and say the following:
“AS YOU KNOW Mrs. Jones, we can’t discount the labor but maybe I can do something for you on the gold and small diamonds.”
You won’t have to discount every job but let’s just say you did. If you have a 20% discount on the $2000 gold and diamonds, material would sell for $1600. Profit would be ONLY $600.
But do that 12 times a year and the profit on custom material would bring in $7,200.00! A heck of a lot more than the messily $1000 cost necklace brings in.
And guess what? You got full price on the labor because “as you know, we can’t discount labor”
So watch this:
$3200 with a 20% discount if you had given it means a discount given of $640.00 on the total job.
But if you discount only the material your discount is $408.00. You get to keep $232.00 more money, more importantly you get what you lost:
• A $2560 sale that you lost
• Full price on labor
• A new customer
• A new customer who will rave about you. What you have now is a woman who will tell 10 friends how overpriced you are (whether or not you are I don’t care-just saying)
Because of turn you can give a price break on special order material on custom design.
“As you know we can’t discount the labor, but maybe I can do something for you on the gold and diamonds”
Director of Shop's Profits