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Geller's pricing system


#1

hi I was working for a jeweler in a small town near a larger metro
area. Last week he tells me that I have lost all my benefits and will
be a subcontractor or I can leave. His reason is he lost in the
high five figures last year. Well, I looked over the price system
he uses and how I would do on that system, and found that it wasn’t
so bad, in fact I figure after taxes I will make almost twice that
I was making before. So the first day I did some jobs and priced
them according to the book and indeed I made almost twice that of
my salary. But here is the hook. when I got to work this morning I
was greeted with a note telling me I had to price all the jobs
before I started on them and get an OK. Now correct me if I’m wrong
but isn’t his job to price them out at the counter? And if not how
can it be fair that I have to do it? Also how do you price custom
work or casting. There isn’t any guideline for those areas.

Robert L. Martin
Goldsmith/Diamond Setter
since 1976
<>< john 3:16
yukhan@aol.com


#2

Robert, Funny…we were just discussing this in my shop. I have
agreed to do work for two designer jewelry galleries in my area. Both
stores have been using the Geller Pricing Guide, but have not been
happy with the quality of work they were getting from the repair shop
that did their work. I occasionally got some of these “repairs” to
repair, or salvage. The workmanship was competent for production
pieces, but not for the special attention that some of these high-end
custom pieces required. With the price of gold, and especially
platinum, being so high recently, we have been trying to find a way
to made David’s Guide work for us and the galleries.

If I have to price every single job out of the book, then wait for

an OK, I’d have to add an additional handling charge to cover the
time spent just to look the job up in the book. Sizing a platinum
ring down one size, for example, is a simple, straight forward job
that the gallery can price. A tapered platinum bezel for an emerald
cut Tanzanite is another matter. The price in David’s book for a
custom bezel is too low. We’re working on a list of Basic Jobs that
we’ll provide to each store as a guideline to jobs that they can
price directly from the book, and which types of jobs will require an
estimate in advance.

A lot of the jobs in David's book also assume that the store will

be providing all the materials. Neither of the stores that I work for
will do this, so I have to purchase the heads, clasps, shank
materials,diamond melle, etc. I simply charge them 1/2 of the retail
price listed in David’s book. When jobs will require extra special
care (and it’s usually obvious to the person at the counter), I tell
them to use the RUSH pricing as a guideline.

David Geller......I'd like to hear from you regarding how to 

adjust
pricing in the Guide to reflect the change in the precious metals
market. I’m not sure what base price the Guide uses, or if you
already have a formula to adjust for increases.

* Another question that comes up a lot is what to charge for 

custom
bezels. We rarely use a straight wall bezel on anything from .25ct
and up (for rings). We make a lot of tapered round platinum bezels,
and we get a lot of requests now for tapered platinum bezels for
Asscher cuts, princess cuts, and emerald cuts. We fabricate these.
Any guidelines for pricing? I have found that to install a pre-made
platinum bezel in a shank, polish the mounting, set the stone, and
double check it to make sure that it’s perfect, and charge for admin
costs to track and bill the job would cost the gallery about 1/2 of
the price listed for EXPRESS. When you throw a handmade platinum
tapered emerald cut bezel into the equation, and set a top quality
Tanzanite, even the Express charges don’t hold up.

* And what about setting charges? In my store, if I sell a diamond

and set it into one of my mountings, the overall pricing is different
from the job where a customer brings in a diamond that they bought on
the Internet and I have to set it. I charge more for "strange-to-me"
stones, especially for some of the off-cut stones customers bring in
from their vacation in Tanzania or from the local gem shows.

I'm also curious as to what job shops are billing as an hourly

rate. Of course, there will be regional differences and differences
in pricing due to skill levels, equipment required, services offered,
etc. We are currently basing our pricing at $90.00 per hour
(wholesale) for most jobs. Our work is expected to be flawless. We
also have the ability to create ANYTHING that can be done in or to
precious metal. We do mostly fabrication, some casting, granulation,
inlay and overlay, custom alloys, laser welding, machining, custom
lapidary, engraving, enameling, die forming, raising, chasing and
repousse. We don’t do CAD (yet).

Doug Zaruba


#3

Robert I’m Geller. Congrats on your raise!

What the owner is doing is washing his hands of ANOTHER loosing part
of his store. In fact he’s making money ONLY in repairs - YOU!

If YOU price it you’ll get the right price. I’m not fond of you
pricing but if you’re getting 26% of the labor price in the book (If
you’re sub contractor it should be: “A” = 33%; “B” = 20%) then if
they UNDERPRICE it, you might not getas much.

My suggestion? ADD $5-7 to every job at retail so you get a buck or
so just to price.

David Geller


#4

When I had my trade shop, I had a long time customer that I
inherited when I bought the business. He was good for about 13% of
the gross, and he thought that fact entitled him to tell me what I
could charge, get him preferential turnaround time and many other
privileges. He eventually became an ex-customer. Now in your case,
where you are working in someone else’s store, there is a difference.
Is he expecting you to buy all the materials and supplies, then
provide him with a finished product? Does he expect rent or other
compensation for the space, electric, etc.? All of these things
should be considered before you decide how much right he has to
dictate pricing. I am in a similar situation, and have little say on
the pricing. However, I don’t buy most materials, don’t pay rent or
utilities. He buys parts, takes the markup. I provide solder, shop
supplies and a small portion of the metals, and I take the labor
fees. He’s happy with his markup. I make an adequate living with
little risk. It isn’t perfect, but it works. Jim


#5

Doug, here are some answers to your posts.

Firstly the book was more designed for an employee working for a
store situation. Secondly trade shops who use my book are doing as
you are, charging 40 or 50% of the retail price. Many trade shops
GIVE a copy to the store and tells them that.

With the higher prices of gold I have made for another jeweler the
same book just 25% HIGHER across the board. A $22 ring sizing is $28,
etc.

Plat in that 3.2 book is priced at $610, 25% higher means $762,
still $100 short but labor didn’t go up 25% so it overall works
great.

So either charge 25% MORE or buy a book already “upped”. (It’s $100
for the first copy of the newer book, $50 additional copies= (404)
255-9565

You mention the express column. For those unfamiliar, we have a
column for those who want the repair done NOW or within 24 hours. All
prices in that column are 50% higher than normal.

A $22 smaller sizing is $33. A $18 prong is $27, etc.

I’ve had 2 stores have me make them a price book and they said

“Remove the PRICE column, leaving only the express column, just call
it PRICE.” So all prices are 50% higher for normal work.

No one walks.

One store told me he quotes ONLY THE EXPRESS COLUMN.

A customer says “How much to size a ring?”

He says “$33.00”

Then he says “When do you want it?”

Whatever the lady says, she gets it. Today? Fine! How about 3 days?
Fine! Next week? Fine.

If I have to price every single job out of the book, then wait for
an OK, I'd have to add an additional handling charge to cover the
time spent just to look the job up in the book. 

I posted the same thing, add in a few bucks for yourself.

Concerning setting charges, many people think my prices are too
high. We charge EVERYONE whether they buy our ring or theirs the same
price. My suggestion is to ADD into the ring after markup the retail
setting charge and tag it that way and then don’t charge extra to
set. Example:

Ring cost: $400 X 3 = $1200
Add retail for Head & Set:  $150

TAG RING at $1350.00

Now you don’t have to charge ANYTHING, you got the real setting
price.

Doug you’d be a good candidate for the 25% higher book or even the
book that’s EXPRESS ONLY. Let me know.

Another thing. You’re an odd ball (nicely said). You value your
time, expertise and income you need. Most people don’t think like
you. Congrats. $90 wholesale? Typical is $45. I argue with jewelers
all across the country. They just don’t think they can get it. If
you’ll open my book and just POINT to the price, this is the closing
ratio ACROSS AMERICA:

Repairs:	Sell 9 out of 10 people (maybe 9.5 out of 10)
Custom Design:    Sell 7 or 8 out of 10

No matter what you charge.

So think if you could do well if the prices are 25% higher or even
50% higher. For an additional $45 flat fee I can put your company
logo on the cover rather than the tools I have there, no matter how
many copies you buy.

David Geller
JewelerProfit
www.JewelerProfit.com
(404) 255-9565
(888) 255-9848


#6
    hi I was working for a jeweler in a small town near a larger
metro area. Last week he tells me that I have lost all my benefits
and will be a  subcontractor or I can leave.for  those areas. 

Hi John; Grrrr…I’m ready to help you with this one.

You’d better get control of this situation or you are going to end
up holding a very short end of the stick. First, if you are to be
truly a subcontractor (and legally so), then you will be using all
and only your own tools (unless you rent or lease from him, and it
needs to be on the books). You come and go on your own schedule, he
can’t tell you how to do the job or when, just when he’d like to have
it finished, and you can agree to that if it’s possible. You keep
the hours you choose, and you pay all your own bills or pay him for a
part of utilities, phone, etc. Better get a cell phone. If you are
working with his customers, answering his phone, taking inventory in
and out of the safe and cases, you charge him, or he can get a
salesperson to do that. You should give him your own wholesale
price list. Anything not on your price list, you estimate the
charges. Make sure that it’s understood that an estimate is not
binding, if it costs more, you get more, if it costs less, be honest
and let the customer have it. You supply all materials in the way of
gold, solder, gas, oxygen, polishing compounds, everything. And
those bench sweeps are yours to send to the refiner and you keep the
gold or the money. He can provide findings and stones, etc., as he
chooses. If you supply them, mark them up on sliding scale. More
markup for lesser costs, less on higher dollar items. This is
because, if you buy materials, he is marking them up for the
customer, and you are supplying him inventory and making nothing on
that investment if you don’t charge. Would you put finished jewelry
in his cases, let him sell it, then pay you what your cost was? You
give him a bill, according to your terms. He pays it, according to
his and your agreement. Get a charge card for your business, charge
everything, make the payments, or use a debit card. You need a paper
trail of your expenses. And hook up with a good accountant (that
goes into your cost of business too).

Price custom wholesale by time and materials (plus that markup).
Your hourly rate must include you wages, the withholding, the
employer’s share of withholding, Social Security (employers and
yours), workers comp insurance (unless you opt out) and all your
other costs like rent, phone, materials, tool replacement,
everything. Now add to your cost of operation a reasonable profit,
at least 10% in my opinion. Oh, and add in the cost of you benefits,
medical (join the local Chamber of Commerce to get a good rate on
medical insurance, or join MJSA and look into their benefits). If
you’d like, I’ll send you my wholesale price list and a profile of my
monthly expenses, but for now, make sure you charge at least $40 per
hour. And by the way, if you are an independent, he really should
have nothing to say about you doing work for anyone else or your own
customers, as long as you don’t “bird-dog” him in his showroom or the
parking lot. Tell him, if he doesn’t like it, he can go fish. If
you’ve been a jeweler as long as you have, you can get a full time
job for $50-60 thousand a year and benefits, and if you’re missing a
few techniques, like wax carving, whatever, we here at Orchid can
hook you up to fix that. It’s a shame when these retailers want out
of their commitments to keep their own piece of the pie intact. Fact
is, you can figure out what a jewelers is costing you, slap your
markup on that, and he pays for him/herself and more. Tell us, do
you ever have time to sit around on your thumbs? If not, then you
have not let him down, he’s failing in other areas. I know people
are going to say it’s the economy, but a bench jeweler, if the boss
is running his business right, will always have enough work to pay
for himself and make money for his employer (unless he’s a slacker or
a hack). And I can tell you from experience, if he lets you go, he’s
going to either end up paying more or getting less. I’ve seen it,
some of these guys aren’t too bright. If he doesn’t like the deal
I’m suggesting, then you find an inexpensive office to rent as close
to him a possible, hang out a shingle, and offer quality, fast
turnaround repairs at very competitive prices. Don’t think the
customers don’t know who actually does the work. And whatever you
do, maintain integrity, it’s the key to success.

David L. Huffman


#7

David Huffman brought up a point that slipped my mind altogether and
that’s the subcontractor status.

I have pasted below info form the company that helped me incorporate
years ago about this.

John already said he will make more money using my book so he
needn’t get into the findings of cost, material, markup that David
mentions. Good way, yes. But John using my book said he’d make more
money. Why complicate life.

If the person BEING the subcontractor doesn’t pay their own taxes on
a timely basis (a real problem for small guys) the STORE OWNER COULD
BE LIABLE FOR THEM.

Here’s the article, the 2 or 3 paragraphs really tell the story as
it might apply to John.

David Geller

2/1/04 from nvinc.com Are You Using the IRS’s most Recent 3 Factor
Test vs the older 20 Factor Test?

Will your Independent Contractors Meet the Tests? When you hire a
person in your business, understanding if the worker will be
considered an employee or independent contractor for IRS purposes is
critical. Many would rather not have the worker be viewed as an
employee because your company must pay half the Social Security and
Medicare taxes. If the worked is classified as an independent
contractor, you have no withholdings or benefit costs.

If you are wrong and classify a worker as an independent contractor,
the IRS will impose substantial assessments, penalties and fines. One
potentially big problem is when you terminate an independent
contractor and they apply for unemployment benefits because they felt
they where an employee. The Old 20 Common-Law Factor Test

To help determine whether an individual is an employee under the
common-law rules, the IRS has identified 20 common-law factors (Rev.
Rul. 87-41). These factors-sometimes called the 20 factor
test-indicate whether sufficient control exists to result in employee
classification. The IRS developed these 20 factors based an
examination of earlier cases and rulings considering worker
classification.

a. The 20 factors outlined in Rev. Rul. 87-41 attempt to identify to
the extent of a business’s legal right to control how the worker
performs the job.

b. Rev. Rul. 87-41 was intended to clarity the treatment of certain
brokered technical service workers following changes made by the Tax
Reform Act of 1986 to Section 530 of the Revenue Act of 1978.

  1. The IRS Training Guide for agents and the Internal Revenue
    Manual, Employment Tax Handbook, Chapter 5 (IRM 4.23.5) sets forth
    guidelines for making worker classification determinations. The guide
    and the IRM reshuffle the 20 common-law factors into three categories
    of evidence (behavioral, financial, and relationship of the parties)
    and identify certain factors as no longer relevant to worker
    classification.

The New Three Categories of Evidence Test

I. Behavior Control: Facts that show whether the business has a right
to direct and control how the worler does the task for which for
which the worker is hired, including the type and degree of: a)
Instructions the business provides the worker, and b) Training the
business gives the worker.

II. Financial Control: Facts that show whether the business has the
right to control the business aspects of the worker’s job. These
include:

a. Reimbursement of business expenses

b. Extent of worker’s investment

c. Extent to which worker makes services are available to the
relevant market

d. How the business pays the worker

e. The extent to which the worker can realize a profit or loss (An
independent contractor can make a profit or loss. An employee
cannot).

III. Type of Relationship: Factors that show “type of relationship”
(as provided by the IRS in Publication 15A):

a. Written Contracts describing relationship parties intend to
create

b. Whether the business provides the worker with employee-type
benefits, such as insurance, a pension plan, vacation pay or sick
pay.

c. The expectation of permanency of the relationship - is the worker
hired with the expectation that the relationship will continue
indefinitely rather than for a specific project or period? If so,
such expectation indicates an employer-employee relationship rather
than independent contractor relationship.

d. The extent to which services performed by the worker are
considered a key aspect of the company’s regular business. The more
important they are to company business, the more likely the business
will have right to direct and control worker’s activities, thus
indicating an employer-employee relationship.

Here is a structured approach for applying the common-law control
roles

A. Statutory employees.

  1. In addition to treating common-law employees as employees for
    FICA purposes, IRC Sec. 3121(d) lists specific types of workers who
    are also treated as employees (i.e., statutory employees). The
    distinction between common-law employee and statutory employee is
    important for payroll tax purposes.

a. Although statutory employees are subject to social security and
Medicare (FICA) tax withholding ( and employer matching), they may be
independent contractors under the common law control rules.

b. In those situations, they are exempt from federal income tax
withholding.

  1. Statutory employees include corporate officers and individuals
    performing services included under an agreement pursuant to section
    218 of the Social Security Act (i.e… certain nonfederal governmental
    workers) are normally considered statutory employees. In addition,
    the following types of workers are considered statutory employees
    when the agreement between the worker and the employer contemplates
    that substantially all services to be performed will be personally
    performed by the worker.

a. Food, beverage (other than milk), and laundry or dry cleaning
delivery persons.

b. Full-time life insurance salesmen who work primarily for one life
insurance company.

c. Home workers who perform work according to their employers
specifications and use the employer’s materials.

d. Traveling or city salesmen in specified industries.

  1. Despite fitting within the definition or one of these four
    enumerated types of statutory employees, a worker with a substantial
    investment in facilities used in connection with the performance of
    the services (other than transportation facilities), or who performs
    the services as a single transaction rather than as part of a
    continuing relationship with the person for whom they are performed,
    is not a statutory employee [IRC Sec. 3121(d)(3)]

Example 1 Officers not considered to be employees. John Smith is an
officer of ABC Corporation. He performs only minor services and does
not receive any compensation from the corporation. Is John
considered to be a statutory employee of the corporation? Although
corporate officers are included in the list of statutory employees
under IRC Sec 3121(d), an exception exists for officers with limited
duties in the corporation. If John performs no services or only minor
services for the corporation and neither receives nor is entitled to
receive any compensation, he will not be considered an employee of
the corporation [Reg. 31.3121(d)-1(b)].

B. Statutory Independent contractors.

  1. Certain workers (qualified, licensed real estate agents and
    direct sellers) have bean statutorily excluded from being classified
    as employees. Example 2 Proper tax status of real estate agents. Bob
    Ping is a full-time real estate agent who sells exclusively for
    Nationwide Realtors. Nationwide pays Bob a commission for each sale.
    The company provides Bob with a desk, a computer, and a telephone and
    requires him to attend weekly sales meetings. Bob will be treated
    statutorily as an independent contractor if [RC Sec. 3508(b)(1)]:

  2. he possesses a valid real estate license;

  3. his compensation is based on sales output such as a commission
    based on sales price (not in the form of fixed, periodic compensation
    paid for services rendered); and

  4. a written contract exists between Bob and Nationwide Realtors
    stating that Bob will not be treated as an employee for federal
    income tax purposes. C. Filing Form SS-8.

  5. If a taxpayer wants to eliminate uncertainty as to an
    individual’s status as an employee or independent contractor, the IRS
    provides a means to accomplish this objective. By filing Form SS-8
    (Determination of Employee Work Status for Purposes of Federal
    Employment Taxes and Income Tax Withholding), the taxpayer can
    receive a ruling as to the individual’s status. However, it appears
    that a high percentage of the requests for rulings usually result in
    the individual being classified as an employee. Furthermore, the
    filing of a Form SS-8 may greatly increase the chances for an IRS
    employment tax examination.

  6. In the past, the design of Form SS-8 reflected the 20-factor
    common-law test for worker status. The 20-factor test has been
    largely replaced by the IRS’s new categories of evidence analysis,
    which groups evidence into three categories (behavioral control,
    financial control, and relationship of the parties) and identifies
    certain factors as no longer relevant to worker classification.
    Accordingly, the IRS redesigned Form SS-8a in early 2001 to follow
    the new guidelines.

It is important to speak to a tax professional or attorney if you
have questions in this area. You do not want your independent
contracts to be reclassified as a employees. It is best to know from
the start as this can be a very costly issue. Plus you will have the
proper agreements in place for the new employee or independent
contractor. Contact NCP at 1-888-627-7007 after you speak to your
CPA to determine if forming a corporation will help you to avoid this
problem as an employer. There are certain rules that allow a
percentage of employees to help solve this issue (see two paragraphs
below).

Incorporation Test: Under this test, an individual will be treated
as an independent contractor if he or she conducts business through a
corporation or a limited liability company. In addition, the
independent contractor must be responsible for his or her own
benefits, instead of receiving benefits from the service recipient.
The independent contractor must also have a written contract with the
service provider stating that the independent contractor will not be
treated as an employee and is responsible for his or her own taxes.

To prevent the incorporation test from being abused, the bill limits
the number of former employees that a service recipient may engage as
independent contractors under this test. The limitation is based on
the number of people employed by the service recipient in the
preceding year and is equal to the greater of 3% of the service
recipient’s employees in the preceding year or 10 persons, as
follows: Example: Business X has 500 employees in 2000. In 2001, up
to 15 employees (the greater of 3% of Business X’s 500 employees in
the year 2000 or 10 individuals) could incorporate their own
businesses and still have Business X as one of their initial clients.
This limitation would not affect the number of incorporated
independent contractors who were not former employees of the service
recipient or independent contractors meeting the general test.

Disclaimer:

This is intended to provide accurate and authoritative
with regard to the subject matter covered. It is offered
with the understanding that NCP, Inc. is not engaged in rendering
legal, accounting or other professional service. If legal advice or
other expert assistance is required, the service of a competent
professional person should be retained.


#8
    John already said he will make more money using my book so he
needn't get into the findings of cost, material, markup that David
mentions. Good way, yes. But John using my book said he'd make
more money. Why complicate life. 

Hello David and John and others;

Something comes to mind, perhaps obvious to others, but I would
think that this employer would be well advised to look into David
Geller’s entire pricing and compensation system as a solution to both
their problems. I’ve seen the book, and it’s layout is very well
designed, and probably the only one of it’s kind. One of my accounts
is using it currently, and I’d frankly like to see the others pick it
up too. Fact is, if John goes properly independent, he’ll have to
pay for a lot of services like accounting, payroll, perhaps benefits,
insurance, etc… If he were to get involved with the system, this
employer, in my opinion, would need to have David analyze his pricing
and compensation system and tailor the Geller system for his
particular situation. I would also advise consultation on the whole
system of pricing custom design. It might very well be the best
solution for both of them, if indeed he has created for himself a
situation similar to the one David describes as having been his
motivation for developing his pricing system. Meanwhile, it’s a
pretty small investment (a no-brainer, really) for this guy to at
least buy the book and CD’s and see if it rings a bell. Why re-invent
the wheel? Best of luck, John. My offer of help still stands.

David