As gold prices pass the $1,300 per ounce mark, it might be useful to
talk about the relationship between gold prices and the price of
finished jewelry. In the late 1970s, during the first gold rush I can
recall, prices seemed to go up every week culminating in a peak price
of $850 per ounce in early 1979. During this period, we adjusted our
prices weekly and often found ourselves raising the ticket price on
finished pieces to keep up with our replacement cost.
A Finished Piece of Handmade Jewelry Averages 70% labor, 30% gold:
After the peak things gradually calmed down and gold tended to trade
between $350-500 for most of the next two decades. Gold is a
material, in handmade jewelry it is normally 30% of the finished
price. That means that 70%, on average, is the cost of the
craftsman’s highly skilled labor. Paradoxically, the more handwork
the less of a factor the actual materials become.
I’m not sure if I’m confused or not. My understanding of Richard’s
post is that approximately 1/3 of the retail price of a piece should
be materials and the rest is labour. If that’s the case the retail is
about 3 times the cost of materials. Am I on the right track or
completely out in left field? Oh, and Charles, your overhead working
with steel has to be considerably more than for leather (cost of
tools, gas, safety equipment,etc, etc). Working with leather and
steel both require a considerable amount of skill but I would imagine
that your costs related to steel are much higher than for leather.
Why are you billing your labour out at only $30/hor for steel? Or,
are you working all of your overhead into the materials cost to
produce something out of steel?
That's a good guide. Cost plus about 70%. Is this a reasonable
rate?
No it isn’t!
To prepare dinner for 2, the cost of food is 10 dollars. The same
dinner in a bistro would run around 50 dollars, and in Alan Ducasse
restaurant - the bill would approach 2000 dollars. It is all depends
who is cooking.
To prepare dinner for 2, the cost of food is 10 dollars. The same
dinner in a bistro would run around 50 dollars, and in Alan
Ducasse restaurant - the bill would approach 2000 dollars. It is
all depends who is cooking.
I understand where you’re coming from. Personally I hate making
shoes, so a pair would definitely cost a premium for me to make.
Okay let me rephrase my original question :-
“Is Cost plus 70% a reasonable rate for a beginner”?
Why are you billing your labour out at only $30/hor for steel? Or,
are you working all of your overhead into the materials cost to
produce something out of steel?
My overhead for leather is much less than that of steel, very true.
It’s more a matter reputation and skill than final product.
I bill $30 an hour for steel, as a labour cost “only”, the price of
raw materials and supplies gets added onto the final bill. It’s a
fair price for an intermediate level blacksmith.
When I charge you $200 an hour for leather, that gets you 33 years
worth of skill, the cost of materials is a sundry expense. I am so
familiar with leather that I can practically do anything with it. I
can make leather soft to hard as a rock, some methods are secrets
that haven’t been shared. If I’m interested in a project, my hourly
rate drops. It stops me getting overloaded by people wanting to get
my services for nothing.
Now that I’m starting in the jewellery industry, I want to charge a
fair price for my jewellery. Overcharging and undercharging, when
there are other people doing the same work is not fair to them.
"Is Cost plus 70% a reasonable rate for a beginner"?
There are no established formulas for special order work.
Mass-production is different, but we are not talking about it here.
The most common mistake is that goldsmiths trying to emulate what
large factories do.
I have always charged for my time + material. That is all. No
keystones, no multipliers, or anything else. Decide on the value of
your time and charge that amount + material cost.
Consider 70% applied to a simple engagement ring, stone is 2 carat
flawless D. Time to make is 2 days max. Cost of the stone could
approach 100 thousand. Using your formula I should charge 70 thousand
for labour. That is obscene. On the other end, a pair of earrings
with center amethysts and some diamonds will take couple of weeks or
longer. Material cost less than 5 thousand, so all I get for my time
is 3500 dollars? That is obscene as well.
I have always charged for my time + material. That is all. No
keystones, no multipliers, or anything else. Decide on the value
of your time and charge that amount + material cost.
Thanks Leonid,
The formula was not mine, I was parroting it, but by the by.
So when charging for a piece of jewellery, it’s a matter of what the
seller thinks is fair, or this is what I gather from what you’ re
saying.
So when charging for a piece of jewellery, it's a matter of what
the seller thinks is fair, or this is what I gather from what you'
re saying.
Fair is not the word that I would use. Jewellery is a very special
product, like no other. Handmade jewellery is always under-priced
regardless of what client pays. The thing to understand is everybody
is paid not in money but in lifestyle.
The shorthand for lifestyle is X number of dollars per hour. There
are some who hiding this number in surcharges for material. That is
where all formulas come from. I believe it is a very misguided
practice. Doctors, lawyers, accountants do not hide their hourly
charges, so why should we ?
The most valuable component in jewellery is the time expended on
making it. Someone may argue that gemstones are much more expensive,
but I am looking at value per unit of time. Diamond may cost several
hundred thousands, but if one considers how much time was invested by
thousands of people in prospecting, mining, sorting, transporting,
cutting, polishing, marketing, and etc - the hourly charge is
actually very modest My time is much more valuable. Another side of
the story is that transaction must represent a value to a client, or
the whole thing becomes a fraud.
Now that I'm starting in the jewellery industry, I want to charge
a fair price for my jewellery. Overcharging and undercharging, when
there are other people doing the same work is not fair to them.
The same work? if your work is not better, I agree. But if your
workmanship is better, you stand behind your work, your store has a
sense of ambience, there’s always a reason to get more money.
if you work out of your home/garage, dress in blue jeans, and if you
stood next to 6 other people and the public could differentiate you
from anyone else, this I agree.
So when charging for a piece of jewellery, it's a matter of what
the seller thinks is fair...
The seller can charge what the seller thinks is fair, but the
customer will ultimately be the one to decide if it is a fair value
or not. If someone wants to get absolute top dollar, they must be
able to do one or both of two different things. They must be able to
do or create things no one else is doing or that no one else can or
will do. And/or they must be able to convince people that what they
are selling is worth the price they’re asking. Both of these also
require that what is being sold is something that people want. Just
because someone can make stack rings from roofing tiles doesn’t mean
anyone will actually buy them. Regardless of how they arrive at their
price, or how many Zig Ziglar books they’ve read. (Zig Ziglar has
written some of the best books on the art of selling - and it is an
art - that have ever been written. I highly recommend them to anyone
selling anything, even for those folks selling only on-line)
Whatever formula you use to determine pricing, you won’t be limited
as to what you can charge, you’ll be limited by what people will pay.
The only way around that is to start by creating truly unique things
that people really want and that can’t be shopped, build a name that
is widely recognized and for which people are willing to pay a
premium. Then you can sell pretty much anything at a premium. Think
of Tiffany, Cartier, Gucci, David Yurman and so on. Because of their
hard work in the ground-laying, their names add value to their
products and they can then sell them for more. Even for those
products that can be purchased anywhere for substantially less.
Tiffany can get keystone (2X markup) and more for a three carat
diamond. Not too many other retailers in the world can even get close
to that these days. But no other retailer’s customers can say “It
came from Tiffany”.
The two most important words in pricing or selling anything are
“perceived value”.
