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Pricing question Answered


#1

Heidi Many people starting out are afraid to price. Many folks price
by GUILT. Guilt pricing is when you charge based upon how long it
took you and how much YOU want to make per hour, not what you NEED
per hour. You mentioned:

=94 Is 3x's the material the rule of thumb?=94 

You might 3x=92s MATERIAL but no way can that markup take care of
labor.

Think this way. You make a plain wedding band. It cost you $30 for
the metal and it takes 1 hour to make. You sell it for $90.00. Bingo!
By your method you made $60.00 for the hour (you didn=92t, but not
now). For the hour you have averaged $60.00 in profit per hour, or
produced in income $90.00 per hour.

Now you take the SAME band and hand etch the bride and grooms name
in squiggly lines in the metal after bending. This takes 3 hours.
You=92d charge the same 3 x material for $90.00, make $60.00 and
average $20.00 per hour or produced in income $30.00 per hour.

Not fair, is it?

Pricing by guilt? You are and you know why? Because of this
statement in your post:

=94 I know some in the industry have told me not to bother with
those simply b/c of the machine made, low quality junk out there
being too much competition.=94 

If you are definitely making the same crap as what=92s out there then
there is no reason to buy from you. So make the stuff differently and
then they can=92t compare. Make the shanks thicker; make the shank
bottoms square, solder gold accents on the ring, SOMETHING to be
better and different and it doesn=92t have to cost a lot.

I know one jeweler, when making any type of hollow ring he does
this. He takes a sheet and pierces out the customers monogram, bends
the sheet and solders it up under the top hollow area. This is
comfortable and very pretty. He charges FOR it but it makes the
price incomparable.

It would be nice to be faster but YES you must charge for your
slowness, time is money. So the way to figure pricing is this. First
off don=92t price by how long your hands touched the piece. Price by
hour long you were at the shop. If it takes 6 hours to actually make
a ring and you were there another 2 hours to answer the phones and
order parts, charge for 8 hours. How much do YOU want to make? If you
want $700 per week for YOU, divide $700 by 40 hours and that=92s
$17.50 per hour. Taxes will be 25% so ADD IN TAXES and you=92ll need t=
o
get for YOU $21.88 per hour so you can get $17.50 and Uncle Sam gets
theirs. So let=92s round up $21.99 to $22.00 per hour.

Now what=92s the cost to run your shop, all costs included without the
materials for customers? Add in solder and wire, tools, emery paper,
rent, phone, etc. This does not include the cost of material that you
RESELL, like the material for the band mentioned. Let=92s say its
$4000.00 per month. Divide that by 40 hours per week, 4 weeks per
month and you get expenses to be $25.00 per hour.

Here=92s 2 very important numbers. You need to bring in EACH and EVERY
hour in your 8 hour day these two numbers per hour:

A. $25.00 per hour for overhead
B. $22.00 per hour for you and your taxes.

That=92s $47.00 per hour.

Remember that number. Now, ARE YOU PERFECT? I haven=92t met you and
know you aren=92t perfect! So add in NOW your mistakes. We found in ou=
r
shop ($1.8 million in sales, =BE from the shop) that 10% of everything
we did had a problem. So add in 10% here for being human.

10% is $4.70 added to $47.00, makes an hour charge of $51.70 per
hour. Round it to $52.00

You need to bring in $52 per hour, 8 hours a day, or $416.00 in an 8
hour day.

So now let=92s work. If you FIX 2 rings (no material, just labor), one
takes 3 hours and the other takes 3 hours, how much do you charge?

From the above you=92d charge $52 X 3 hours = $156.00 ea=
ch
for a total of $312.00 for both.

So in a day you produced $312.00. What happened to the $416.00 per
day we were to charge? Where=92s the missing $104.00? You talked on th=
e
phone, rolled emery paper and spoke to a customer. Can you get away
from that? NO!

Notice that you were in the shop 8 hours and worked 6 hours. You
worked only 67% of the day. You were doing administrative tasks 33%
of the day.

Here=92s the secret. Most jewelers don=92t work more than 5.5 to 6 hou=
rs
at the bench in an 8 hour day.

Now that you know that you need to increase you hourly rate by 33%
to have the CUSTOMESR pay for the time you can=92t make money!

Add 33% to the hourly rate of $52.00 and you need to charge $69.16
per hour (yes, just like car mechanics. The number rings a bell,
doesn=92t it?) Round that up to $69.50 per hour.

So if a two ring takes 3 hours each you=92d charge 3 hours X $69.50 =
$208.50 per ring. Two rings would bring in a total of $417.00 per
day. B I N G O

This is HOW to figure how much to charge for your TIME. Now just
multiply most all materials by 3 and add that number to the labor and
that=92s the selling price.

Learn how to romance and sell and you=92ll get your price.

We have found that in repairs alone there is a 90% closing ratio as
customers come to a craftsperson for TRUST, not price.

Any questions let me know.

David S. Geller
JewelerProfit
http://www.jewelerprofit.com