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Pricing question


#1

Fellow Orchidians: Being new at metal smithing, I am most curious
about how to price articles I have made. I am wearing my pieces and
friends have asked whether I could make more. I am not sure how to
price these. Is 3x’s the material the rule of thumb? What about
silver items (low cost) with high labor? 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.
I tend to think along the lines of this group, though. Handmade
quality WILL be recognized by those to whom I wish to sell.
Besides, the articles I make can not be reproduced by a machine. I
am certain I cannot count my “hours” of work as of yet,simply b/c I
am probably much slower than experienced jewelers. I would love some
feedback on this. I am thrilled with all the learning taking place by
reading these posts. Thank you all!!

Heidi P in AZ


#2

Heidi, please don’t be afraid of doing the math, it has nothing to
do with your 'smithing experience. The formula that you should
follow is:

Labor + Materials & Overhead + Profit = Total Price

While this formula can be much more complex if you are actually
running a storefront, for your purposes it can stay with that. Now
for an explanation of why this formula should work for everyone, no
matter who you are or you level of experience.

Labor is the number of hours it took to make the peice times your
salary per hour. Example: As a journeyman apprentice, I charge $25
per hour. A peice that took me 3 and a half hours to make has a
Labor charge of $87.50. A beginner might only charge $10 an hour, and
take 5 hours to make the same piece, and would therefore charge $50
for Labor. This is the money for ‘YOU’, it’s what you are being
paid.

Materials & Overhead accounts for the exact amount you spent on the
materials to make the peice, and the prorated cost of the
consumables used in making the peice. Example: In making a simple
silver ring, I spent $3.50 on the metal and findings, $5.00 on the
cabachon, I used up a $1.00 felt bob in polishing, as well as an
estimated $2.00 in consumables (sanding belts, wear and tear on
burrs, files, the electricity you used, etc.). This is a Total of
$11.50 in M & O. This won’t change much for experience level of the
Craftsman, though it does have the potential too. A more experienced
jeweler might take less time using a particular tool, and therefore
put less wear-and-tear on it. This covers your shops expenses. This
is separate from what ‘YOU’ get paid, this money goes back to your
shop.

Profit is simply a percentage of Labor + Materials and Overhead.
Example: In my previous two examples, I had a Labor charge of $87.50,
and a M & O charge of $11.50. This Totals to $99.00. I add in a 15%
profit charge for my business, coming to a Grand Total of (99 times
1.15) $113.85. This is the Total Price for that item. Profit is the
one that some people have trouble with, but it’s the variable that I
argue for most. As a business, you deserve to make a profit, even if
you are simply wholesaling to other stores. This profit is what
allows your business to survive and expand. This money goes directly
to your shop and allows it to remain afloat. Even if you don’t have
a “store” you do have a shop; it’s a separate entity from you and
should be paid the same way you are paid.

You will notice that the Labor charge is much higher than the
Materials charge. This is why the old “rule of thumb” such as “3
times your materials” will almost always never truely represent what
your item is really worth. There are simply too many times that your
cost of materials will be miniscule in comparison to the work you
have put into a peice. If I am doing something like reticulation on
a small peice sterling, how can “3 times your materials” cover my
true cost? A reticulated brooch may have only $2.00 worth of
materials, but I’d never recoup my true cost if I sold it for only
$6.00.

This may seem like a lot of work, and a lot of math, but it really
isn’t. Try it on a couple of your peices and see. You can even
guesstimate for your first few times; the Total Price will be
incorrect, but not as incorrect as if you’d tried a “rule of thumb”.

Now, one final comment on why I stress this so much for new
craftsmen. I’ve seen many people come and go in the Artist trades.
The few that stay in the trade have many common traits; one is the
willingness to deal with the business side of the trade. This
includes (quite highly) the willingness to do the math that’s
involved with running a business. I strongly feel that there is more
than enough room in our game for everyone, and hate to see people
fail simply because they undervalued their work. I know that you may
not feel that you are worth what the formula says you should charge,
but please beleive me that you should stick to the price it tells
you. Cut the Profit to the bone, but don’t lose money in making you
art. That way leads only to failure.

Neil


#3

Set your price so that it’s slightly less than the value the item
will provide to the buyer. Of course “value” is a tough nut to crack
but it includes consideration for aesthetics, competition, content
(materials), labor, etc. You’ll also have to “shop” for/target the
right buyers for the kind of work you want to output such that there
is a good balance between your buyer’s value point and a price that
allows you a decent (at least) profit. (Just covering your own labor,
materials, and overhead, BTW, DOES NOT provide a “profit.”)

James E. White
Inventor, Marketer, and Author of "Will It Sell?
How to Determine If Your Invention Is Profitably Marketable
(Before Wasting Money on a Patent)"
www.willitsell.com


#4

Hello Heidi, I would suggest that you always keep track of the labor
and materials that you put into any handmade piece on what I would
call a " costing card". Identify the item with a model/ design
number and possibly scan or photograph the item and put it on the
costing card. This will accomplish a number of things… one is to
track your time, labor and materials. 2 would be to be able to
replicate the design again if you so wish , or if you have a few
customers intersted in the design. Then , When you have to repeat
making the design, you can do another time study to see if you got
faster at what you made previously. At the same time, you need to be
able to cover your cost and make a decent profit … It does not
matter if the item is made in gold, silver, brass…or any other
media that you choose to use. I have seen hand made items in sterling
go for a couple hundred dollars if the design concept warrants it
anbd if the customer likes it enough to pay that kind of money.Don’t
forget, there are people making designs out of far less expensive
material than silver… some people work in steel…plastics…etc…
So, I would suggest that you start by having some form of shop
time/labor figure that you use on your costing card … Say… Start
at $25/hour… this should cover your salary and some part of the
expenses and tools that you will always be buying to increase your
skills… Tools are a major part to ccost/time savings. As an
example… If you are using a flexshaft to do all your
work…including polishing your design with tiny wheels… this will
take a lot of time… putting some money into a small polishing
system ( no matter how small) will dramatically decrease your
finishing time on any project. This money has to come from
somewhere… so a suggestion is to use $25 or so /hour for labor…
then add your cost of materials and add 30- 40 % onto the total
cost on your costing sheet. Now, realize that in a hand made item ,
the cost can literally be “what the market will bear” so to speak !
Supposing you spent 3 hours ( $75 labor) + $10 in materials for
silver and a few stones…Total $85 x 1.40 (40 %) =$119 The market
value may be more than that… but that should be your bare minimum.
Remember, You have not added in the “overhead figures " of owning/
renting a studio… additional electrical /heat expenses and a
LLLLong list of other costs that you may not be aware of as of yet.
Again, I must say that these figures are just a starting point if
you don’t have much experience in costing and selling your designs.
Another thought on the subject relating to cast products… Not all
casters produce " junk” … Some of us produce very high quality
pieces for designers that demand a good price because of the design
… and the quality… Many designers have actually asked us to cast
repetitive parts for their hand made items… This can be very
helpful specifically when you are attempting to solder something
complex that may require a " marquis" stone setting or a square
setting. In this case, A cast setting may be far better as it has no
solder and won’t fall apart or require more cleanup. if it were a
hand assembled/soldered setting, it could be problematic for some
people… If you had to make 30 pieces with 6x4 oval settings, You
can have the settings cast for a few dollars/piece… instead of
spending a day making the thirty settings which would cost far more
. Clasps for bracelets and necklaces are another area where cast
parts can be very helpful. And finally, when you have an item that
becomes very popular… but does not sell because it is too
expensive, That, Is when you need to speak with a good
caster/finisher who can give you what you need, when you need it , at
a price you can’t make it for. In my particular case, I’m a very
experienced model maker/designer with a full casting and finishing
facility … we help a lot of emerging designers when they get to
that transition point… Many casting companies are only casters and
usually do not give advice to designers …because they can’t … and
that is why, often, designers who come to us tell us of their
horrible past experiences dealing with a casting company… and we
walk them through what they need to know and give them the quality
and advice they need. Best wishes, Daniel Grandi …We do
casting/finishing/model making by hand and cnc for people in the trade.
Sales@racecarjewelry.com


#5

Heidi-- I am the exact type of artist that Daniel Grandi was talking
about when he wrote:

" Many designers have actually asked us to cast repetitive parts for
their hand made items… You can have the settings cast for a few
dollars/piece… instead of spending a day making the thirty settings
which would cost far more . … we help a lot of emerging designers
when they get to that transition point… we walk them through what
they need to know and give them the quality and advice they need. "

This is exactly what he has been doing for me, and I am delighted
with his craftsmanship, attentive service, helpful communication,
and suggestions. Thanks to him, I have some production items for my
next show, totally my original design, but much more affordable than
they could ever be if I hadn’t had them cast. And they look just as
good as my originals.

It was a tough decision for me to job out the casting and finishing.
Everyrthing I have ever sold before was made entirely by me, other
than some chains and findings. But I really need to make my business
more profitable, and I fear that in our current climate, my one-off,
high-end pieces will not be able to do it.

Good luck!
Noel


#6

Hi Heidi, I used to use the 3X material model when I was doing more
low-labor jewelry (casting from molds, using pre-made findings,
etc.). Now that I’m doing much more fabrication, I’m shifting to
model that takes into account my labor. I’ve only been doing
fabrication for about 6 mos, so I charge only about $15/hour (for
wholesale pricing). As my skill and time efficiency improves, I plan
to raise my labor rates. My retail price is twice my wholesale
price, a standard in the industry known as keystone.

Sincerely,
JoAnna Kelleher, co-owner
Pearl Exotics Trading Company, LLC
Phoenix, AZ
Phn# 623.845.0998
Fax# 623.845.0917
www.pearlexotics.com


#7

Heidi, I spent years doing Service Cost Estimating for a large
computer company. We analyzed the failure rate of each component,
determined how long it would take to diagnosis the failure, and how
long it would take to repair it, what the cost of the parts were,
how many of the new parts would be defective and need to be
replaced, what was the hourly rate of the technician based on the
expected number of day they would be sick each year and how much
time they would spend drinking coffee and how many day vacation they
had, and, and, and ,and. When we were through, we had a estimate
down to the penny per month of service cost. And we tracked it to
the penny.

What did this have to do with what we charged?? Nothing other than
to set the floor on what we needed to stay alive. The same for your
jewelry. What you are selling is perceived value. For example,
today the patriotic jewelry is in fashion. You can go into a big
box discount store and buy a sterling silver American flag set with
red, white and blue colored stones for say $29.95. Or you could go
into a top of the line, 5th Avenue New York Jewelry store and buy an
similar American flag make of the finest Sterling Silver and set
with the finest of Laboratory Created Rubys, Sapphires, and Cubic
Zirconia, manufactured by the most talented of American craftsmen,
for the ridiculously low price of only $995.00. So who’s pricing is
right? That depends on who your customers are. The customer who
goes into the big box store has in mind spending 20 to 30 bucks on a
symbol, while the person who goes into the 5th avenue NY store is
looking for prestige. Both customers are willing to spend what they
perceive the piece is worth. What will your customer spend? That
is the question you need to answer.

Now If the answer is the your customer is only willing to spend $10
for the American Flag piece above, and after you have done all of
the detailed cost analysis and determined that it cost you $9.82 to
manufacture it, you have to decide if you can live on a $0.18 margin
for the number you can sell. If you can sell 10 million a year at
that rate, a $1.8M profit ain’t bad. It you can sell 20, then
that’s a different story as your profit will now total a whopping
$3.60. But if the answer is that your customer thinks that the
$995.00 is the buy of a life time, and you still only sell 20, your
profits are now almost $8k on that line. You can’t live on that but
10 or 12 of these a year will not be a bad income.

What is the Perceived Value of your work. That is all that you can
get for it.

Don