I started in 1974 as a trade shop, by 3 years later dropped trade
and was full retail. Had a showcase of castings and we reset
customers stones and handed them their old gold back. Gold was at $85
an ounce. $125 to remount a new ring with 5 low base heads was
1978 or so gold went up to $150-$200 an ounce, business dropped off.
We thought the world would come to an end. Who would buy mtgs at $200
So we stocked waxes and CAST with the customer's gold and charged
for heads and setting. In the 70's we charged $50 to cast a wax,
I thought like most of you "No one would pay higher prices"
You and I were correct. No one would pay. The biggest #1 reason they
wouldn't pay was because I WOULD NEVER ASK. True. If I didn't think
they would pay (after all I am the smartest one here in the store) I
would ask-god forbid they'd say NO. But I never gave them a chance to
Forward to 1986. $830,000 in sales, 3/4 from the shop. 5 jewelers, a
waxer, shop foreman, 4 sales people, all doing repairs and custom.
Paid the jewelers $9-$11 an hour. Sales people $7-$11 an hour.
Jewelers pay had nothing to do with what we charged. Used a trade
shop repair list and doubled it. Called my competitors and stole
their list (smart! Steal someone's list that isn't doing much better
than me. Real Smart)
End of 1986, owed 1/4 million to accounts payables and $80,000 for
payroll taxes I couldn't afford to pay.
Christmas Eve lay off and fired half of the company -8 people.
Started 1987 with $125 in check book.
Summer of 1987 IRS put a lien on my business and house. Don't tell
me you had a bad day.
So I went to a lawyer and declared bankruptcy. Don't tell me you had
a bad month.
August 1987 met an accountant who had been a watchmaker for a while.
He showed me they way to make money from the shop.
Fix my costs.
My current costs had nothing to do with my charges.
Pay a guy $11 an hour and he takes 5 hours ($55) to cut a wax and we
charge $125. Or whatever we charge is just too darn close to our
costs. But we had no one way of knowing.
Ben, the accountant watchmaker makes a deal with IRS to pay off
taxes and we withdraw the bankruptcy proceedings.
We buy the jewelers a time clock and clock on the envelope every
procedure. Ben shows me how to pay commission to the jewelers. With
the time clock data and in 1987 thinking I should pay $35,000 a year
($15 an hour) I make my first price book with in it what we'd pay a
jeweler to do a job, paying them an average of $15 an hour.
I announce on Monday that we will stop paying hourly wages starting
today. No more $9-$11 an hour, only these monies we figured up. I was
I announced that on Monday, I had 5 jewelers.
On Saturday I had 2 left.
Within 6 months the 2 guys who stayed were making 50% more-$13 to
$16 an hour, working 40 hours. Our money drain stopped and we became
We did a 3 time markup on the parts (that cost was always easy to
We marked up the jewelers pay 4 times. After adding in matching
taxes, we ended up with a 3 time markup there too.
Shop costs were now known and we tripled them. With goof ups, redos
and freebies, we ended up with a 2.5 markup after all was said and
Knowing our costs for parts and LABOR we obviously now raised our
I was scared to speak the words in this book I printed for our
Scared to death, but I wasn't too scared. When you sit across the
table from an IRS agent who says
"Mr. Geller, we have the power to take your home and business is we
like. We have also charged you the most available penalty and
interest allowed by law."
In 4 years they had charged us on a $65,000 debt, $60,000 in
interest and penalties.
It was now "Screw charging what I thought was right, I have to
charge enough to pay jewelers and staff well and pay my bills"
My prices went up dramatically,
Whereas we had been charging $50 to cast a wax, it went to $125 in
the 1=late 1980's. Lots of things went up 50% and more.
I was scared.
But I SPOKE THE WORDS that were in the book I printed, along with
the sales staff, who gave me a hard time for charging "too much."
Besides being cash flow positive, the thing that happened really
ticked me off was:
THE SAME AMOUNT OF PEOPLE WHO BOUGHT A REPAIR OR CUSTOM JOB BEFORE
BOUGHT WITH THE RAISED PRICED. NO MORE PEOPLE WALKED AT $125 WAX THAN
DID A $50 WAX.
Man, that was a bummer.
But I was still scared.
We had a showroom of 8 showcases, 3 were filled with waxes. Over
2000-we actually counted.
Typical custom job was $125 cast a wax with some alteration charges
($50-$150) and setting charges.
Very few custom wax jobs. We KNEW no one would pay, we only offered
$125 waxes. Custom waxes were few and far between in sales.
- Sales people were being paid $7-$11 an hour plus 1-2%
commission. I attend a Harry Friedman workshop. How to run a detail
store as a selling machine. Come back and changed the sales staff to
100% commission, like the jewelers.
They all said "If you do that our pay will drop and we'll quit."
When you get Christmas cards from your IRS agent because they know
you so well, you don't care.
They could quit, I wanted the business to thrive. I attended in
March 1991. Come back and started instituting Harry's suggestions. In
May I brought Harry himself into the store for 3 days. Cost me
$12,000 and I had to put it on 3 credit cards. Best money I ever
June 1st made an announcement like the jewelers
"No more hourly pay. Only commission, you get paid for what you
They baulked. No one quit.
But they were right, for 40 days and 40 nights their pay dropped
because they were all underperforming. But on the 41st day they "got
it". Sales took off.
It took me 18 years to get to 1.1 million (1990). In that year, 1991
sales went up 45% to $1,450,000.00
Sales staff was making $17,000 to $24,000 a year. Within 3 years
they were making in the $30,000 to $45,000 range, the $17,000 sales
person was now making the most money. The $24,000 sales person, who
had been a manager at a Sterlings store, was making the least.
Funny thing occurred. Remember the 2000 waxes we cast at $125 each?
Sales dropped off dramatically in 2-3 years. The sale staff started
selling NOTHING but custom waxes.
Under $7 an hour and 2% commission they too thought no one would
At 100% commission they only suggestion custom waxes.
They saw no reason to get paid $12.50 to sell a wax when they could
make $32.50 to sell a custom wax where the customer would get what
they truly wanted-a one of a kind design.
I kept doing studies because we needed to continually fine tune
EMPLOYEE PAY first and we just marked it up pay like merchandise.
Every time I raised prices I got butterflies in my stomach. Every
time we never lost business and sales grew.
Did people complain? OF COURSE they did. But they complained at
lower prices too.
I'd much rather hear a customer complain as they PLACE THEIR ORDER
(never had a locked door-they could have walked) than listen to
vendors and IRS agents.
(You don't want to be in front of 16 employees on Christmas Eve
handing out severance paychecks because you can't pay your bills
because YOU charge too little. In 2 weeks that will have been 20
I ended up having something none of you have:
Yep, they complained. Kept hearing year after year:
"DAVID, WHEN ARE YOU GOING TO RASIE PRICES IN THE PRICE BOOK-WE WANT
When I sold the store to the top paid sales person in January 2000,
the year before we did 1.8 million with 3/4 of that coming from the
Average repair was $65 (Someone mentioned a $500 repair was
average-this is without any big stones and such. Labor and small
Our average custom was $750. This is without material other than a
few heads. I didn't count larger s as custom as custom is labor
mostly. So if we made a $750 ring with customers gold (we did) and
they bought a $1500 tanzanite, we took the tanzanite out of the mix.
Which means labor mostly, to make a ring, was $750.
If the customer didn't have gold, only a credit card, it was usually
a $1500 item.
In 1999 we were charging $20 to size a ring, $95 for a half shank,
$175 to cast a wax with your gold and a custom wax started at $400
and there were 4 levels of complexity and a custom wax went up to
We closed the same number of people.
9 out of 10 said "Repair it"
7 or 8 out of 10 said "make it"
3-4 out of 10, after looking in the case said "I'll buy it".
The jewelers were making $30,000; $44,000; $49,000 and $61,000 a
year in 1999. Waxer made $45,000 a year. Sales staff made $39,000 to
$61,000. Remember the young girl in 1991 making $17,000? When I sold
the store, Denise was making $44,500 working 4 days a week. 100%
commission selling repairs and custom work 3/4 of her day.
Knowing what my costs were to make ring and marking labor up like
merchandise saved my business and made it profitable. Paying the
staff commission raised their pay easily 50%.
Having a price book to show customers got the prices and got the
customer to say "O.K., go ahead" and not ask for a better price
nearly as often. "Can't you do better?"
So for most of you who say a $750 wax is ludicrous, learning how to
sell it and opening your mouth with confidence and saying the number,
having a good reputation and your showroom, staff and yourself looks
like this is the kind of place that does quality-you will get it.
I had a reason to raise my prices. Too many people were dependant
upon how well the store did, myself included.
I didn't make my price book to sell to jewelers, it just happened.
But if I hadn't gone through what I did, I might just have been
working for one of you folks for the past 20 years.
No thanks, I nor my staff would work for those lower wages.
Maybe you don't have an IRS agent sitting across from you. I didn't
from 1974 until 1987. But all of those years was a struggle-self
You don't have to pay commission to make the right money, just
charge more than you're charging now. That's all. (Commission does
Ever had a snow storm that closed the shop/store for a day or 3? Did
you close up? What's the WORST that could happen if you raised your
prices? Would 100% of customer walk like you had a snow storm?
Nope, you'd find 5-10% would walk in the beginning and many of them
would come back because of your good workmanship.
Car dealers are having a hard time, margins are slim. But the shops
in the back are always profitable.
Like them, you'll get your money asked because
"REPAIRS ARE NOT PRICE SENSITIVE, THEY ARE TRUST SENSITIVE."
If you ask for $50 you'll get it 90% of the time.
If you ask $70 you'll also get it 90% of the time.
You just choose which number to ask.
20 years ago this month I had the most gut wrenching Christmas.
I hope yours is wonderful, profitable, well paid and your bills are
all paid in January.
510 Sutters Point
Sandy Springs, GA. 30328