Shop & Business Setup

Jewelry Discussion
1

I have a repair, design & manufacturing shop located inside a retail
jewelry store. I do all the work for the store and do not pay any
rent. I am responsible for all the take-in repairs, shop expenses,
supplies, findings, gold and maintenance. The retail store provides
computers, software, bookkeeping, insurance, advertising, utilities,
customers & location. We are currently working on a 40% shop and 60%
store split, using the Geller Blue Book pricing. My wife and I work
off a base pay of $4000/month wages with a 50/50 split (between shop
& store) of the net earnings after all expenses are paid. So far
there are almost no net earnings to split. Has anyone else out there
have any experience with owning a shop inside a retail store and if
so, how did you work it so it is fair to all involved?

Gary L. Mills
Complete Jewelry Metalsmithing

2

Hello Gary, I worked in several stores in the dim and murky past. It
was always done the same way. The store paid the rent, insurance, gas
and elect. I paid for metals, solde and other bench supplies. We
split the price of each job fifty- fifty. Seemed to work.

Tom Arnold

3

Hi Gary,

I could have written the same post twenty years ago. I was in
exactly the same situation, except for the base pay part. I was
strictly contract labor; shop expenses, findings and parts came out
of my end. It was more or less fair (at least for the first few
years), and provided a stable and decent living, but it’s no way to
financial success. Splitting the net earnings may sound pretty good,
but depending on who is doing the books (and the buying), there most
likely will never be any real net earnings. I never saw any net
earnings (except for the owner’s wife’s new Cadillac company car, the
buying trips they took, the wife’s new 3 carat diamond ring and so
on. But those were all legitimate business expenses. Right?).

Be very aware of what your responsibilities are, and what you will
and will not be paid for. If you’re not careful, you could end up
being an unpaid salesperson or even store manager for the owner.
That’s what happened to me. You also have to be careful about keeping
your own books and paying your own taxes.

The store owner gets the best part of this bargain because he has an
employee, but he doesn’t have to treat you as an employee. It is
really nothing more than a great way for an employer to skirt labor
laws. He doesn’t have to do any withholding, pay unemployment or
disability insurance, Social Security taxes (you get to pay both
parts now), provide paid vacation, sick leave or anything else he
would have to pay or do if you were an employee. In addition, you
have very few of the rights you would have as an employee, but you
are still the employee in the employee-employer relationship. You
also get all of the hard stuff that comes with being self-employed
with very few of the perks. You are in effect willingly handing the
owner the carrot and stick of your professional life and giving him
carte blanche to do with them what he will.

It is also possible that this relationship is not entirely legal on
the store owner’s side. There are some very specific laws about
contract labor that come into play in a relationship similar to what
you describe. I would check with an attorney specializing in labor
law if there is any question at all in your mind. Those laws are
there to protect YOU! Let them do their job.

Having done it once, I would never do it again. It is a true win-win
situation for the owner, but the upside for you is very slim, and it
is very easy for a store owner to screw you and you likely will have
little if any recourse. You are giving up most of the protection you
might otherwise have in a relationship like this and getting very
little in return.

If there is any doubt about the nature of this relationship, ask
yourself one question: who can ask whom to leave?

I speak from painful experience. Beware.

Dave

4

I had a similar set up when I started in the jewelry business. At
that time, I gave the store a pricelist of repairs/custom work and
worked off that. There was no Geller book back then. I had a hard
time surviving just on the stores work, so I negotiated a deal that I
would be allowed to have my own customers come in the store. The
store would get none of the income from my customers. In return, I
waited on the stores customers when I had time and didn’t get any
income from those sales.

This arrangement lasted for 5 years until the store changed managers
and the new manager wanted a slice of my personal sales. I had built
up enough customers that I was able to open my own shop. The first
years were rough, but my store has been in existence for 24 years and
has provided a reasonable income.

If you are not allowed your own customers to come to your store, you
may want to work out an arrangement where they can. Or you may want
to try to pick another wholesale account. If you are so busy doing
the stores work that you have no time to do other peoples work, you
might want to check their accounting more closely.

Don’t take life to seriously-- you’ll never live through it.

5

I had a similar set up when I started in the jewelry business. At
that time, I gave the store a pricelist of repairs/custom work and
worked off that. There was no Geller book back then. I had a hard
time surviving just on the stores work, so I negotiated a deal that I
would be allowed to have my own customers come in the store. The
store would get none of the income from my customers. In return, I
waited on the stores customers when I had time and didn’t get any
income from those sales.

This arrangement lasted for 5 years until the store changed managers
and the new manager wanted a slice of my personal sales. I had built
up enough customers that I was able to open my own shop. The first
years were rough, but my store has been in existence for 24 years and
has provided a reasonable income.

If you are not allowed your own customers to come to your store, you
may want to work out an arrangement where they can. Or you may want
to try to pick another wholesale account. If you are so busy doing
the stores work that you have no time to do other peoples work, you
might want to check their accounting more closely.

Don’t take life to seriously-- you’ll never live through it.

6

By creating a corporate agreement with the owner: you should be doing
a profit sharing programme at any rate… The guy’s business, it
sounds like is largely. based on your work you should be making more
than what he’s making retailing leased items from Stuller, Hoover and
Strong, or any other catalogue- of- the- same- stuff vendor. You
could set up your own computers, book keeping and simply rent space
from him at a far less rate (say, depending on location, traffic and
daily sales, somewhere between $550 and 1000 a month -including
electricity, utilities, services (garbage dumpsters, waste disposal,
maintenance) and an agreement that he will notify you at least 180
days before declaring bankruptcy or any other financially based
decision tha will affect your location and livlihood. I hope you are
doing an audit of the books yourselves as well…just because you work
together doesn’t automatically mean he’s not cooking the books in
some manner.

It is absolutely your right to know what’s really going on
financially. Because you are getting taken if there is no split- or
you are happy with the salary (if each of you are receiving 4K a
month then it’s reasonable). He sould begetting 40% because you are
doing the work, retaining the customers and keeping his doors open-
where would he be if you moved down the street?Seriously- think of
that…My guess is closing his doors…It sounds very mismanaged if
there is no net after expenses that are annual and recurring…the
gold market though should be mentioned here-

YOUR costs are not being accounted for- I’m betting when you began
gold was not at the price it was, so you need to develop a formula
that deducts that inccrease from when the deal was struck to reflect
the difference in prices you are having to pay for the repair and
casting and consumables… He is not accounting for that- his stuff
is in all liklihood from a vendor in which if he doesn’t move x in a
set period he can just return it- you can’t…and truly are you doing
an audit or at least have access to the books? It sounds to me with
the assistance of your wife and a good insurance agent, you could
open your own location- It sounds as if you should make that
move…after you have done your homework into the actual expenses, and
insurance, and his sales that are not from your designs or work…once
seperating them then look again at the figures and reasses…I think
you would probably find that unless he’s advertising you and your
work its vendor promotions or holiday or community connected promos
only - not original designs and an in-house jewelry design team on
the premises…the features that are making the business are probably
not the focus- but the posters by x vendor are…

You can get virtually free promotional printing from an on-line
source from postcards to presentation folders with your designs,
adding in some cases of your originals and a focal design desk for
customers to sit down and talk jewelry for estate planning heirloom
creation etc., could be as easily executed in a building you rent as
he rents. Bookeeping software is freeware and shareware at this
point unless you wnat to pay for “customised” jewelry mangement
softwaare that I can tell you plainly, is NOT worth the money
considering you can add the elements to whatever basic software for
bookeeping out there and probably actually customise it precisely to
your situation and needs for far less than the $795-1200 tag on the
most commonly used software inthe retail jewlelrry biz. You should
definitely - at least - bring up the inflated gold and silver market
and use that as leverage to profit sharing- or implement costs
sharing because for your 80% of the work, the 40% simply isn’t
right, particularly if your work pieces aren’t coming to you as 100%
of which you give him 40%…that’s the way to handle that. Keep his
inventory seperate from yours and factor in the costs of your
consumables vs. his rent, utilities, water cooler and other
"expenses" and see who is paying more- Your two ounces of gold
stock/raw materials I’m betting pass his monthly expenses (I am
presuming his expenses are including both you and your wife’s
workmen’s comp and soc. sec. in addition to factoring in your
vacation pay, any seasonal bonuses, health insurance, etc) by at
least 21%…If that is the case then the entire arrangement needs
negotiations…-which if you need a good consultant I happen to know
one! (wink!)…

Stand up for yourselves, examine the entire picture in black and
white and red, see where his credit is and deduct your costs from wht
is discernable then renegotiate for a more fair set-up or open your
own store - it sounds like that time has come…

Feel free to contact me off this forum if you need any further
assistance in a more private setting as with independent bussinesses,
vendors,employee relations, labour laws, brands, etc,. it is
difficult to speak freely and I am somewhat limited regarding
specific considerations that absolutely should be examined, legal
counsel and discussing actual figures, locations, etc. in what I
can/will state on Orchid…

rer

7

Hi Gary,

The first year I was on my own (over 20 years ago) I had a similar
set up in a store with no rent to help me get started. I developed a
wholesale price list and billed the store for the work that was
done, just as I did in later years when I had my own location. They
paid the same price as any other jeweler I did work for, the
advantage for the store was that they had me in their store to help
answer customer questions and I would give the stores work priority.

Mark

8

Gary, When my husband Tim and I had the shop inside Zell Brothers
Jewelry in Portland Oregon we just charged them our wholesale prices
and then they keystoned it to the customers. We had no salaries or
personal insurance. We paid no rent. They provided insurance for the
merchandise on the premises as well as advertising, etc.

Hope this helps.
Have fun and make lots of jewelry.
Jo Haemer
www.timothywgreen.com

9

When I had a large store (1800sf) I had this setup years ago with my
brother, who did trade work for a number of retail jewelers…

I had an extra bench plus shop equipment and so forth. He paid me a
monthly modest rent. He did my work and others’ work the same as if
he had his own location, which in essence he did. He charged me
whatever he liked, competitive but he set his prices. I marked up the
same as I would with anyone. His accounts could call on him but he
offered delivery so it didn’t happen all that much and it didn’t
interfere with my operations.

The advantage to me was I didn’t have to send customers’ goods off
premises. This was critical to me because experience had shown that
once you lose possession of goods, it becomes a risk.

He was responsible for and controlled his own costs, there was
basically no bookkeeping (Re: a joint venture), just submit an
invoice and collect. His rent was paid in a separate check, there was
no offset from his invoices to me ( ie. deducting rent from total
invoices. This provides a legal whatchamacallit that supports the
fact of him being a contractor). He was paid weekly so that helped
his cashflow. His taxes etc were his own affair. Any liability
concerning the goods conveyed to him was indeed his. My attorney
signed off on the deal because of the rent and that he did work
other than mine and at his risk. He was NOT an employee. He was a
contractor who coincidentally leased space from me.

His bench was off limits to everyone, including me.

Then later I experienced the flip side. I took a job as
benchie/appraiser/whateverer with a really nice to work for upscale
designer oriented store, who btw got a lot of trade press as a
leading innovative retailer. I was an employee. Store paid for
materials and all overhead. They paid me a salary. In addition they
paid a cushy commission on all work (repairs and custom, didn’t
matter…work’s work. I set retail prices because I was the most
qualified to do so, I made sure they made money so as to keep my
job!) over a certain amount (this was what they previously did
monthly in service work that they sent out) plus a smaller but still
NICE commission on my floor sales (yeah I washed my hands frequently
and wore a gasp tie). Over the years they tinkered with the rates
and so forth but they were always fair and it was a matter of
discussion before the fact of changes. At one point they paid me a
small percentage of the combined floor sales as an inducement to
service the sales associates’ immediate or extraordinary needs.
("Neil, can you make a setting for this stone I’m selling, by three
o’clock?) and the sales staff took a small percentage of my work as
inducement to steer work my way. Everyone was happy. It made for a
very cohesive machine. The bookkeeping on this must have been
laborious.

Within two years I had tripled their service volume. I worked my
behind off, especially in the closing days of the month. Still, the
entrepreneurial bug never left me, despite the rewarding experience
of being there, so one day, whoosh I started up again. In the five
years I was associated with them I would say my skill and
professionalism increased at least double. The bar kept getting
higher.

I mention the two things because there is no one best way. There may
not be a net earnings in your case illustrated but, at least it
seems, you are guaranteed $4K monthly, nothing to sneeze at. Not a
lot of money but you get paid even if there’s no work.

My suggestion to you is to first assess your benefits and risks as
things are now. Then project what different scenarios might be if
management were open to renegotiating the arrangement or what you
might reasonably expect if you get your own location. My gut feeling
is that while you are not making the money you could, you’re doing OK
risk wise. As someone who has taken his lumps over the years, risk is
not something to be blas’e about. But better profits are always
attractive, no?

Hope that long ramble helps.

10 
Be very aware of what your responsibilities are, and what you will
and will not be paid for.

It reminds me of the fine print that says". and such other duties
as may be assigned."

Mike DeBurgh, GJG
Henderson, NV