What should I pay myself

Jewelry Discussion
21 
should actually be How To Pay Yourself

I guess it’s pretty clear that there is no answer to the question -
not really. I charge more to do difficult work - I charge a LOT more
to fix other people’s mistakes. I charge a competetive rate for
setting (the setting I do) but I make a lot of money because I’m
fast. I refuse all silver work because the pay scale is different -
the silver trade wants to pay me 1/2 of what the gold trade does for
the same effort. I quit doing models-for-pay years ago because
people just won’t pay what they are worth. On and on…

But the more professional you get, the more important it is to
understand a fundamental concept - that you are two people. You are
the person at the bench, and you are also the owner of a business,
and both of those people get paid. I don’t sit down and calculate
such things, but I just keep it in mind all the time. The reason it
matters is simple:

You make a line of jewelry, whatever it is. You take $10 for every
piece you sell, as the maker. OK - your line soars, people are
knocking on your door. Or perhaps you become deathly ill… Now
you need to pay other people to do the work, and they want $10/per -
maybe $12… And there you are left hanging out to dry… There’s
a fair labor price for a given piece, which is part of ~cost~, and
then there’s a fair market value, wholesale or retail, which is
based on cost. As the owner, you get all of that, until you pay
someone to work for you…

22

Goo- It’s easy.

Just start yourself an S Corporation. As a self employed person we
have to pay double the SSI taxes that employees do. As an employee
and president of the corp. you pay payroll taxes, SSI taxes, etc
only on the income you pay yourself. The monthly paperwork is a
chore, but the tax savings can be immense.

I pay taxes. Just no more than I have to. The one tax that just
kills me is that our Multnomah County biz taxes are based on our
gross income, not our net. I don’t have to tell anybody here about
how different our net and gross income is compared to, oh say, a
coffee shop.

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

23

In order to come up with my hourly wage, I calculated how much time I
spend at the bench. When I had those numbers per year, I then
calculated how much it cost to live and work: once I had that
number, which included wear and tear on the studio, tools etc. and
pet care and vacation, health insurance, everything including
retirement…it was pretty easy to figure out what I had to charge per
hour to come up with an hourly wage. I review each year to make sure
I am on track.

24

I’ve seen all types of hourly wages here posted and surprisingly saw
a number of $10-$12 an hour. Come-on!

Simple start:

  1. Decide how much you NEED at home to do and save for what you
    want. Lets say you need a w-2 of $75,000. Lets also say you’re not a
    corporation and you’ll pay your own fica/medcare. So you have to add
    ANOTHER 10% for the matching plus a few other taxes.

  2. So $75,000 for you, taxes come out of that but you knew that. To
    add in another 10% for matching Fica/Medcae, you need:

$75,000

  • $7,500
    TOTAL: $82,500

So now we know what YOU need.

Now lets assume you work at the bench making/repairing. You come to
work 50 hours a week. Big deal. You ONLY WORK AT THE BENCH 25 hours a
week. those 25 hours a week MUST pay you the $82,500.

25 hours a week times 52 weeks a year, means you only really work
1300 hours a year to make your hourly wage.

So divide $82,500 by 1300 hours.

you have to CHARGE $63.00 an hour for those 25 hours a week and
you’ll be able to yourself $75,000 a year plus be able to pay the
matching taxes.

The other profit you make from selling things and selling materials
goes to the business to pay ITS bills.

David Geller
www.JewelerProfit.com

25 
The point is labour (an hourly rate) is a cost.

The amount I charge for my labor is not a cost. I am on this earth
for a finite period of time and within that time there are things I
must do to be able to do the things I want to do. Lucky for me, most
of the stuff I have to do is the stuff I want to do. Of course if I
had employees I would look at their labor as one of my costs.

This is how most businesses functions, they know how much per hour
to charge. They can also estimate how long it's going to take them
etc. etc etc.

My prices are based on many factors. One of the major factors is how
willing I am to do the job. We’re talking about a piece of my life
here! And experience has shown that there could be pain and
blood-letting involved. I guess time is a factor.

Time equals money...

Labor equals money.

As a professional person running a jewellery business you should
have worked out an annual figure (a yearly wage), and work
backwards from there to get your hourly rate. A lot of business
fail as they work the other way around and are confused why they
don't have money to pay the bills.

I’m always surprised at the fact that all my bills are paid on time
and I have little debt and I get to play all day doing stuff I
enjoy. I guess paperwork isn’t my strong suit, but frankly I don’t
see the need. YMMV

An hourly rate is good for the customer and the jeweller.

I think my customers would fall out of their chairs if they knew how
much “per hour” they were paying me.

The conscientious worker gets rewarded when an hourly rate is
known.

Yeah, that’s one way, if we’re talking about employees. Others might
be a percentage of the profit, a bonus for coming up with ways to
save me money, paid vacations, and treating them with respect, etc.

The non-conscientious worker that you mentioned would lose out. I
don't know any jeweller that charges after the work is done, it's
usually an agreement of price before work starts.

I often charge after the work is done. My customers know that they
can easily double my charges and they trust me to not gouge more
than the market will bear.

The customer gets a quote and decides whether to let the jeweller
proceed.

I mainly repair jewelry so maybe we’re talking apples and oranges.
People don’t shop price for repairs, they shop trust. (I think
that’s a Geller quote)

This is where the rub comes in. A mark up doesn't necessarily mean
you'll make a profit. If there's more work involved, advertising
costs, gas, utilities etc. etc.etc., these can eat into your
profit.

Yeah, all that’s figured in albeit governed by that invisible hand.

You're quite right I do love my job/s, but I'm going to do this
right, so that I can cover all my costs, and be able to charge the
customer accurately.

Ok!

No, my method helps me to adjust to the market. So your method is
reactive, not proactive... interesting.

Check out that link.

26

Jo Haemer, I took the time to visit your web site, the jewelery is
very well done and I admire your style and finish.

Well done!!
Sam Olin

27 
For retail, I triple key my materials and add my labor ($10 per
hour). For wholesale, I double my materials and add my labor ($10
per hour). I still think, as artisans, we are all asking way too
little money for our work. Which is why I buy so much jewelry - I
really appreciate the time and craftsmanship involved.

So Robin,

out of that $10 you pay your taxes? Including your employers (you)
share of your payroll taxes? That means you clear 3-4 dollars an
hour? And I’ll bet you work out of space in your home? With tools you
purchased? Not a good yardstick for someone who wants to, and can,
make a living making jewelry.

Ray Brown

28 
As a self employed person we have to pay double the SSI taxes that
employees do

Jo, that’s not quite true. Self employed people get to adjust thier
gross income by 1/2 of thier self-employment taxes. Therefore, in
actual practice self employed people only pay half again the SSI
taxes, not double.

Andrew Jonathan Fine

29

When at my setting class, I asked my students the very same question.
Do you know what the response was?..anywhere from $25 -$30.00 and
hour…never mind what country we are in, it’s the same form of lack
of nowledge in structuring our prices.

Ten dollars an hour was from 35+ years ago…not in our excited rates
of today.

My carpenter charged me $250.00 just for his time…plus
expenses…for each day he was on the job…get my point?

If anyone is charging $10.00/hour for jewellery repairs, I will not
go to him. Why?

He has no idea on his pricing and he is too much of an "apprentice"
to qualify himself to work on my high-end merchandise…

Gerry Lewy

30

Wow! Quite a wide range of numbers.

I suppose its fine to say ‘I need $X an hour’ and base your billing
on that but this is business. You only get what you actually
consummate.

From time to time people ask my advice on their startups, I dunno,
like might know something or whatever. What everybody gets is the
warning to avoid strategic wishful thinking. You want $85/hour? (in
your pocket, not the business) Sorry to say and I mean no disrespect
but you’ll be hard pressed to consistently earn that on amateur
level jewelery, even midrange will be tough. Come on get real that’s
$176K per year. You’re going to need annual sales of a million bucks
at least in order to pay yourself 85/hr.

Say your average price point is $50. That equates to 20,000 units
you have to make. Sitting down? That’s 10 units per hour 40 hours per
week that that you have to actually make, sell and get paid for. All
the time. Can you REALLY do that? All by your lonesome?

So OK Neil, smartass, ‘how do you make a million in sales?’ Well,
first off you won’t make a million at the bench, You make it at the
sales counter. Your efforts/reputation at the bench support and
hopefully enable what happens at the counter. You might get two
thousand for a ring mounting but you also might get twenty thou for
the stones to go in it. I don’t think I need to illustrate that
further. Romance the stone? Bank the stone.

Do what is accomplishable. And sustainable.

31

just called up a plumber this morning…he charges $135.00 just to
"knock on the door", and not even entering our home. Do you think that
your jewellers bench time is slightly out of touch, or less
important?

Gerry Lewy

32 
Of course if I had employees I would look at their labor as one of
my costs.

For tax purposes you are an employee of your business, I find it
easier to think of myself as an employee for myself.

Labor equals money.

Labour takes time therefore time equals money :wink:

I think my customers would fall out of their chairs if they knew
how much "per hour" they were paying me.

In a good way or a bad way?

Yeah, that's one way, if we're talking about employees. Others
might be a percentage of the profit, a bonus for coming up with
ways to save me money, paid vacations, and treating them with
respect, etc.

When you consider yourself an employee of yourself it works too.

I often charge after the work is done. My customers know that they
can easily double my charges and they trust me to not gouge more
than the market will bear.

How do you manage that? Imagine going into an icecream store, and
buying an icecream, but when it comes time to pay the bill there’s
an extra $5 to pay.

I’m not saying there’s anything wrong with it but I’ve really only
seen that here in Oz with mechanics, when the actual repair is not
known, but even then they ring you up and tell you how much it’s
going to cost before they proceed.

I mainly repair jewelry so maybe we're talking apples and oranges.
People don't shop price for repairs, they shop trust. (I think
that's a Geller quote)

You repair jewellery, so you’d know the costs before you started
right, wouldn’t you be able to give the customer a quote before you
start the repair? Just trying to get my head around your approach.

Regards Charles A.

33 
For tax purposes you are an employee of your business, I find it
easier to think of myself as an employee for myself.

My accountant has never asked me what I pay myself per hour.

I think my customers would fall out of their chairs if they knew
how much “per hour” they were paying me.

In a good way or a bad way?

They would fall in a bad way injuring themselves severely. Seriously
though, I make between $0 and a $zillion per hour depending on how
fast I work or if I fall asleep in my chair (and how long I sleep.)

I often charge after the work is done. My customers know that they
can easily double my charges and they trust me to not gouge more
than the market will bear.

How do you manage that? Imagine going into an icecream store, and
buying an icecream, but when it comes time to pay the bill there's
an extra $5 to pay.

Imagine though if you knew the ice cream man and trusted him so much
that he served you your ice cream then billed you at the end of the
month and you were always happy.

I'm not saying there's anything wrong with it but I've really only
seen that here in Oz with mechanics, when the actual repair is not
known, but even then they ring you up and tell you how much it's
going to cost before they proceed.

So you mean if they’re going to replace your water pump and they
don’t know the prices they tell you a really high price that should
cover it? And you agree to that so no matter what the ending price
really is, you agreed to the inflated one?

Dude, I’m not rebuilding carburetors. There’s a kit you know? The
prices of the kits are known. The time/labor it will take to do the
deed is also known.

In jewelry repair all too often there are unforeseen issues. There
are past repairs done improperly with cadmium-bearing solders or
even soft solder. Stuff happens. Does your mechanic ever have to
actually build a piece of one of the cars he’s fixing? Or does he
buy parts and work on a fixed markup?

How do you figure your hourly wage when working on many peoples’
item at once?

Do you charge something during that hour for the time you’re waiting
for things to cool?

Do you change your per hour charge if you’re working on sterling or
platinum?

Your hourly wage charge sounds too complicated to me. Tonight I’m
sizing 4 rings up and one down for one client, fixing a catch on a
bracelet for another and finishing a ring and setting diamonds in the
top, plus I took in a big ol’ handful of sterling repairs and I’m
prepping them for repair also I’m making Porter (beer) for Christmas
gifts, all at the same time. Kinda difficult to figure this stuff
hourly.

I mainly repair jewelry so maybe we’re talking apples and oranges.
People don’t shop price for repairs, they shop trust. (I think
that’s a Geller quote)

You repair jewellery, so you'd know the costs before you started
right, wouldn't you be able to give the customer a quote before
you start the repair? Just trying to get my head around your
approach.

I charge a set price to size a ring (every metal) up and a set
charge down. (Up I supply the metal, down I keep it) But if I’m sizing
a platinum ring covered in pave’d emeralds, there’ll be additional
charges to put stones back in, to tighten prongs, and to replace the
stones I lose in the ultrasonic and/or smash. But again, whatever I
charge will be cheerfully passed on to the satisfied customer.

You know, there are the occasional customer who must have a price
before she’ll leave her jewelry. For her it’s like your mechanic: I
charge (and tell my clients to charge) enough to make them just go
away.

34

Neil

Your comment leaves out one big piece of info. How many HOURS are
you figuring they’ll be able to charge $85 an hour?

My post a few days ago assumed they only WORKED at the bench half a
day.

David Geller
jewelerprofit.com

35 
So you mean if they're going to replace your water pump and they
don't know the prices they tell you a really high price that
should cover it? And you agree to that so no matter what the ending
price really is, you agreed to the inflated one?

No my experience with mechanics (I’ve known good, bad, angels and
crooks) is that they do an inspection, find out the problem, go to
find parts, tell me how much it’s going to cost including labour. I
then have the option to tell them to proceed or bugger off (trans: go
away, get lost, that’s too high a price etc. etc. etc.).

Does your mechanic ever have to actually build a piece of one of
the cars he's fixing? Or does he buy parts and work on a fixed
markup?

Had that happen once, had to have a new part machined, had
reconditioned parts as well as new. Mind you he doesn’t sell ice
cream, but there’s always a latte available free if I want one :wink:

How do you figure your hourly wage when working on many peoples'
item at once?

For the other stuff I do, I have an hourly rate, and I know the
costs up front and can tell the customer what they need to pay me.
This is for run of the mill stuff, but I can do this for new items
that I’ve never made before. There are no surprises in my work. I
don’t have enough experience in jewellery manufacture to know if this
will be the same.

I know how long it will take to do the individual items, and I quote
on that, if I gain some time by performing repeat operations, that’s
a win, a reward for working efficiently.

However I don’t think I’d have the stomach for doing repairs,
because I don’t like the thought that if I make one wrong move I can
destroy a poorly made piece. Basically paying for someone elses
shoddy work.

Do you charge something during that hour for the time you're
waiting for things to cool?

Technically no. The customer has already been charged, if something
unexpected happens, I wear it the customer doesn’t.

Do you change your per hour charge if you're working on sterling
or platinum?

Why wouldn’t I? If I ever work with platinum (unlikely, but never
say never), hopefully the course I’m undertaking will teach me what’s
actually involved in working platinum.

So if I quote on silver it will take so many hours to make that
silver object, and if I quote platinum it will take so many hours for
that piece. If I go over that’s on me, if I go under that’s also on
me.

Your hourly wage charge sounds too complicated to me. Tonight I'm
sizing 4 rings up and one down for one client, fixing a catch on a
bracelet for another and finishing a ring and setting diamonds in
the top, plus I took in a big ol' handful of sterling repairs and
I'm prepping them for repair also I'm making Porter (beer) for
Christmas gifts, all at the same time. Kinda difficult to figure
this stuff hourly.

I don’t understand why it’s complicated? You know what you charge
per hour, that’s a fixed rate. You know how much effort it will be to
fabricate an item in a specific metal. You know how much gas you’ll
use, electricity. etc. etc. etc.

The only issue that you outlined would be if there were unknown
events that you didn’t factor in. The worst that can happen in that
case is that you lose money, so it pays to know what all your costs
are up front. You may not be able to do this, but I definitely do
this with other things I make, it only makes sense to do this with
jewellery too.

I mainly repair jewelry so maybe we're talking apples and oranges.
People don't shop price for repairs, they shop trust. (I think
that's a Geller quote)

I think that’s the case.
Regards Charles A.

36 
That makes sense. It is what in USA is called minimum wage.
Interesting. It is about twice what is mandated here.

We also have a minimum wage in Oz but it is different to award
wages.

The minimum is the lowest wage an adult full-time permanent employee
can legally be paid - this year it went up to $15- an hour and is
often reserved for meanial jobs like cleaning etc.(notice that
jewellers aren’t all that far behind). The award wages are dependant
upon individual trades and how effective the unions have been in
negotiating benefits. For instance, a senior hairdresser can earn
$19.71 an hour whereas a senior person in hospitality would have an
hourly rate of $19.51 which will increase to $48.79 for for working
on public holidays. These are the minimums for the most experienced
in their professions but can be increased by the employer if deemed
suitable, there are others with less experience who do earn less.
Also negotiated into the awards will be leave entitlements and other
work conditions.

One thing that I am grateful for is that we don’t have gratuity
culture evident here - yet. A customer is not expected to pay more
for good service, and with the hospitality wages - thank goodness.
Also no-one is allowed to work just for tips however unfortunately
some workers, mainly in the larger cities, are increasingly expecting
tips to be left by customers.

Roger

37 
wouldn't you be able to give the customer a quote before you start
the repair?

Well of course, Charles, that’s SOP…

This thread and it’s companion, how to price your work, have been
round and round, and there’s been a lot of good advice and a bunch
that’s not so good. Most of this is covered under business 101 -
rather manufacturing 101. The concepts and principles are used to
price cars, refrigerators and alarm clocks and to asses and evaluate
costs all down the line. IOW, there’s no real mystery, there’s only
lack of knowlege. You can learn these things in school or from
books.

Aside from what’s already been said - you are an owner and also your
own employee - maybe the #1 thing to understand, there are two other
important concepts:

First is that if you have a product being made, as opposed to repair
work or special order, then you need to do a time-and-motion study.
You get all of your materials together and ready, start a clock
(literally) and sit down and make your piece from start to finish at
a normal, regular pace.

That gives you a base time for making that one piece, and that is
the time you base your cost on. That’s also a common denominator
because if you make 5 pieces at a time using production methods
(make 5 bezels, solder 5 bezels) then you make more money per piece,
and if you are slow then your piece is either overpriced, which will
reflect in sales, or you make less money per piece and per hour.

The other concept is that you, as a jewelry maker, are entering an
existing marketplace - don’t kid yourself. This piece has a market
value of $100 - wholesale or retail doesn’t matter much, it’s the
company’s price. Of that $100, we have an allotment of $10 for
labor, because we read the above paragraph. If you can make that
piece in one hour, then you are “worth” $10/hr. If it takes you three
hours to do it, then of course you are " worth" $3.33/hr and etc. $10
probably means we expect to get 2 or 3/hr. off the bench. I use
italics because we don’t need nonsensical arguments about worth -
this is a discussion of business, and money. Most business uses the
model of “a qualified worker”, which means that if you are a college
student you’re probably not qualified for certain tasks, and
therefore you don’t get $85/hour. These two ideas tell us all about
that, and why.

And of course the company gives you that $10, and then charges $20
in it’s costing calculations…

Outwardly complicated, but understanding certain ideas takes out the
mystery, too… In general terms this is how Boeing prices airplanes
and Whirlpool prices washing machines… And yes, in our business
there are times when you figure in an “artistic merit” value, which
I privately call “ZAP value”, but it still begins with your cost
figures…

38 
However I don't think I'd have the stomach for doing repairs,

Thankfully, most people who go into jewelry making want to be
Artists. I find my art in repairing those pieces other jewelers say
can’t be fixed.

Do you charge something during that hour for the time you’re
waiting for things to cool?

Technically no.

But waiting for a piece to cool between solders is part of the job.
You should charge for it.

Do you change your per hour charge if you’re working on sterling or
platinum?

Why wouldn't I?

I imagine anyone in their right mind would, but again it seems
complicated. What happens if your customer wants a married metal
piece? Do you then average your hourly wage?

I don't understand why it's complicated? You know what you charge
per hour, that's a fixed rate. You know how much effort it will be
to fabricate an item in a specific metal. You know how much gas
you'll use, electricity. etc. etc. etc.

Well, like you said above, you change your hourly charge/wage based
upon the metals you’re working with. If I’m sizing all these rings
and they are all different, i.e., different metals, different stones
that require different handling procedures, and beer that’s not ready
to drink…well it’s complicated.

39

A number of years ago I worked at a shop on Long Island NY. There
were five jewelers working all types of benchwork, custom design,
repair etc. Some worked at least three times longer on a piece than
others. So my question? Is there an appropriate hourly wage to
assign, when everyone works at a different speed.

Sigi Eurich

40 
which means that if you are a college student you're probably not
qualified for certain tasks, and therefore you don't get $85/hour.

That’s what I was trying to get at with my wishful thinking remarks.
Its one thing to say, "I’d like to make $X, its quite another to
actually get it, consistently.