by Guest Author Gary Capps of Bead Manager Pro
Making sure you price your jewelry the right way is probably one of the most discussed topics by jewelry artisans wanting to know “how much should I sell my jewelry for?”
And it’s tough.
You have to work out what parts went into your piece, how much they cost and how long you spent creating it.
So for most people they figure out something like:
(Cost of parts * 2) + (a dollar amount for my time)
In this article I’m going to explain to you why that’s dead wrong and you need to be thinking about quite a bit more when you price your jewelry.
Firstly just to clarify who I am and why you should listen to me, my name is Gary Capps and I am the owner of the specialist inventory and pricing software Bead Manager Pro. I’ve personally been lucky enough to work with thousands of small business owners just like you to manage their jewelry businesses and get them tracking things the right way.
Christine has done some work with us before and wanted me to share some of the knowledge that we have gained through working with our customers throughout the last 5 years we have been running and bring that to you here in her great blog.
Now in this article we are going to be primarily looking at pricing but I want you to think long and hard as you read this how it applies to your market.
If you don’t know what your market is then that’s one of the very first steps you need to take because if you don’t know who you are selling to then you have no way of knowing how you can price anything because handmade jewelry is a “love purchase”.
Lets face it, it’s not a practical “must have” item, it’s something that people love and that’s why they buy it and that gives us some great flexibility on pricing because the first thing I want you to know is that “Your jewelry is worth what you can get someone to pay for it”.
Working Out Your Material Costs.
So lets take a look at the pricing model I listed above and break down why that’s wrong.
Firstly, multiplying your part costs by 2. Now is that right or wrong?
In this instance it could depend. There is no way you should just be taking the cost of your parts adding them up and then adding labor on top, you’re simply giving your stock away.
I would suggest that you have at least two or three different markups on your inventory depending on your market.
If you are selling to retailers then obviously your markup on your actual stock will have to be lower because they have to make a profit on your jewelry when they sell it, so keep it to around 2 times the cost of the material.
If your selling it directly to your customers then make your markups higher, even up to 5 times if you are buying in bulk and getting a great discount. Take advantage of that and put that markup into the finished piece.
And, I can’t stress enough at this point; you obviously need to know EXACTLY what you used to create you piece. If you don’t know what went in there you can’t possibly work out what the cost of all the pieces were so keep track of your materials.
How To Value Your Time
This is the bit that most people get so dead wrong. They workout roughly how long it took to create a piece, assign themselves an hourly rate and add that to the finished piece.
So, if it took an hour to make a piece and you assigned yourself an hourly rate of $20 per hour (for example) then they will markup the cost of the parts and just add $20.
This is so wrong.
If you are in anyway serious about making even some money for your jewelry you have to know what your time is worth.
Have you even considered your overheads?
The overheads for your business; electric, phone, advertising, Etsy fees, tools, training etc etc.
What about the time you spend on admin doing paperwork and ordering new materials?
“But I love ordering new materials, looking at all the new techniques and shopping down my local bead store”, I hear you say.
And that’s great, I applaud that, you should love what you do.
But I also believe you should get paid for doing what you love.
And to know that you need to know the figures.
So, write down:
· How much income would you like to make per year? (#1)
- How many weeks will you work a year? (#2)
- How many hours will you work a week? (#3)
- How many hours do you spend on admin a week? (#4)
Then you can calculate what your hourly rate SHOULD BE by doing this calculation.
Income (#1) / weeks (#2) * [Work hours (#3) – Admin hours (#4)]
Try it and you will be surprised at what you come up with as your new hourly rate and we haven’t even got started on the overheads yet.
So What About The Overheads For Your Business?
Even if your small you still have overheads. You still bought tools right? You still use electric to run your soldering iron right? You still need to use the phone or the Internet to call suppliers right?
All these things are a direct cost attributable to your business.
So again write down what your costs are every week and tally them up. If you direct overheads per week are $20 and you are working 20 hours per week on your business you need to add an extra dollar an hour to the figure you already worked out that your time is really valued at.
If you don’t do this you’re really running your business blind with no idea of the true costs involved for creating your beautiful jewelry pieces.
It’s obviously no-where near as easy to work out the weekly cost of your tools because they’re not a weekly purchase so that’s why in Bead Manager Pro we have automated this whole process so you can enter in some simple figures to work out your entire hourly rate including overheads and tools.
So What Is Your Jewelry Piece Worth?
Well, I already gave you the definitive answer at the start of this article.
“Your jewelry is worth what someone will pay for it”
But what you must know if you are to run a successful business is “what did your jewelry COST in the first place to make?”
If you know that then you have all the knowledge and bargaining power you need when your talking to a customer because you know that if you sell it below a certain price then you are losing money, and that’s no way to run a business, even one you love.
And remember, people love to buy jewelry; they don’t need to buy jewelry, so sell them with compliments not facts and figures.
Sell yourself and your story, your great work and what makes you and your jewelry unique.
I hope that’s given you all some great food for thought anyway and I would love to hear your feedback below.