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| Pricing the Jewelry Designs for Profit |
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Figuring out how to price your designs is not one of the more glamorous parts of running a successful jewelry design business. Pricing your designs can be tricky, especially if you design one of a kind pieces, but it is an essential step you must take to turn your hobby into a profitable business. Once you understand the costs of your business, and what you expect to profit from your work, creating a formula to price your designs is a simple process.
1) Keep a "recipe book" to record exactly what was spent to create each design. You will basically need to price each item used in your designs. For example, if you pay $1.50 for a dozen sterling crimp beads, and you used 2 crimps beads in your design, you would divide $1.50 by 12 (.13˘ per crimp bead), and so on, making it much easier to calculate the exact cost of each design. The more meticulous you are about calculating expenses, the better your pricing will be. Even the packing materials you use for the design and the shipping costs of the supplies should be accounted for. Keep receipts--this will also come in handy during tax time, if you want to deduct business expenses.
2) Record your time spent on each design. How quickly can you design and complete your jewelry? Second to quality, speed is a key factor in profitability. If it takes you 30 minutes to recreate a design, you would charge differently than a design that takes 4-5 hours to create. Write your time spent in your recipe book.
3) Calculate the price. Using a formula will give you a starting point, and you can tweak the price with the steps that follow. Which formula you use, however, will depend on whether you're selling retail (directly to customers) or wholesale (to stores, for example).
Retail - Take the total cost of your supplies, multiply it times 2.5 (some people multiply by 3) and there’s your retail price. A spreadsheet is perfect for this step. Simply set up a table of products used, your cost, and then a formula to calculate the pricing using the 2.5 or other multiple. If your business has a physical storefront, you have to take into consideration that there are additional costs. Rent, employee pay, utilities, displays and fixtures, and property taxes all need to be considered in your pricing strategy. You may find that in your market, you may need to price at 3 to 5 times your cost of materials.
Wholesale - Multiply by 1.5 (some people multiply by 2) instead. You can charge less for your jewelry if you're selling wholesale because you spend less time marketing to individual customers and more time actually making jewelry (advertising, processing orders, maintaining a shopping cart website, maintaining a store, etc.). You should verify that your market can afford a higher price (usually times 2 to 2.5) than the price you arrive at, using the next few steps. Many jewelry designers find that selling wholesale allows them to achieve business growth and profitability. When you use the 1.5 factor, you are allowing room for shop owners to sell your designs and even offer sales and discounts on your designs, if a certain design doesn’t sell quickly enough. This may sound like a lot, but make sure that you consider the amount of time and labor you put into developing and creating your pieces as well as the boutique owner's expenses.
4) Adjust for the cost of your labor.
For some jewelers, this is a tricky issue and an uncomfortable part of pricing your jewelry. Pricing your jewelry must compensate you for your time, experience, originality and overall uniqueness of the jewel being made.
There are lots of ways to calculate your hourly labor rate.
Some jewelers put their hourly rate associated to minimum wage (nothing less!), others add up other criteria like the ones listed above.
You may take into consideration the following aspects to calculate your labor rate:
the time spent doing the actual jewelry piece,
time spent designing (doodling, drawing, making models, etc),
the effort and complexity of the manufacturing of the piece (rare tools needed, specific and unique techniques)
the recognition or “fame” you have acquired,
the originality and exclusivity of the jewelry made (one-of-a-kind jewelry)
For the sake of the exercise, let’s say you took 2 hours to complete this necklace and that your hourly labor rate is US$18.
Labor rate for your necklace: US$18 x 2 = US$36.00
5) Perform market research. Now that you have an idea of what you want to charge for a design, it's time to dip your toes in the market and see if the piece can be profitable. Generally, it's a good idea to start off with the highest price you think the market will bear, because you can always bring it down.
Have people offered to buy any of your jewelry designs? This is a good indication of the marketability of your designs. If your coworkers fight over a necklace you made, that may be a good sign that there is a market for your design. Friends and coworkers are also good sounding boards for prices. Ask them how much they think your design is worth, and what they would pay for it.
6) Re-evaluate the design. If you encountered feedback in the previous step which indicates that the price you arrived at isn't going to fly, you have some thinking to do about this design.
If you do not find interest for a particular design, you may want to think of changing the design.
Assess your materials. Do you design using sterling findings and semi-precious beads, or less expensive beads? Higher quality materials will always command a higher price in the market. You may want to consider making designs with both high quality materials, and less expensive materials. This will allow you to attract business from both the high end buyer, and the more budget minded buyer.
Don't cut yourself short just to "break in" to the market (e.g. selling to customers at wholesale prices). This will only get people used to cheap prices, and it'll be difficult to raise them later on, jeopardizing your chances of ever making your business profitable. It's better to redesign or reject pieces that don't cover their costs as described above.
It's better to redesign or reject pieces that don't cover their costs as described above. People are often suspicious of products sold at unusually low prices; most of us have internalized the idea that 'you get what you pay for. Cheap prices are often interpreted as cheap materials and workmanship. If your pieces aren't selling well, try raising your prices. It goes against our intuition, but you may be surprised at the results! After all, jewelry is a luxury and not a necessity.
Pricing and selling your jewelry for a profit is a skill acquired through experience. The above considerations will influence the price of your jewelry - up or down. Using the above jewelry pricing formula, and knowing your customer, product and marketplace, will help you with pricing jewelry at a fair price for your customer, and you.
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