Number of people have been
talking to me about selling their jewelry creations and starting a business.
I’ve been asked questions, such as:
- “My co-workers love the jewelry pieces I make for myself, and they
want to buy them. How much should I charge?”
- “To afford my jewelry making addiction I must start selling some.
What should I do?”
- “How do I figure my costs and selling prices for my jewelry?”
- “A woman told me that she would pay me my costs and she will wear
my jewelry for people to see and I’ll get a lot of business. Is this
how I should start my business?”
- “What jewelry supplies can I buy with out paying the sales tax
(California)?”
- “My hairdresser has offered to sell my jewelry in her salon. She
will display them and pay me after she sells them. How much do I
charge? Do I need a written agreement? Who is responsible for the
sales tax? Help!”
- “How can I make sales and charge the prices you (me) tell me to
charge?”
MY BACKGROUND
I design and make beaded jewelry that I sell at fine art shows,
through boutiques, and to a network of clients. I have run “hobby
based” businesses for more years than I want to count. I am hired as
a consultant on designing and making beaded jewelry, plus the
promoting and selling of that jewelry. I am an active member in the
L.A. Bead Society.
I used to teach a class at UCLA, and other schools, on running a
“Hobby based” business. I toured the country lecturing on this
subject, and people hired me as a private consultant. A number of
years ago, my own business was audited by the California State Board
of Equalization (the sales tax people) and I came through without a
discrepancy or penalty. So, I think (and many other people agree) I
know what I am talking about.
Let’s start off with a couple of quotes that I think are pertinent.
“…(Charge) all the market will bear.” Ambrose Bierce
“Make your own myths. That’s the way the gods started.” A famous
philosopher from Poland.
PRICING YOUR WORK
A basic rule:
YOUR MATERIAL COSTS X 3, + YOUR DESIGN & CREATION TIME, + “NAME
RECOGNITION”, + INTRINSIC VALUE.
YOUR MATERIAL COSTS:
Base MATERIALS COSTS include: Beads, findings, pendants, stringing
materials and/or wire, packaging, and anything else included in the
final delivered product. If you are able purchase supplies at a one
time reduced price, it is best to use the regular replacement cost
of those supplies in your calculations. Remember, your client might
ask you to make duplicates, at the same price.
Secondary MATERIALS COSTS include:
Time and expenses incurred in finding and selecting your base
materials (time, car mileage expenses [more than $.65 per mile1],
parking, meals, etc. or time, phone and/or internet charges,
shipping charges, etc. Add to this, credit card or bank
interest/fees, and anything else involved in the procurement of your
supplies. If you had an assistant do this work, add this expense,
too.
[Hertz study over 15 years ago. Includes: gas, oil, tire wear,
general wear & tear, depreciation, insurance, etc.]
YOUR DESIGN AND CREATION TIME:
How much is your time, vision, and expertise worth? When a person
purchases your creations they aren’t just buying the raw components
(they could do this them selves). They are, in fact, purchasing your
vision and expertise. They buy it because they love what you did
with those basic components. As an example, Pablo Picasso applied
his vision and expertise to a few dollars worth of paint and canvas
to create his multi-million dollar masterpieces.
Again, how much is your time, vision, and expertise worth? I’ve
heard all of these excuses. “My time doesn’t cost me anything
because: ‘I’m not very good’; ‘I do it in my free time’; ‘I’m
retired’; ‘I just love to see people wearing my creations’; ‘I just
love making jewelry and don’t care about the money’; ‘I don’t feel
it’s right charging people for my time’;” and so on. BALLONY! No
matter what, if your creation is appreciated and worthy of your
clients’ purchase, your time, vision, and expertise have value, and
you should be rewarded.
Where do you start? If you feel you are worth $12.00/hr., “minimum
wage”, or less, you might as well get a job at McDonalds, or the
like, where you can earn a steady income, receive benefits, and have
no business expenses. Jewelry and clothing designers/creators I have
talked to said their hourly fees run between $25.00 and $75.00/hr.
(& more). In a survey of self-employed people, crafts people, home
based business people, consultants, etc. $25.00 tends to be the
lowest hourly fee. If you call a plumber, mechanic, computer
consultant, phone repairman, or the “Maytag Repairman”, you’ll be
quoted a fees starting at $25.00 or more. So, in your calculations,
I suggest a very reasonable minimum hourly rate of $25.00.
In reality, you must
also consider a few more (hidden) factors in figuring your true
expenses. They include, your: “Costs of running your business,”
“Costs of promoting your work,” and “Costs of selling your
creations.”
Costs of running your business:
These can include: ·Tools; ·Displays; ·Stationary; ·Cards;
·Licenses; ·Professional insurance policies; ·Returns; ·Repairs;
·Workspace (a room or space set aside for your work and storage);
·Lessons and classes; ·Bookkeeping or hiring a book keeper for your
business and taxes; ·Sales forms; ·Charge card services and
machines; ·Bank services and fees; ·Furniture; ·Maintaining stock
and supplies (your money tied-up); ·Business publications;
·Telephone expenses; ·DSL line; Computer and peripherals; ·Close-up
camera and lights; ·Postage; ·Delivery; ·Packaging; ·Auto mileage
expenses; ·Extra electricity expenses; ·Employees or assistants
(with employees come taxes, unemployment, and workers-comp insc.);
·Donations; ·Samples; ·Wear and tear; ·Depreciation; ·Etc.; ·and
don’t forget the time it takes you to run your business (if you were
someone else’s employee, you’d be paid for this time).
Costs of promoting your work:
Promotion expenses can include: ·Photos; ·Brochures; ·Web site and
links; ·Yellow pages; ·Contests; ·Advertising; ·Donations; Etc, plus
your time.
Costs of selling your creations:
Venues: Direct retail sales: Open a store; Art and Craft
shows; Flea Markets; House parties; Mail order
catalog; “Trunk shows”; Internet sales; E-Bay; Wear your creations
at your “9 to 5” worksite and sell them; Etc.
Wholesale to other retailers: Retail stores; Boutiques;
Galleries; Beauty salons; Internet stores; “Blended stores”; Etc.
Retail: Open a store – Check with your local SBA
Art and Craft shows, Flea Markets – Venue guide
(publications); Tables, Canopies, Table covers, Display pieces,
Signs; (Wear and tear on everything); Business cards; Sales books;
Packaging; Charge card services and machine (some, plus “air time”);
Liability insurance; Booth entry fees; Judging fees; Application
package; Donations; Auto mileage fees or truck rental; Hotel (if
out-of-town); Food & drinks; Helpers fees; Theft and breakage; Etc.;
and don’t forget, Your time has value.
House parties and “Trunk shows” – Tables; Table covers;
Display pieces; (Wear and tear on everything); Business cards; Sales
books; Packaging; Charge card services and machine (some, plus “air
time”); Liability insurance; Theft and breakage; Hostess gift or
fee; Auto mileage fees; Etc.; and don’t forget, your time has value.
Internet sales and E-Bay – Computer and peripherals; Site
design fees, DSL line; Digital camera and lights; Backgrounds and
displays; Packaging; Delivery; E-Bay fees; Hosting fees; Domain
fees; Invoices; Charge card equipment and fees; Telephone charges,
Sales forms; Employees (+); Etc.; and don’t forget, your time has
value.
Mail order catalog - Computer and peripherals; DSL line;
Digital camera and lights; Backgrounds and displays; Printing;
Packaging; Delivery; Invoices; Charge card equipment and fees;
Telephone charges, Sales forms; Employees (+); Etc.; and don’t
forget, your time has value.
Wear your creations at your “9 to 5” worksite and sell them –
Nothing; OR, Sales forms; Charge card equipment and fees; Your
employer is paying for your time.
Wholesale: Retail stores; Boutiques; Galleries; Beauty
salons; Blended stores. – Wholesale discount % ; Sales forms; Sales
product sheets; Auto mileage fees; Packaging; Delivery; Displays
(sometimes); Travel fees and hotel (sometimes); Blended stores might
require you to spend some hours in the store; Etc.; and don’t
forget, your time has value.
Consignment: Retail stores; Boutiques; Galleries; Beauty salons;–
Same as Wholesale, except a lower discount rate, and a special
consignment form to protect you and make sure you are paid and/or
retrieve unsold merchandise.
This ends the majority of your basic expenses.
BASIC RULE IN VALUING COST:
There is another factor that must be considered in developing your
own retail prices. If you sell your creations through agents and/or
retailers, they will be expecting one or more of the following; a
wholesale discount or a consignment discount, plus (perhaps) an
agents’ fee. Also, if you give a discount to any of your friends,
relatives, and/or retail customers, you must take this into account,
and build this into your retail price. Otherwise, perhaps
unknowingly, you will lose money.
This is part of the reason our “BASIC RULE” states:
YOUR MATERIAL COSTS X 3 (at least) + YOUR DESIGN &
CREATION TIME, + “NAME RECOGNITION”, + INTRINSIC VALUE.
Before I discuss figuring your own value, I’d like to show you a
few examples of bead jewelry pricing I have seen:
1) A few years ago, in Honolulu, Hawaii, I visited the jewelry
department in the famous, high end, Texas based, department store. I
saw beautiful, and exquisite, jewelry created with gem beads. The
price tags on the jewelry were what I would expect of such a fine
store. One necklace, in particular, stood out in my mind. It was a
17” necklace of strung jasper nuggets with a sterling clasp. The
price tag was, approximately, $600.00. The basic cost, of all
components, would have been around $10.00. While I was there I saw
three gem bead necklaces sold. No one tried to negotiate the price.
2) Last year I was in the Beverly Hills (CA) branch of a famous,
high end, New York based department store, and, of course, I visited
the jewelry counter. Again, I saw beautiful, and exquisite, jewelry
created with gem beads, and, again, the prices were consistent with
such a fine store. Here two necklaces caught my eye. The first, by a
“famous designer”, was created with polished (fragile) calcite
crystals, strung with a silver clasp. Tag price, around $500.
Components cost, around $12.00. The second necklace, also by a
“famous designer”, was created with African, sequin like, thin vinyl
beads strung with a 14k lobster claw clasp. Price tag - $600,
materials cost – around $35. While I was there, I saw a number of
people being shown, and purchasing bead jewelry. No one tried to
negotiate the price.
3) Last year I was at an Arts & Crafts Show in Los Angeles (venue
fee = $275) where I saw a lady selling beautiful, gem bead
necklaces. She had them priced between $35 & $50. Her materials
costs were between $15 & $20. As I watched, some people looked at
her jewelry, a few made offers, and all passed on. I heard one old
lady offer her $20, and she turned her down.
These are examples of some common extremes in pricing. They
show how designers with very differing ideas of self worth figure
their selling prices. It is important to take into account that the
designer in case #3 was selling at her retail price. Where as, the
designers in cases #1 and #2 had sold their jewelry to the stores at
reduced, wholesale prices. I have heard that these stores mark up
their jewelry approximately 2 ½ times.
Based on a 250% mark up, the necklace in case #1 wholesaled for
$240, case #2a wholesaled for $200, and case #2b wholesaled for
$240. As you can see, even at their wholesale prices, these
designers are making a good profit, and, people are buying their
jewelry, too. Of course, these designers are aiming at “higher end”
clients. If you were to compute your direct sales prices
using the same creation value and mark up system these
designers used to compute their wholesale prices, you could sell
your creations for 60% less than those “big name” designers, receive
a reasonable income, and still have a small discount “fudge factor”
to work with.
By the way, while at the same Arts & Crafts Show as case #3, I saw
another person selling gem bead jewelry for considerately higher
direct “wholesale” prices. One $2000 necklace caught my eye. It was
a multi-strand Ruby nugget necklace with a 14k clasp. I recognized
the ruby nuggets, because they had been purchased from our parent
company. The total materials cost for that necklace was $250. As I
watched, there were a lot of lookers and a few buyers, too. The
designer offered to sell me the necklace for $1500.
Now let’s discuss your own value as a designer/creator of
your jewelry. In part 1, we said the “buyer is purchasing your
vision and expertise” (including your invested time), not
“just a piece of jewelry.” So, what are your time, vision, and
expertise worth?
Before I go any farther, I have received a few comments on my
statement, “hourly fees run between $25.00 and $75.00/hr. (& more).”
I was told that hourly fees should start at $50.
Here are a few things to look at to help you figure your “basic
billable hourly fees.”
· If you have (or did have) a regular 40-hour/week job, add up your
hourly wage , plus of all your benefits (medical, over-time,
advancement, paid vacation, company discounts, social security,
retirement plan, education, etc.). This is your low base.
· How much do others receive for the same job, designing and
creating jewelry?
· Figure your monthly comfortable income needs and divide by the
number of billable hours you can work in a month. (Your income needs
must include paying for the Costs of running and promoting your
business and the benefits you would receive if you were an
employee).
· If yours is only a part time business, for “a little extra
income”, use all of the above as a reference, and don’t forget,
your time, vision, and expertise are very valuable.
NAME RECOGNITION:
Here in L.A., I have met a number of people, who have NAME
RECOGNITION in other fields, who, talented or not, have
started their own jewelry business. Some of these designers are in
the entertainment or fashion industries, and others just have a ton
of “Chutzpah”. These “celebrities” seem to have influential friends,
connections, and entrée. They are able to open their business “with
a splash”, have “Beautiful People” wear their jewelry, get their
creations in the best venues and fashion shows, attract the press,
and charge high prices. But, if the celebrity designer’s jewelry
doesn’t catch on, or live up to the hype, their businesses will
close and their reputations might fall.
NOW LET’S TALK ABOUT US, “REGULAR PEOPLE.” Most “regular
people” seem to feel: a) they have no name recognition, and 2) they
aren’t as good as those celebrities. Well, you might not have
International Name Recognition, but you might have Local Name
Recognition, plus, you can always create a Name.
Remember, if a celebrity fails, their reputation falls, too, and
it’s hard for them to recover. Where as, “regular people” have
nowhere to fall. As to, you not being “as good as those
celebrities”, that’s nothing more than your fears and insecurities.
If your work is good, or better, you deserve recognition, and the
money that goes with it.
HOW DO YOU CREATE NAME RECOGNITION? First I’ll repeat a
quotation from Part 1 of this series. “Make your own myths.
That’s the way the gods started.”
Virtually, all celebrities and corporations have publicity agents
whose main job is to produce NAME RECOGNITION for their clients.
They do it by keeping the client’s name and products in the public
eye. By following their methods you, too, can develop your own NAME
RECOGNITION. So, let’s develop your fame and recognition.
Publicity: Send out little “News Releases” to your local
newspapers, etc. Don’t forget the little neighborhood papers, as
they are always looking for news about local people. Radio and TV
stations also like to do features on successful, local people. If
you have designed some special jewelry, send releases and photos to
national publications, especially craft, jewelry, and fashion
publications. Collect and show copies of the articles, your Releases
generate, to help justify your importance and value.
Here are a few subjects that warrant publicity:
* The opening of your business.
* Your jewelry will be included in a fashion show or trunk show.
* Any awards or recognition for you and your jewelry.
* The placement of your jewelry in a boutique or gallery.
* Any famous people (local or national) who own, or are wearing your
jewelry.
* A bio on how you started a “Small Business”.
* A special element or process in your jewelry.
* Any classes or demonstrations you are giving.
Magazine articles: Submit ideas or Write:
* “How to” articles for craft, jewelry, and/or bead magazines.
* “How I started a (ex. home based) small business for Small
Business; Entrepreneur; Woman’s; Craft; etc. magazines.
Exposure: Placement of your jewelry where you can receive
exposure and/or recognition. These can all generate “News Releases.”
* Enter art shows, exhibitions, and contests.
* Arrange for a local newscaster to wear your jewelry.
* Have your jewelry worn in magazine and newspaper fashion layouts.
* Volunteer your jewelry for fashion shows.
* Have your jewelry worn by fashion manikins in local store windows.
* Volunteer to teach jewelry classes at hospitals.
* Make presentations at local service club lunch meetings. (Rotary,
Lions, etc.)
* Donate a piece of jewelry to a (high end & high visibility)
charity auction.
* Presentations on TV Craft, Women’s, and/or Business shows
* Place your work in the most “In” boutiques.
* Produce a web presence and links.
* Produce a sales brochure, with photos.
* Purchase ad pages in advertising books aimed at selling crafted
jewelry.
You, too, can become a famous jewelry designer, but first develop
your vision and your craft. Before you’re famous, you can make
mistakes, without repercussions. But, once you are famous, and have
NAME RECOGNITION, poor design and craft errors can be disastrous.
Other components of NAME RECOGNITION include:
· Distinctive packaging. ie. Tiffany’s blue paper box.
· An individual, classy Logo or Logotype. Hire a great graphic
designer.
· A Logo tag on all jewelry pieces.
· Tie in signage, stationary, business cards, brochures, etc.
· Produce a “Look” to your displays.
INTRINSIC VALUE IN PRICING OF YOUR WORK:
The intrinsic value of the gemstones, and other components,
you use, should influence the final price you give your creation. A
ruby is a valuable, precious gem. The fact that you are able to
purchase $10/ct. rubies for $1/ct, doesn't it devalue those rubies?
So, use the gems, or components, full value, as it’s intrinsic
value.
Research the marketplace for personally designed and crafted
jewelry that is similar to yours. If those pieces are selling
for higher prices, they will influence intrinsic value of your
work. (Name recognition can, also, influence either price.). At
the same time, if stores are selling imported jewelry, that
is similar to your work, for very low prices, that, too, will
influence the intrinsic value of your work. Based on that, it
makes sense that you shouldn’t try to compete with those under
priced, mass produced imports. Use your own creativity and
produce your own creations.
I’ve sold my jewelry creations in numerous art shows. Sometimes
there were other designers, in those shows, that were selling their
own jewelry, equal to my work, but at much lower prices. When their
low priced work wasn’t very good, or very creative, it usually
didn’t really influence the intrinsic value of my work. On the other
hand, when the low priced work turned out to be very creative and
well made, it did effect the intrinsic value of my work.
As an example, a few years ago, I was showing my jewelry in a better
art show in the Los Angeles area. One of the other vendors was
selling his jewelry, and it was very similar to my work. His work
was very creative and well crafted, and he was selling his work for
half the price I would have. I visited his booth and complimented
his work. Soon we were discussing pricing. He explained that he was
a well-to-do doctor, and he created jewelry as a creative outlet.
He, also, stated that he had no interest in making a profit, (he
needed a business tax loss), and that he was thrilled that people
liked (and purchased) his work. Obviously, he continued to under
price his work.
Although, I could have let his pricing influence the intrinsic value
of my work, I decided not to let it. I continued selling my work at
my prices, and I did pretty well, although I did lose a few sales to
him. By my maintaining my prices, my intrinsic value stayed the
same. All, in all, both of us made a number of sales, maintained our
own prices, and I made a profit.
Intrinsic value can influence how a buyer values your work. If your
work is priced below what a buyer would expect to pay, the buyer
will not have confidence in your work, and might assume it is
nothing more than a cheap, mass produced, import.
Five years ago, I was showing my jewelry in an expensive, indoor, 3
day, Arts and Crafts show. There was a lady, one aisle over, selling
her jewelry in her, brand new, beautiful, expensive, booth. We got
into talking, and she said that this was her very first show and
that she was uncertain about her work. I noticed that most of her
necklaces had $30 ~ $40 price tags. I saw that her work was very
nice and I suggested that she raise her prices. Her response was,
“No one will buy my jewelry if I raise my prices.” We discussed her
costs, value, and pricing, and then I returned to my booth.
The following early afternoon, she visited my booth. She was crying,
and told me that no body was buying her jewelry. I told her, that
since she had nothing to loose, she should try raising her prices by
300%. She said that she couldn’t do that, but she would experiment
with doubling her prices. An hour later, she returned to my booth.
She was beaming, and said she had sold two necklaces. She told me
that she appreciated my counseling, and she would re-evaluate her
pricing before her next show.
So, “Intrinsic Value” can also be defined as “perceived value.”
Another important consideration is “Price point”, or
determining the clients and price range you are targeting. Before
you start your business and purchase your jewelry supplies, you
should make the following decisions:
- What price range do you want to sell in?
- $25 ~ $50, $100 ~ $200, $500 ~ $1,000, $2,000 ~
$10,000?
- Who do you plan to sell to and what is their
income/sophistication level?
Neiman-Marcus or Wall Mart or Swap Meet?
- Will you be selling in Beverly Hills or in a
low-income community?
If your prices and intrinsic values
are too low, they won’t sell in Beverly Hills.
If your prices and intrinsic values
are too high, they won’t sell in a low-income community.
(In either community, if you try to
sell Rubies at low prices, the buyers won’t respect your work or
believe the Rubies are real.)
- Will your buyers be “high income-young urbanites”,
“old rich”, seniors, or people on a fixed income?
- Do you want to work with plastic, Austrian crystal,
Agates, Amethyst, or Alexandrite?
Platinum, 22k gold, 18k gold, 14k gold,
gold fill, sterling silver, pewter, gold/silver plate, or less?
- Do you prefer quality sales, or quantity sales?
Once you have determined your “Price Point”, you can proceed with
your planning, supply purchases, design, and the crafting of your
jewelry. If you do not do this, you can end up very frustrated and
broke.
Note: The purpose of this series is not for me to tell you exactly
how much money you must charge, that is collusion (illegal).
Instead, it is meant to be a guide to help you understand some of
the basics of business, how to understand and calculate your true
component costs, and determine the value and selling price of your
jewelry.
- Your first,
and most important step is to create a written, personal
Business Plan. It should include: What you are selling; Methods
of manufacturing; Types of selling (Retail, Wholesale, Internet
sales, etc.); Who is your Targeted Market, and what is your
Price Point; Place of business; Who will be involved in your
business; etc.
- If you are looking for outside financing or working with a
business consultant, your Business Plan will be requested.
- Define your business type: Sole Proprietor; Partnership, Limited
Partnership, Corporation, etc. If it is a Partnership or
Corporation, I suggest you have a lawyer set it up.
- As a Sole Proprietor, you are completely responsible for all
income, expenses, and liability.
- In a Partnership, each partner is responsible for the debts of
the partnership, even if the other partner has incurred the
debt.
- In a Limited Partnership, one partner is the talent and the
other partner is the financial investor. The investor, who has
no active roll in the business, is the “Limited” partner and is
not responsible for debts incurred by the business. You, the
talent, do have an active roll, are the “General” partner, and
are personally liable for partnership’s debts.
- With a Corporation, you are setting up a completely new entity.
It provides limited liability for all stockholders (you and
others) and can provide unique tax situations. Talk to a lawyer.
- Create a business name. It can be just your own name (“Joan
Doe”), your name plus added words (“Jewelry by Joan Doe”), or a
created name, such as; “Beautiful Beaded Jewelry”. If you have
created a business name, other than only your own name, you have
created a Fictitious Business. When you create a Fictitious
Business, you must file a “Doing Business As (DBA)” form and
publish the necessary information in local publications. In Los
Angeles there is a network of DBA Newspapers, who allow you to
file on their web sites and they will handle everything else,
including publishing your information in their network of
newspapers.
- Define your fixed business location: Home based (will customers
be visiting your home, or not) – check local Zoning laws, Store
Front, or Office Space.
- Have an accountant, or bookkeeper, set up you accounting books.
Define who will be maintaining your books.
- Obtain a state resale certificate (and number), and understand
your responsibilities. This allows you to purchase all
components of your final product without having to pay sales
tax. It also requires you to collect taxes on all of your sales,
maintain sales records, and send the collected taxes to your
state’s tax agency. In California, the agency is called the
“State Board of Equalization.” You can visit their local office
or go to their web site, to obtain your Resale Certificate and
number.
- Obtain a local Business License, if it is required. Some
jurisdictions do not require one if you are a small, home based
business grossing under a specified amount.
- Set up a separate Business Checking Account, and perhaps, a
separate Business Charge Card. Get to know your banker. He can
be of help in starting your business, and after your business is
in operation. Create a “line of credit.”
- Arrange to accept credit cards from your customers. You can do
this through your bank, or through an independent credit card
processor, such ad Retriever.
Before I go any
further, I just want to thank all of the people who sent me Emails
showing your appreciation of this series, and the information we are
passing on to you.
I have received many questions about pricing when you make wholesale
sales to resellers. This actually fits right in with my next
segment.
WHOLESALE PRICING.
First, and foremost, you must compute (using information gleaned
from the previous parts of this series) your lowest reasonable
selling price. That wholesale price must include: 1) All of your
“true materials costs”; 2) Your design and labor costs; 3) A portion
of your general business expenses; 4) Any business expenses,
specific to this sale; and 5) A REASONABLE PROFIT!
In figuring a mark up or a discount you use two different processes,
and the final prices are don’t match.
MARK UP: This is used when you know the cost (or materials
costs) of your product and want to multiply it by an amount that
will cover all of the business expenses necessary to the sale of
this product, plus a reasonable profit, and a “Fudge Factor” that
will allow you to give a discount, if necessary, to make the sale.
For example: your cost is $100 and your markup is 2.5 %, so $100 X
2.5% = $250.
MARK DOWN or DISCOUNT: This is used when you need to discount
a price, and still make a profit, to: 1) Sell wholesale to a
reseller; 2) Make a sale; or discount prices where a profit might
not be necessary: 1) Clear out old merchandise to make room for new
merchandise; 2) To liquidate stock for invest able or needed cash.
For example: your retail price is $300 and you are discounting by
50%, so $300X.50%= $150.
UNEQUAL FIGURES: As I said before, when figuring prices in
the Mark Up method and in the Mark Down method, the numbers don’t
match. Here are a few examples.
MARK UP
MARK DOWN
$100 X 50% mark up = $150
$150 X 50% mark down = $ 75
$100 X 100% mark up = $200
$200 X 100% mark down = $ 0
$100 X 50% mark up = $150
$150 X 33.3% mark down = $ 100
$100 X 100% mark up = $200
$200 X 50% mark down = $ 100
So, as you can see, if you give a discount equal to your mark up,
you will lose money! It is very important that you understand
this difference and the mathematic principals that are involved.
DISCOUNT SCHEDULE: Many wholesalers use a Discount Schedule.
Using this schedule, the wholesaler gives greater discounts as your
purchases increase.
Here are discount schedules from two of my old suppliers:
Supplier #1: (discount based on each order, only. Does not
carry over to future orders)
Minimum purchase with a wholesale discount is $ 200. = 0% discount.
Purchases over $ 200 receive a 30% discount. = 30% discount.
Purchases over $ 500 receive a 30% discount, + a 10% discount. = 37%
discount.
Purchases over $ 1,000 receive a 30% discount, + 10%, + 10%. = 43.3%
discount
Purchases over $ 3,000 receive a 30% discount, + 10%, + 10%, + 10%.
= 49% discount
As you can see, 30%+10%+10%+10% doesn’t equal a 60% discount. In a
discount schedule each discount is taken before you take the next
discount. Based on 100% (retail price), deduct 30% and you get 70%.
Then 70% - 10% = 63%. Then 63% - 10% = 56.7%. Then 56.7% - 10% =
51%.
Supplier #2: (discount based on each order, only. Does not
carry over to future orders)
Purchase 1 to 4 identical items = retail price.
Purchase 5 to 24 identical items = 21.4% discount from the retail
price.
Purchase 25 or more identical items = 36% discount from the retail
price.
Here at HouseofGems.com, we also have a discount schedule. Unlike
the previous 2 suppliers, our “Frequent Buyer program” is based
on your total cumulative purchases. Each time your total accumulated
purchases reach a new plateau your discount grows and it is applied
to that purchase, and all future purchases.
Your total accumulated purchases of under $100 = 0% discount
Your total accumulated purchases of $100 to $499 = 5% discount
Your total accumulated purchases of $500 to $999 = 10% discount
Your total accumulated purchases of $1000 to $1999 = 15% discount
Your total accumulated purchases of $2000 or more = 20% discount
These are examples of discount schedules used by two of my previous
suppliers and ours, here at HouseofGems.com. You can develop
schedules to meet your own needs. These schedules can build sales
and weed out phonies. These phonies can be people (with a “resale
number”) who claim they are purchasing one or two pieces of your
jewelry to sell in their store and that they will make many more
purchases in the future. In reality, they have no intention of
reselling the jewelry or make future purchases. They just want to
buy your jewelry at a reduced price, and not pay you what you are
worth.
It is important to understand, your “Retail Price” might be very
different from the “Retail Price” your wholesale client puts on your
creation. I find that most resellers mark up jewelry 2X, 2.5X, and
3X the prices they paid (aka: keystone, 2.5 keystone, 3 keystone.).
Another consideration necessary to setting your wholesale prices
is how soon you will be paid. If you are paid in advance, or on
delivery, you can be generous. But if you have to wait 30, 60, or 90
days (or longer) to be paid, your costs go up and you can’t be as
generous. These people are using you as their “Free Loan” bank, and,
normally, you don’t have a bank’s financial assets.
You invested your money to make the jewelry you sold, but now you
have to wait for your money. When you have to wait for your money
you: 1) can’t pay your bills; 2) have to pay interest on money you
owe; 3) can’t buy new supplies to make more jewelry; 4) can’t invest
your money; 5) can’t enjoy your life.
Generally, the wholesale discount on jewelry left on consignment
is lower than the discount given to a regular wholesale customer.
Not only is the consignment reseller using you as their bank, but,
since they have no financial involvement in your jewelry, it is to
their advantage to sell the items they paid for, before they sell
your consigned jewelry. Personally, I have had to sue to collect
money owed me on consigned items that were sold, and to get back all
of the unsold items. It is very important that you have a good,
signed contract with anyone you consign to. You can find
examples of consignment contracts in books on craft sales (I will
list some in part 8).
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~ ~ ~ ~ ~ ~~ ~ ~ ~ ~ ~ ~~ ~ ~ ~ ~ ~ ~
Next week, I will list useful books & magazines; discuss frustration
& burnout with under pricing; etc. Plus, I will answer questions
from part 1 of this series, and e-mails I have received.
Note: The purpose of this series is not for me to tell you
exactly how much money you must charge. Instead, it is meant to be a
guide to help you understand some of the basics of business, how to
understand and calculate your true component costs, and determine
the value and selling price of your jewelry.Over the past 7 weeks we have covered:
- Starting your business and the steps involved.
- Pricing your jewelry (or other creations). Includes
examples.
- A “Basic Rule”.
- Materials costs – base & secondary.
- Design & Creation time – value of.
- Name recognition.
- Intrinsic and perceived value.
- General business costs.
- Wholesale pricing.
Let’s look again at some
of the questions I listed in part 1 of this series:
- “My co-workers love the jewelry pieces I make for
myself, and they want to buy them. How much should I charge?”
- I hope by now you understand that your work has value. It is
relatively common for women to admire the beautiful jewelry that
another woman is wearing. Sometimes when they find out you are
the creator, they ask to purchase your creation. In doing so,
they are they are confirming the value of your work. Since they
are confirming your work has value, you, too, should respect
yourself & your work, and charge accordingly.
- “How do I figure my costs and selling prices for my
jewelry?”
- Go back to “The Basic Rule”. YOUR MATERIAL COSTS X 3, + YOUR
DESIGN & CREATION TIME, + “NAME RECOGNITION”, + INTRINSIC VALUE.
- The Basic Rule is only a basic guide, a starting point, to
help you develop your own pricing schedule. One in which you
can recover all of your costs, be paid what you are worth, and
make a profit.
- “A woman told me that she would pay me my costs and
she will wear my jewelry for people to see and I’ll get a lot of
business. Is this how I should start my business?”
- First, she is telling you that your work is special and
valuable.
- Second, unless she is a great sales person with a large
social circle of friends with the money to buy your creations,
you’ll end up with nothing and she will have your wonderful
creation without paying for it.
- “What jewelry supplies can I buy (with a state resale
number) without paying the sales tax (California)?”
- You may purchase “for resale” the following items,
only: 1) everything that will be included in the final product
when it is sold; 2) packaging for your product when it is sold
and delivered to your client.
- You must pay sales tax on everything else you purchase that
is not physically included in your final product when you sell
it. The state requires you to account for everything you
purchase “for resale”, and it expects you to pay the unpaid
taxes on everything you do not sell.
- The state requires you to pay, to them, the sales tax for
all items you sell. They don’t care who pays the tax (your
client or you), as long as they receive their money. I suggest
you collect the tax from your client when you make the sale.
- “My hairdresser has offered to sell my jewelry in her
salon. She will display them and pay me after she sells them.
How much do I charge?, Do I need a written agreement? Who is
responsible for the sales tax? Help!”
- This is called a “consignment” sale. Because she is not
purchasing your creations, outright, and you will have to wait
for your money, your discount, to her, should be less than for a
regular wholesale sale.
- It is very important to have a written contract
between you and the consignee. It should cover each
person’s responsibility, when you will get paid, how and when
you will recover all unsold merchandise, physical
responsibility, etc. You can find sample Consignment forms in
books on crafting as a business. (See book references.)
- The Consignee should be responsible for the collection, and
paying to the state, local sales taxes.
- “How can I make sales and charge the prices you tell
me to charge?”
- First, I’m not telling you how much to charge. I am
giving you information, and the tools to develop your own
pricing schedule. One in which you will cover all of your
expenses, receive a reasonable compensation for your creativity
and craftsmanship, and make a profit.
- Don’t take the attitude, “I’m not worthy.” If you are
creative and a fine craftsperson you are every much as worthy as
Paloma Picasso (Tiffany & Co.).
- Produce fine quality, creative and unique jewelry.
- Be creative and do not create jewelry that resembles mass
produced, cheap and/or imported, jewelry.
- With your wonderful work, you should aim high. Set your
“Client Level” and “Price Point” high, and you will take
yourself out of the arena of the low talent and low priced
“designers”. Remember, “Heavy Weight” boxers never have to worry
about “Bantam Weights.” Whether it’s beads or boxing, or music,
“want-to-bees” with no talent will always be in the background.
So always keep yourself in the front..
This is the concluding Part in our series, “Starting and running
a jewelry business.” I would like to start this segment with a
quick anecdote about frustration and burnout among beaded jewelry
makers:
A woman spent her weekdays making simple, sweet necklaces that she
would sell for $29, and earrings that she sold for $8. When she got
bored making jewelry, she would make toll work and other inexpensive
crafts to sell, too. She spent her weekends selling her work, and
although she sold most of it, she never seemed to get ahead,
financially. Also, she felt her buyers didn’t appreciate the energy
she had invested in her work. All of this caused her to become
frustrated and depressed.
Her friends asked her to “go out” with them, but she never seemed to
be able to find the time, and money. She realized that she didn’t
“have a life.” and this, too, added to her frustration. She became
angry, started denigrating the handcrafted jewelry business, and
blamed everyone else for her predicament.
When caring friends and other jewelry makers tried to help her, and
suggest changes in her operation, she would become defensive and
very angry. She refused to listen to their helpful suggestions, and
she said they didn’t know what they were talking about, but that she
did. She refused to look at what she was doing and continued to
blame everyone else.
This is just one person, but I have known a number of people with
virtually the same story.
Now that you’ve read this series I hope you can pick out some of the
steps that led to her decline. Here are a few points that might not
be so evident:
¨ She may have had low self-esteem and was afraid to go beyond a $29
price point.
¨ She continued to make simple, inexpensive pieces of jewelry that
would have to compete with mass-produced, low price, imports.
¨ It takes the same time to make a $100 necklace as it does to make
a $29 necklace.
¨ It is said, “The best defense is an offense.” Her anger and
blaming others would be this defense.
Let’s review the quotes I gave in an earlier part of this series:
¨ “……(Charge) all the market will bear.” Ambrose Bierce
¨ “Make your own myths. That’s the way the gods started.” By a
famous Polish philosopher.
Plus, here’s a new one.
¨ “A definition of insanity is: Doing the same thing, over and over,
expecting a different result.” Bill & friends.
Here are a few recommended books and magazines for you to read:
Bead and craft business – Books.
¨How to be Successful in the Bead Jewelry Business, by Kate
Drew-Wilkinson.
¨Crafting for a Business, by Wendy Rosen.
¨Crafting for Dollars, by Sylvia Landman
Bead and craft business – Magazines.
¨The CraftsReport.
www.craftsreport.com
Beading – Magazines.
¨Lapidary Journal
www.lapidaryjournal.com
¨Bead & Button
www.beadandbutton.com
Sales source book
¨Designer Jewelry Showcase
www.designerjewelryshowcase.com
Art show venue listings – Magazines.
¨Craftmaster News (AZ, CA, CO, ID, KS, MT, NB, NV, NM, ND, OK, OR,
SD, TX, UT, WA, & WY.)
www.craftmasternews.com
¨Art & Craft Show Yellow Pages. (CT, DE, MD, MA, NJ, NY, PA, VA, WV,
++)
www.SmartFrogs.com
¨Where It’s At. A guide to Arts & Crafts Shows. (AL, AZ, AR, CO, GA,
KS, LA, MS, MO, NM, OK, TN, & TX)
1-800-972-8589
¨Art Fair Source Book (Includes a shop rating).
www.ArtFairSourceBook.com |