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Beads and Beading Blog - the Official Weblog of House Of Gems, Inc. (www.houseofgems.com). Here you can find exciting news and tips on - beads, gemstones, beading materials & methods, jewelry making plus product and website updates , promotions and more. This is a place for us to interact with our customers and the beading community, in general, on a fairly regular basis.Tune in regularly to the voice of House Of Gems. |
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Starting and Running a Jewelry Buisness Part 6 |
| STARTING YOUR BUSINESS
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.
You will need different types of Business Insurance..
- Business liability insurance: This covers you if: anyone is injured by your product; is injured in your place of business (this can include a show venue – some venues require proof of insurance); is accidentally injured by you or an employee; if, as a part of your business, you (or your employee) injure someone or damage the property of another; etc.
- Business Auto insurance: Your personal Automobile insurance will not cover you if you have an accident when you are using your vehicle while conducting business. Conducting business can include: making deliveries; picking up supplies; sales calls; transporting your business materials and jewelry to a sales venue; etc.
- Workers Compensation Insurance: If you have an employee (an employee is anyone following your direction, whether they are paid or not) it is mandated by most states that you carry a "Workers Comp" policy. This policy provides medical, rehabilitation, income protection for all listed employees, and can cover you, too. Your employees are not covered by your liability insurance, so this also protects you from some liability if an employee is hurt on the job.
- Your lawyer might suggest other types of insurance.
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Starting and Running a Jewelry Buisness Part 5 |
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The next important component of pricing your work is its INTRINSIC VALUE. Webster’s Dictionary defines “Intrinsic” as, “belonging to the essential nature of a thing (the ~ worth of a gem)”. Now, how does this pertain to your beautiful creation?
· 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 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.
In the next week, or more, I will cover experiences with different pricing methods, starting a new business and your requirements; useful books & magazines; frustration & burn-out with under pricing; etc. Plus, I will answer the questions in 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, 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.
· 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.
In the next week, or more, I will cover experiences with different pricing methods, starting a new business and your requirements; useful books & magazines; frustration & burn-out with under pricing; etc. Plus, I will answer the questions in 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, 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.
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Starting and Running a Jewelry Buisness Part 2 |
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
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