Pricing Your Jewelry ~ What I've Learned Along The Way - By Mary Ann Springer9:00 AM
I was so excited as I finally felt as if I were a "real designer". People out there liked my work as much as I did and actually decided to purchase it! I was over the moon. Of course, I had to relay the exciting news to my husband, who immediately wanted to know how much I made on the piece. When I told him the selling price, he said, "No, I mean how much did you actually make?" Well. I really didn't know. I hadn't really thought about that. I started the auction low as I thought that was what you were supposed to do. And to tell you the truth, I never really thought about calculating out the cost of creating the piece before I set a starting bid. I was an artist, not a business person. So, you can imagine my surprise when I found out I made approximately two dollars on my first sale. While that fact really didn't diminish my happiness over the sale, it did get me to start thinking about the whole subject of pricing jewelry to sell. When I started to get serious about my business, I knew it was time to do some research.
Through reading and speaking to many different people in the business of selling jewelry as well as some other types of businesses, I settled on a pricing plan that works for me. Along the way I learned about three important things that should be considered when pricing that never really occurred to me in the beginning of my business venture. Now that I think about them they are nothing earth shattering and parts really are common sense, but I figure if I didn't know, there may be someone else out there that doesn't know, either. And this is for you. Please note that I am certainly no expert on the subject, and there are many different ways to price your pieces. I am just going to give you three things to think about.
You Want to at Least Make the Cost of Your Piece
You would think this would be a given, but I made this mistake myself in the beginning. I also can't tell you how many times I have visited a website or an auction and said to myself, "That price isn't even CLOSE to how much it cost this person to make it!!" As a designer myself, I can pretty much rattle off the current price of any finding sold by one of my vendors, as well as the price of silver that day, so sometimes this makes me wonder if they have some fabulous low cost vendor that I don't know about. I really don't think so. This bothers me. Why are they giving their pieces away? Is it to get their name out there? Is it to undersell the competition? Are they just unaware, as I was in the beginning? I can't be sure. But I do not think that it's a good idea. The reality is you are not going to stay in business very long by underselling yourself. Eventually, you are going to have to raise your prices. I feel it's better to start out consistent. While the goal is to eventually make a profit on the piece, you really don't want to lose money on it, especially if this is a new business. The bottom line is you should calculate the cost of every single piece you make to sell. All of those tiny little findings can add up, especially with the price of precious metal these days! Time consuming yes, but very necessary. There are even computer programs that can help you calculate cost. You enter in an inventory of your findings and beads, as well as how much each costs. It then allows you to enter in a "recipe" for a piece and it automatically calculates the cost of creation. Cool! This cost should be your starting point for calculating the selling cost of the piece.
Don't Work For Free!
You would expect to be paid at any other job that you took, so why do we forget to pay ourselves for our jewelry making business? Most likely because of the fact it is something we love to do and would be doing it anyway, even if we weren't trying to turn it into a business. But the reality is, this is your job and you need to be paid for your time and effort. You have the choice of paying yourself an hourly wage or per piece. You need to decide which will work best for you. Do you create pieces quickly, or do you like to make intricate pieces that require hours to complete? The choice is up to you. You don't even need to use the same method every time. You can use the one that best fits the situation. For example, if you are creating the same pair of earrings multiple times, it may be wise to pay yourself by the piece as this work tends to move quickly. If you are working on a custom piece, an hourly wage might be more suitable.
I think the hardest part is deciding how much to pay yourself. To help me, I decided to think of it as any other part time job. How much would I expect to make an hour if I took a position somewhere outside the home? $10 an hour? $12? $15? Once you decide it was very easy to calculate your labor costs whether it's per piece, per hour, or even per minute.
Time is important, too. In the beginning I suggest really keeping track of the minutes you work by writing down the time you start a piece and the time you actually finish it. You may be surprised! I know I sometimes really underestimate the time it takes me to create something. I get all into the creation, restringing and restringing and the next thing I know, 2 hours have flown by and I am still working! It works the other way for me, too. Sometimes the ideas just flow out of me and I create piece after piece in no time. (This usually happens when I am under pressure....like when I have procrastinated on craft show inventory and it is fast approaching!)
The best part is you are your own boss and can adjust your wages whenever you like!
All That Other Stuff You Need to Run Your Business Counts
Everything outside of your labor costs and the actual cost of your piece is called "overhead". At first glance this category may not seem to be that big of a deal, why add this cost to the piece of jewelry? How much can it be? When I started to actually write down all of those "things" that I needed to run my business, I was surprised at how long the list became!
Some things are easy to think of when you consider overhead~~ we know the cost of tools should be counted, as well as the cost of packaging, or the cost of padded envelopes for mailing pieces to customers, your business cards, etc. But what about electricity? The phone bill? Travel and gas fees? If you work out of your home as most of us do, you can argue that you would be using the electricity and the phone anyway, so why count it? But what if you weren't in your home? What if you rented out studio space and were paying for those things out of your business money? Just because your home is your office doesn't mean you shouldn't count these things as overhead. To be completely honest, this is the category that never even occurred to me when I began pricing my pieces. I think many artists overlook this category. For one, it seems to be an almost impossible to figure out.
So, the big question is, how do you calculate overhead in order to add it to the cost of your piece? Do you really have to add up all your extra expenses and somehow divide it out for each piece? I thought there had to be an easier way. When I first started out and was researching this topic, I read that your overhead costs are about 20 to 30 percent of your piece cost and your labor cost combined. Let's use 20% as an example. Your base cost on a pair of earrings is $4.00 and you pay yourself $15 an hour. These earrings took you 5 minutes to make, so your labor wage would be $1.25. You then add those two numbers together and take 20% of it to get your overhead cost. Finally, you add all three numbers together. For all those interested in the math, here it is:
(PC) $4.00 + (LW) $1.25 = $5.25 x .20 = $1.05 + (PCLW) $5.25 = $6.30
Here's where it gets tricky. I know some people that consider this price the "wholesale" price. (The price you would give to a retail company that wanted to sell your piece in their store. They in turn would mark that price up by another 2-3%.) I know some other people that agree with the above formula but say you now need to multiply that $6.30 by 2 making it $12.60, and that is the wholesale price. This is actually what my jewelry software does, and what I tend to do myself. If were to sell this piece myself as retail, I would take that $6.30 base cost and multiple it by 3 or 4, getting my own retail price.
In the beginning this is going to sound extremely tedious and time consuming. It definitely gets easier and you will become very good at "guessimating" the cost of a piece!
So, Is That It?
Unfortunately, no. This has all been very cut and dry, but jewelry pricing isn't really cut and dry at all. There are many outside factors and influences to think about. For example, the area in which you live. It may be easier to sell jewelry in a place that is well populated than a place that is not. The venue you sell in is another factor. What is the cliental like? A little research into your area and cliental will help you price your jewelry at a fair price that will sell for you.
I think the bottom line is to not sell yourself short! You may be an artist, but in order to succeed you have to become a business person, too. If you have realistically calculated your costs and come up with what you believe is a fair price, then by all means believe in yourself and your creations and go for it! By assessing and reevaluating your pricing situation as you go, you will be well on the road to having a successful and profitable jewelry business!
Former third grade teacher extraordinaire becomes jewelry designer quite by accident. Always known as the "crafty type", her friends are not surprised when her jewels are quickly picked up by many upscale stores in the northeast. Along with making exquisite jewels, this Indie designer also loves drinking coffee, surfing the net, running to stay in shape, her killer Yorkie, and Mr. Jon Bon Jovi. She also loves to make her customers completely happy with their purchases. Please visit her website at www.pinkpapillon.com