Article: Profitable Jewelry Design and Repair

By David S. GellerMore from this author

This article covers and discusses the Why's and How's of Profitable Jewelry Design and Repair written by David. S. Geller.

The Past

A few years ago, Jewelers Circular Magazine reported that over 75% of all retail jewelers in America lose money on their jewelers. They were talking about a bench jeweler losing money on 3/4 of all jobs that they touched. There are plenty of stores that use a jeweler as an aid to making a sale and they look at the profit on the item sold, not the profit on the labor to set the stone. This would be a store that had the jeweler there on the premise to set a diamond they sold or to size rings they've sold.

For the rest of the time, the jeweler might be doing repairs and other chores. There are other jewelry stores that hire craftsmen specifically to make and repair jewelry and they have intricate work to be performed. They are charging "good" money for their jobs, but they still loose money or make very little on the jeweler. You know the scenario, where you charge hundreds of dollars to make a ring and later, when you add up the costs, you made nothing or lost money. Usually the store owner is the "brain" with all of the prices wrapped up in his/her head. Many times you negotiate a price with a customer because they are "good" customers. What's your definition of a "good" customer? Mine is someone who brings repeat profitable business into the store. Not someone who constantly chisels you on each deal or wants the labor thrown in for free. Giving a repeat customer prices near cost is not a good customer. You might have this type of sale and not know it.What ends up happening? You either loose money on the jobs you do, or if figure out you're loosing, you'll only do simple repairs.

Why deal with labor intensive dollars?

Making a living dealing with labor intensive dollars can be a real headache. It also can be enjoyable and profitable, if it's done right. Today, you'll get some very valuable tips on doing it right!.

Adding or extending your dollar volume with jewelry design and repairs will do many things for you and your store:

• Make you money. You can make 21/2 to 4 times cost on repair and design. Are you getting that now on your inventory?
• Make your store different that other stores in town. Even stores that say they do custom and repair business don't do it well. Besides performing good workmanship, it's a matter of how you treat the customer, come across as a professional and pricing for profit.
• Build customer loyalty and referrals like you've never seen before.
• Custom and repair will actually help you sell more inventory. You'll have an easier time selling loose stones and gain a better markup on many items.

A quick example is the following. If you buy a $1000.00 ring and keystone it, you'll sell it for $2000.00 (that's double cost). But you could design the same ring and have it cost $1000.00 and sell it for $2800.00. Yes, and very easily, too.

How? Well firstly, if you're used to "wheeling and dealing" with the customer on the ring, you'll lower the price on every "component" on the ring, including the center stone. Components are: the melee, the gold mounting, the labor to manufacture the ring, and the center stone. If you design it, you'll have an easier time getting full price on most all parts and designing of the ring. You could buy the melee at $600.00 per carat and sell it for $1600.00 per carat. That's 266% markup. You'll also get about the same markup on the gold mounting and the labor to assemble. If you have to wheel and deal, do it on the center stone you'll sell. You most likely can't divide up what you discount on a finished item from the case.

There's another advantage to this. If the customer complains about the price, you can point to your price list as to the reason for the price. You didn't make up the price, the customer's request did! If the customer wants to lower the price, show them how you can subtract some stones and the price can be lower. Not so easy to do on finished jewelry from the case. The customer will know (you'll also tell them) of the advantages of custom jewelry and it always costs more to get just what you want, doesn't it, Mrs. Jones?

The Present

For you to make a profit on jewelry repair and design, you'll need to do two very important things before all of this will work for you:

• A. Control your labor costs.
• B. Have profitable pricing that includes all of your costs.

A and B just above are a combination of two very important things. These thoughts will be new to you, but you'll need to change your way of thinking to do well in this particular field. They are:

• Pay your jewelers on 100% commission.
• Figure your repair and design prices in advance, adding up your actual costs, without pricing from the hip. If you have a hard time guessing, this method will insure profitable pricing even when you price it wrong.

If these two items have you squirming in your chair, please continue on. Allow me to give you a brief history of myself. It will take just a paragraph or two and I know it will bring of this to light.

I have been doing bench work since I was ten years old (I'm 49). My father had his family tree traced and supposedly, I'm a 14th generation jeweler. All in all, doesn't mean a thing except that I have tenure and experience. Anybody can be good at something if they put their heart into it. I own a custom design and repair store in Atlanta, Georgia and over 50% of our income comes from the labor of our craftsmen. This August starts our 23rd year in business.

About twelve years ago I became very frustrated with paying our jewelers hourly wages and watching them sit and chat when work was to be done. Yes I would speak softly, yell and scream, or just turn my back. Why would it take "all day" to install a shank? How could one person, at $10.50 per hour, make a ring sizing job take 45 minutes? Why did I have to keep hiring more people to keep up with increased work load, but never get caught up? At that time, we had 7 craftsmen and we would keep about 300 to 350 jobs in the store at any given time. Repairs were promised for 3 weeks and custom design for 6. My stomach was getting pits from the aggravation.

With the help of my accountant, I turned all of the jewelers (6 at the time) over to straight commission. Within a month, 1/2 of them quit. I was left with the better jewelers, the worse ones quit. Why? Because the lousy ones weren't pulling their weight and they knew it. The better ones saw the potential. Within 6 months, all of the jeweler's salaries increased by 50%, to $15.00 per hour. Within 6 months, we went from 3 weeks on repairs to 2 and 3-4 weeks on custom. We did this with 3 jewelers, rather than 6. In two years, we were keeping 400 to 500 jobs in the store with 4 jewelers. (Remember, we used to keep 300 jobs in the store with 6 jewelers.) The secret was paying the jewelers a percentage of what we charged the customer for the labor charges. The jeweler doesn't get any percentage of the product.

The Nitty Gritty

Our jewelers get paid 22% of our regular labor charge. An example is a ring sizing. We charge $14.50 to make a narrow 14kt ring smaller. 22% of that is $3.19. That's what the jeweler receives. We provide the gold, solder, polishing compounds, etc. The jeweler provides his/her own tools. We provide emery paper, saw blades, things that get replaced often. If the jeweler wants to take 45 minutes to size a ring, so be it! He gets $3.19 for the 45 minutes. If the jeweler sized it wrong, he redoes the job at no charge. Now we don't want people who take 45 minutes to size a ring. But it does happen! Just because someone has been doing bench work for 5 years doesn't necessary mean they're are good! Pay people for a good job done on a timely basis, not time at a bench or how long they've worked for you.

In our shop, we have jewelers who make $385 to $575.00 per week. They're slow. On the other hand, we have guys who make in JANUARY $1000.00 per week. If they make $1000.00, we're grossing approximately $4600.00 from their work. When's the last time you sold a job for $4600.00 in at retail and your cost was $1000.00.

There are down falls. Redo's can be a killer. The customer doesn't like it, you chip or break a stone, your design isn't at all what the customer wanted and you have to remake the item. If done properly, you can reduce your problems.

The solution to profitability and reducing errors is writing out your own price book based up actual costs to perform the task. We have a 282 page price book in our store. It lists everything we possibly could do to a piece of jewelry. It took me several years to come up with the formula, of which I'll pass along to you. It will take work on your part to device your own price list or price book, but the rewards are beyond many other things you can delve into.

A price list will guarantee your customers that they will be quoted the same price on every visit. But most of all it will keep from making you the answer person! "Oh Mr. Storeowner, how much is it to retip this emerald ring? How much is it to size a class ring? How much to replace the low base head with a 6 prong tiffany head?" Enough questions already! Let's make money.

Your price list will be the key to how much you receive from a customer and how much the jeweler gets paid. Remember, our jewelers get 22% of most labor costs. Our list has the jewelers pay amounts in code in the book and we staple a form on the back of the envelope with these prices in code. When they finish the job, they tear off the tickets and save them. At the end of the week, they turn in one copy of the ticket to the bookkeeper and they are paid from that. We take out taxes, pay for insurance, the whole gammit. They are not independent contractors. This is just a way of figuring their income. Our jewelry staff earns from the low $30,000 to the high $40,000's. In 1995, our best jeweler earned $58,000.00 working 5 days a week. (but maybe 9 hours per day).

The Future

Production is the way to earn better profits on repair and design. There are many other things to be considered besides pricing.

• A. Teaching and maintaining a knowledgeable sales staff who can sell repairs and custom design.
• B. Excellent paperwork must be adhered to. We've made up our own double sided job envelopes, estimate forms, design sheets, and order form requests. Poor instructions can kill profitability.
• C. Procedures must be kept to insure that the job is inspected before the customer leaves the store and the item is inspected during it's route from beginning to end.

All of the items listed above work around two important things that a store needs. One person in charge who understands the mechanics of the jewelry trade. The second thing deals with the knowledge. Sales people will do better if they are trained in how a job is done and what to look for. Also important is that the sales staff have a handy reference tool and believe that the designing or repair option is a good one. . Some sales staff don't believe repairs are worth their time. Paying sales staff members well for designing and repairs will make believers out of them.

We solved that dilemma. Our sales staff is on 100% commission. They start at 10% commission for a full retail sale. If they discount over 10%, their discount drops to 8%. If they design something that has to be remade after the item is delivered, their commission drops by 50%. Everyone shares in the good fortunes, as well as shares with the problems.

The Price List

Your price list is going to be a work of art. I'm going to tell you what mine has in it and how you should devise yours. A page from our book is attached in the back of these pages to give you some good ideas. Our book carries tips for the sales staff in designing and repairing as well as listing 2 or 3 findings houses with their stock numbers for a certain item. (Where to order the 2mm clasp, as an example.) An example is in the "retipping" chapter. Most people solder a new tip right on the diamond without removing the stone. With protection, this is fine. But you can't heat on an emerald. So right above "tipping" in the price book is a small paragraph telling the sales person this point and to charge the customer to remove & reset and stone that can't take heat. For the most part, the only stones my staff knows that can take heat are the stones of the color of the American flag: Red, White & Blue.

Red, white and blue: Ruby, Diamond, and Sapphire. All other stones need to be removed. Before you send me nasty notes, I know their are some others that can take heat, but this is easy for them to remember.

The second thing is the listing of the price. We charge $14.00 for the first tip and $9.00 for each additional tip. In a column next to the retail price is a column called "Jewelers Code" or Jlrc for short. We place a number 9 in front of the jeweler's code so the customer doesn't understand what it is. We also place a letter after the jeweler's code. "A" means the jewelers gets 22% of the price and "B" means the jeweler gets 11%. I'll tell you more on that in a moment. But first to the 22%.

Again, the jeweler gets 22% of most repairs, along as there's no appreciable value in the finding or gold finding. Retipping a prong or making a ring smaller has very little value in the gold. I also don't want to compute the value of the gold in retipping or even sizing a ring one size larger. So at $14.00, the jeweler gets 22%, or $3.08. The price list looks like this:

Remember in the "Jlrc" column, drop the "9" from the code, which leaves you with $14.00. The "A" means the jeweler gets 22% of the $14.00. (Why 22%? My accountant said 22%, that's why.)

We charge $11.00 to solder a simple chain repair, or a customer's jump ring onto a bracelet. At 22%, the jeweler gets $2.42 for a simple solder.

Now what about a 2mm barrel clasp, soldered to the customer's chain? What would you need? Firstly, a clasp. The clasp in 14kt cost about $5.50. It will need 2 jump rings to connect to the chain and to be soldered. The jump rings will cost about $1.00 for the two. Total cost so far is $6.50. We charge the customer, complete, $35.00 installed, parts and labor, everything. We don't pay the jeweler 22% of the $35.00. What is the jeweler doing to the job? You guessed it - 2 simple solders on the jump rings. So the jeweler gets 22% of the 2 solders on the two jump rings. 2 solders X $11.00 each equals $22.00 retail for the solders alone. 22% of that means the jeweler gets $4.84 to solder the barrel clasp onto the customer's necklace. This is how our price book looks for items where there's some substantial gold involved, like barrel clasps:

Again, you drop the "9", leaving you $22.00. the "A" means the jeweler gets 22% of the $22.00, or $4.84 to solder the two jump rings. In our store, we have a full time polisher, so our jewelers don't polish, only do bench work.

This is how we came to $35.00 for the clasp. We "charged" the customer two solders to attach the clasp to the chain. We charge $11.00 each, so that's $22.00 so far. The jump rings and the clasp have a total cost of $6.50. We keystones that to $13.00. Add $22.00 to $13.00 and you have $35.00 retail. So let's look at the profit here:

These same numbers work for larger pieces and designs. More later. These three costs aren't the only costs evolved because you have overhead.
Other costs added to these would be employee benefits and overhead, like rent, insurance and such. I'll tell you later how to figure that into play.

But think about this now. What if this example had 1 or 2 zeros added to it?

Costs: $ 113.40
Selling Price: $ 350.00
Gross Profit: $ 236.60

Or

Costs: $ 1134.00
Selling Price: $ 3500.00
Gross Profit: $ 2366.00

Not Bad, eh?

How is the jeweler making out on all of this? Ours make between $30,000 to the high $40,000 ranger per year, working 5 days a week. (Christmas doesn't count). Let's say on this job, the jeweler melts the jump ring. Or it drops on the floor and he looks for 15 minutes until he finds it. You've paid out No More Money for his time. You will pay for the melted jump ring at $.50 cents, but not his time at $15 to $20 per hour. You'll find the jeweler will be more diligent on doing it right. If it's not done right, back it goes to the jeweler at no charge to you. If you mess up with a customer, do you get to charge the customer more? Heck no! And neither can the jeweler.

We guarantee all of our work for a year, and so does the jeweler.

What About the "B" Prices?

Remember how the jewelers code has a "B" attached to it? "B" in our price but means 11%, rather than the 22% for the jeweler. We use this code when there is other substantial findings costs involved and we can't or don't want to figure out the labor and the materials. An example is a ring shank. We charge $95.00 retail for a 1/2 shank on a ladies engagement style ring. Rather than try to figure the exact cost of the gold for the shank (which is probably $20.00 - $30.00) and give the jeweler 22% of the labor to install, we just give the jeweler 11% on the whole charge. 11% of $95.00 is $10.45 for the jeweler. You provide the gold and the jeweler puts the shank on. Should take less than a half hour to do the job, so he's making about $21.00 per hour at it and your gross profit is assured. I figure that your cost is about 30% to 40% of what you charged. And if the jeweler takes 45 minutes, the gross profit is assured. Without a lot of "dilly-dally" on the jewelers part, the job should take 20 minutes. But who's counting?

Another example of the 11% is a Fingermate arthritic adjustable shank. The retail price is $300.00 for the narrow one. Because the Fingermate includes installation, we don't break down the labor and finding. At 11%, the jeweler gets $33.00 to install it and it takes 45 minutes to an hour to install it. Just so happens, that's exactly what the factory will charge you to install on Fingermate when you send them the ring. Few Other pointers on your pricing

We don't give the jeweler the full retail amount at 22% on every labor only job. If we charge a customer $95.00 for a 1 carat four prong Tiffany style head, soldered in place and setting the customer's diamond, the jeweler gets 22% of that charge. But, that's the most he will get even if we charge $132.00 for a 2 carat diamond. The jeweler will still only get 22% of $95.00. Here's the reasoning. Part of the higher fee to set a 2 carat diamond over a 1 carat diamond is you self insuring yourself against breakage. You can't buy insurance if you chip or break a diamond, so you charge higher fees to set larger diamonds. Being the jeweler doesn't share in the expense of his mistakes on the material side, he then doesn't get the reward of higher pricing for really profitable jobs. It only cost about $10.00 more for a 2 carat head over a 1 carat head and really takes no more time to install it than a 1 carat stone. But our jewelers are capped out at 1 carat because of the breakage factor. It helps to build our "reserves" for the day he chips or breaks one. Below is a sample our pricing from our price book.

Four Prong Tiffany style head, soldered into place and setting the diamond.

We have many areas in our pricing like that. We also don't give the jeweler the full retail on 18kt sizing, which we charge more. It takes the jeweler the same amount of time to size an 18kt ring as it does to size a 14kt ring. Your price list should duplicate these same ideas.

Our price book also has some features to help expedite the sales person's time, as well as the jeweler's time. (Could also help the back office personnel.) Right below the charge to the customer for an item or finding, I have listed the company and their stock number to order it from. This saves the sales staff the time to look it up AND the CORRECT stock item is listed there. Here's a sample of our repair area for barrel clasps:

Includes Complete clasp, 2 Jump Rings & 2 Solders and 1 Figure 8 safety. 14kt yellow & white gold.

. S.E.F. 2mm=A3513-Yg & Wg; 3mm=A3514 Yg & Wg;
4mm=A3515 (Yellow Only)
STULLER 2mm=218; 3mm=244; 4mm=251:
All Available in Yellow Only, No White!

Seems like a lot of work? It can be. But it will help the newest sales associate seem like a professional and your pricing will be consistent and profitable.

How to Actually Figure Your Cost and Markup

In the first 10 years or so of our business, I figured the pricing on how fast I performed the work. Wrong! If you're a fast worker, great, but your pricing has to be based upon the average worker. If you can set a diamond in 15 minutes and it takes most other craftsmen 30 minutes, then 30 minutes is the standard. Attached are two forms that we recently used for our craftsmen to keep track of how long it takes to do a job. From these sheets, we compiled an average and used that time frame as our cost factor. You should keep track for a few weeks before starting on a new pricing system. Many jewelers copy someone else's price list or just keystones the trade shops. You must figure your own.

After your get an average price, you can then decided that all in all, it should take a craftsmen no more than "X" minutes or hours to perform the job. Our waxer is averaged over a weeks time for his labor, as waxing to me is more of an art than a science, as bench work is.

Here's how to figure your selling price on a repair or custom job. A customer has a ring made and we pavè set 6 of her diamonds and set her diamond in a six prong head in the center. Let's figure that it will take 1 hour to carve a wax and the person carving the wax makes $15.00 per hour. Waxer cost is $15.00. This includes sprueing. Then a jeweler takes 3 hours to cast, file up, set the stones and polish the ring. The jeweler also makes $15.00 per hour. (In our shop, the jewelers don't get paid by the hour. We figured that a jeweler should make $15 to $25 per hour.) Jeweler cost is $45.00. So far our labor cost is $60.00. But not really! We have to add in all of the costs to hire these two people. What are they? Matching FICA, Medcare, workers comp insurance, any insurance we pay AND sick days and paid vacations, along with holidays. That's right! If a person contracts to work for you for 50 weeks, but you pay him for 52, then you've paid two weeks salary and received nothing in return. That's a cost. We figure an additional 50% to a person's salary as his or her costs. So someone who makes $15.00 per hour actually cost you $22.50 per hour. Figure it in!

The casting gold and the six prong head for this job cost a total of $110.00. So we now have $110.00 for product cost.

Now we have to add in actual overhead. That's the money you'd pay out to open the doors and be able to sell, but without the cost of merchandise. You know, rent, insurance, job envelopes, insurance, electricity, advertising, etc. This should be found as a percentage of sales. If your overhead is $300,000.00 on sales of $1,000,000.00, then over head is 30%. Add it in. See how it looks below:

Now add in your profit margin. If you want a 25% margin, add that in. 25% of $260.00 is $65.00. That added to $260.00 gives a selling price of $325.00 Now you've covered all of your bases and you know you're making a profit.

But let's look at the selling price another way. Let's look at what we would charge from a price book. In our price book, to cast an item where we already have the mold or wax, would have a charge of $175.00. Then we charge $140.00 for the six prong head, soldered into place and setting the stone. To pavè set the six diamonds is 6 times $13.00 or $78.00 total. Then the ring took 6.75 pennyweights of 14kt gold and we charge $40.00 per pennyweight, or $270.00. Total selling price is now $663.00. Our total cost, including all overhead was $260.00. That's over a 21/2 time markup, including all costs!

One secret to this is to Pay Jewelers on Commission so they won't artificially raise your costs. Your sales staff will be able to quote prices from your price list and won't have to second guess and therefore loose money.

In A Nutshell

Your price list should be lived by on a daily basis. Ours is referred to as our "Bible". Other nifty neat things to include in a price list are the following:

• A. Charts of gemstone sizes and appropriate carat weight.
• B. Lists of some selling prices for gems and diamonds. I recommend "The Guide" as a pricing guide. You can markup your prices from "The Guide's" average prices and feel confident that you can by diamonds and gems at these prices.
• C. Safety features to be careful of when taking in work. As an example, our book notates on retipping stones, that you can only tip on the stones of the American Flag: Red, White, and Blue (Faceted diamonds, rubies and sapphires). All other gems must be removed first.
• D. Vendor part numbers and the vendor's name. This way when the sales person finds the price for a lobster claw, if you don't stock it, the sales person can put in the appropriate form to get the office to order the part.
• E. Included your guarantee and refund policy so the staff will know it and can refer to it. We blew ours up and framed it at the front door. No one can say we didn't post it.

P.S.

Here's a little money maker we use and it's listed on the back cover of our book, along with laminated ones on our counters. Charge more money for anything done "While You Wait". Do you find customer's thinking that "this is a simple job" and should be done now? How about people who don't need it now, but just want it now? We were always apologizing and making people mad because we couldn't put their job in front of another customer. WE solved our problem by charging 50% above our regular price for anything done while you wait or within 24 hours! That in of itself dropped about 60% of the whining. BUT, the other 40% pay the extra money. The store makes the extra money, as does the jewelers and the sales staff. The customer now gets what they want and it solves our dilemma. You know when a customer asks "how soon can I get it?" or says "is your work done on the premises?" what she's really saying is "Can it be done while I wait?" Many times that's asked because of her fear of you swapping stones. We circumvent that problem. We'll do virtually ANYTHING while you wait, as long as we charge more money. Try it. You'll like it.

Still Stuck?

Really, this is a project that you can handle. But if you feel like you need some experience from "way back", I'll be glad to help as best I can. My expertise in custom design and repair procedures is where I shine. You can take care of the selling, hiring, firing and the like. If you need a few pointers, call, and I'll give you what help I can. You can design and produce your own price list on a type writer, but a computer would be best. Our price list is for sale. It has nine chapters, with an index for each chapter, along with a master index in the front. We have two types and two different prices for each

The first price book has your store name on the cover. Each chapter use different colors of ink on white paper. The different colors of ink help to bring to the sales person's attention important items to address. For instance, on retipping, red ink denotes the fact that when retipping stones like emeralds, that the stone must be removed before it's done and it will cost additional money to retip on an emerald. Another advantage of this price book is that after you receive it, you can have us change up to 100 prices in the price book and return it back to you. For instance, after receiving your price book, you decided that you'd like to charge more for appraisals than we do. Or you just don't think you can get $11.00 to solder a jump ring (you can). Mark the new prices on the pages and return the book. We'll change the prices and reprint and insert those pages and return the book to you. If you wanted additional books with the same prices, they would be sold at a discounted price of $99.00 per book. This gives you the availability to customize, up to a point, your price book.

The second choice on a price book is one that is available in all black ink on all white papers. It has exactly the same prices, but the cover will be generic, similar to the one here at the show. It can not be customized, either with your logo or with different prices. These books will do the job just fine, although we use the books with the colored chapters in our store, as it helps to bring important issues to life for our sales staff. These black and white price books sell for $75.00 for the first book and $50.00 for each additional book.

We have found that a store needs more than just one price book. The sales staff needs one or two, along with the back room.

Please feel free to call upon me if you need some pointers or want to discuss your own copy of our price book. I call also make arrangements to come to your store for a one day seminar for your sales staff. This encompasses how to use a price book, but more importantly, how to sell design and repair, profitably. Good luck.

David S. Geller

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