Business: Pricing

Business 1: Pricing!
The most realistic and accurate pricing is a dual approach.
First, the Formula:
The two most important things when figuring out a price for your jewelry are time spent and materials. As you are working on pieces, keep track of the time you spend on each piece. There are a variety of formulas out there, and formulas change for custom work versus production work. This is for production work.
A common price formula:
Labor= hours x rate
(Labor + materials) x 2 = wholesale price
Wholesale price x 1.5 or 2 = retail price.

Example:
A piece takes me 3 hours. I pay myself $35/hr.
Labor= 3 x 35 = $115
Materials = $4 in silver + $6 in pearls + $15 gemstone + $4 ear post/backs = $29
Wholesale price= (115 + 29) x 2 = $288
Retail price= $432 – 576

You can see the importance of your time in this equation. If the same piece took 2 hours to make, we’d be looking at a retail price of $297-396. That's a pretty big difference!
This formula is by no means set in stone. You can adjust your price so that you fit into the market. This does give you a good starting point for figuring out how much you need to make on a piece to make money.
Beginning jewelers working in stores usually make $10-15/hour.

Second, the research:
Look at comparable pieces in galleries, at shows, online. See what the market will bear for similar work. This gives you a good benchmark to measure your formula against and see if changes need to be made. When researching- look at what is handmade and what isn’t. What methods are they using/ What materials? Gold plate or vermeil versus gold is a big price difference.
Also, Another good question to ask is “How much would someone have to pay me for me to make this again?” This is where the “PITA” (pain in the ass) tax can factor. If you realize that a certain design is a royal pain to make, charge more! If it’s easier than you thought, you might be willing to take a little less.

After looking at both sets of numbers you should havea good idea of what to charge. Pricing is not an exact science, and it is likely you will make changes as you go. The important thing is to set the starting price as accurately as possible, and don’t sell your work too low.

While marking a piece up double and more may seem like a lot, it isn’t. The money from that markup covers business expenses such as materials, travel, bills, displays, office supplies, show fees, etc. After doing business for 6 months to a year, look at your expenses and what you are making off of each piece. You may see that the markup isn’t covering all of your costs and then you need to add more into the markup to cover what is called “overhead”. Overhead typically consists of rent, utilities, and monthly business expenses that occur.
One important thing to remember is that with the internet, information is available to all. I know some artists who in the past have raised prices for higher income areas (NYC, Miami) and lowered them for less affluent ones. With information easily accessible, this is harder to do nowadays as customers may find out they were charged a different amount based on where they live. This is a practice I don’t agree with, but it is another pricing tactic.

If you are being represented by galleries, it is important to make sure that the galleries know how much you sell your work for, so that they aren’t being undercut by you. I tell all my galleries that I do a straight “keystone” markup of the wholesale price. A keystone markup is when the retail price is double the wholesale price. This is the industry standard for retail prices. If the gallery chooses to mark it up higher, that’s fine, but this way they know what I retail it for as well.

Keep your prospective market in mind while figuring out preliminary costs. If your prices seem too high or low, figure out why. If they seem to low, raise them. If they seem too high: Can you reduce the amount of time spent? Can you reduce your materials cost? - find a new supplier that has better prices, buy findings in bulk, or lessen the amount of metal in the piece. If none of these will work, you may need to put that idea on the shelf until something changes.

Figuring out your time
Figuring out exactly how much time you spend on a piece is critical to pricing it. It is also one of the most difficult things to do because we multi task so much. If you are extremely organized, look at the clock every time you switch tasks or pieces and jot down the time spent on that piece. However, most of us will forget to do that. The method I have found that works pretty well is the following, and your homework assignment for all of your pieces throughout the semester.

Homework:
Every time you sit down to work, note your starting time, your ending time and what you worked on during that period. If you take a break, make a note of that too. Also note what you did during the period also.
Example:
10am-11:15am Filed, soldered, and sanded 5 pairs of leaf earrings. Made 8 waxes of leaf necklace and cleaned waxes up.
This way you can see over time how long pieces are taking you, and have an accurate accounting of your time for pricing purposes. Over time you will get faster as you get more comfortable and adept with the tools.
You will be responsible for keeping a log of your time throughout the semester. When you are working on a prototype, notate that also.