May 2008

from wikiHow – The How to Manual That You Can Edit

Figuring out how to price your designs is not one of the more glamorous parts of running a successful jewelry design business. Pricing your designs can be tricky, especially if you design one of a kind pieces, but it is an essential step you must take to turn your hobby into a profitable business. Once you understand the costs of your business, and what you expect to profit from your work, creating a formula to price your designs is a simple process.

Steps

1. Keep a “recipe book” to record exactly what was spent to create each design. You will basically need to price each item used in your designs. For example, if you pay $1.50 for a dozen sterling crimp beads, and you used 2 crimps beads in your design, you would divide $1.50 by 12 (.13¢ per crimp bead), and so on, making it much easier to calculate the exact cost of each design. The more meticulous you are about calculating expenses, the better your pricing will be. Even the packing materials you use for the design and the shipping costs of the supplies should be accounted for. Keep receipts–this will also come in handy during tax time, if you want to deduct business expenses.
2. Record your time spent on each design. How quickly can you design and complete your jewelry? Second to quality, speed is a key factor in profitability. If it takes you 30 minutes to recreate a design, you would charge differently than a design that takes 4-5 hours to create. Write your time spent in your recipe book.
3. Calculate the price. Using a formula will give you a starting point, and you can tweak the price with the steps that follow. Which formula you use, however, will depend on whether you’re selling retail (directly to customers) or wholesale (to stores, for example).
   • Retail – Take the total cost of your supplies, multiply it times 2.5 (some people multiply by 3) and there’s your retail price. A spreadsheet is perfect for this step. Simply set up a table of products used, your cost, and then a formula to calculate the pricing using the 2.5 or other multiple. If your business has a physical storefront, you have to take into consideration that there are additional costs. Rent, employee pay, utilities, displays and fixtures, and property taxes all need to be considered in your pricing strategy. Even if you sell at a booth at a crafts market, you need to consider your transportation to and from the market, your time spent at the market, and all the supplies involved (tables, food, signs, etc.).You may find that in your market, you need to price at 3 to 5 times your cost of materials.
   • Wholesale – Multiply by 1.5 (some people multiply by 2) instead. You can charge less for your jewelry if you’re selling wholesale because you spend less time marketing to individual customers (advertising, processing orders, maintaining a shopping cart website, maintaining a store, etc.) and more time actually making jewelry. You should verify that your market can afford a mark-up, using the next few steps. A wholesale operation will be selling your piece for around twice as much as you sell it to them. Many jewelry designers find that selling wholesale allows them to achieve business growth and profitability. When you use the 1.5 factor, you are allowing room for shop owners to sell your designs and even offer sales and discounts on your designs, if a certain design doesn’t sell quickly enough. This may sound like a lot, but make sure that you consider the amount of time and labor you put into developing and creating your pieces as well as the boutique owner’s expenses.
4. Adjust for the cost of your labor. The difference between a hobby and a business is whether you get a paycheck, so decide how much you want to make per hour, and make sure that your labor is accounted for in the price. Treat yourself as an employee who doesn’t work for free. If you have employees, consider the cost of paying them in addition to your own salary. Let’s say, for example, the cost of supplies for your design is $10 and you calculate $25 as your retail price (using the 2.5 guideline). If you want to pay yourself $10 per hour and you spent 2 hours on this design, then you really need to be charging at least $30 for the piece ($10 supplies, $20 labor). There may be additional costs to consider, such as your storefront, or time spent marketing (e.g. creating a brochure).
   • When deciding how much to pay yourself hourly, consider your experience. How long have you been designing jewelry? If you have a long track record, vast expertise, and a portfolio of unique designs, you may find that you can charge more. You may have particular advantages, including contacts and unique designs, that allow you to charge more.
   • To repeat–just because you enjoy doing the work doesn’t mean you shouldn’t get paid for it! Make sure you’re getting at least minimum wage.
5. Perform market research. Now that you have an idea of what you want to charge for a design, it’s time to dip your toes in the market and see if the piece can be profitable. Generally, it’s a good idea to start off with the highest price you think the market will bear, because you can always bring it down.
   • Have people offered to buy any of your jewelry designs? This is a good indication of the marketability of your designs. If your coworkers fight over a necklace you made, that may be a good sign that there is a market for your design. Friends and coworkers are also good sounding boards for prices. Ask them how much they think your design is worth, and what they would pay for it.
   • Examine past success. Have you already sold any of your jewelry? This is important too in that it gives you concrete information on how much you can sell a design for. You may hear from friends of coworkers that they would pay $XX for a design, but an actual sale is real, concrete evidence.
   • Has an experienced designer evaluated your work? Having the opinion of another designer can be valuable in determining the level of quality of your work, and what you can expect to get for it.
6. Re-evaluate the design. If you encountered feedback in the previous step which indicates that the price you arrived at isn’t going to fly, you have some thinking to do about this design.
   • If you do not find interest for a particular design, you may want to think of changing the design.
   • Assess your materials. Do you design using sterling findings and semi-precious beads, or less expensive beads? Higher quality materials will always command a higher price in the market. You may want to consider making designs with both high quality materials, and less expensive materials. This will allow you to attract business from both the high end buyer, and the more budget minded buyer.
   • Don’t cut yourself short just to “break in” to the market (e.g. selling to customers at wholesale prices). This will only get people used to cheap prices, and it’ll be difficult to raise them later on, jeopardizing your chances of ever making your business profitable. It’s better to redesign or reject pieces that don’t cover their costs as described above.

Tips

• As you become more experienced, you’ll find which prices cover your unique costs while still generating sales. For example, if you’re doing a lot of beadwork and wirework where the supply cost is low but the time spent is high, and you’re selling retail only through a website, the following could be a better formula:[1]
  • (cost of materials x 2) + (time spent on piece x hourly rate)
  • calculate 30% of the previous figure and add it to the previous figure to account for overhead
  • multiply the figure by 2 to get the retail price
• Some people use the tactic of setting a retail price just under a whole number ($49.95 rather than $50) to make the price look less intimidating. This may be more suitable for relatively inexpensive pieces[2] but you should experiment to see how your customer base responds.

Related wikiHows

• How to Price Your Product
• How to Earn Money by Making and Selling Crafts
• How to Start a Crafts Business
• How to Set Up Credit Card Processing for Your Business
• How to Choose Jewelry
• How to Make Jewelry
• How to Accessorize With Jewelry
• How to Clean Birthstone and Mother’s Ring Jewelry

Sources and Citations

• HHHenterprises.com – Source of information.
• Erayo.com – Source of information.

1. ? http://jewelrymaking.allinfoabout.com/features/pricing.html
2. ? http://jewelrymaking.allinfoabout.com/features/pricing.html

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