Starting a jewellery business is an exciting adventure and one that many of our students move on to achieve, and we are here to help every step of the way. One of the things new jewellery business owners find difficult is pricing their work. There are many ways to work out your pricing and make sure your work is profitable but here our our top tips to selling your silversmithing and ensuring your pricing will pay your businesses way.
THINK ABOUT WHAT INCOME YOU NEED FROM YOUR JEWELLERY BUSINESS
Do you need it to provide a full time income to pay your bills and feed your children?
Are you supplementing an income from another job or partners wage to pay for nonessentials?
Do you want to feel you are progressing with your work and get some recognition and raise your profile?
Do you want to cover the costs of materials and make space so you can just continue making jewellery?
Do you want a social job that gets you out and about?
Do you want more time to express your creative self and develop your own designs and ideas?
It may be none of these or a combination. Defining what you need your business to profit will help you make your business work for you.
WORK OUT YOUR OVER HEADS?
Your over head costs are all the costs and expenses you incur in your business which aren’t directly related to your product. They are the things you have to pay for regardless of whether you make and sell anything. They tend not to vary much if you increase or decrease your working hours or productivity and are often paid monthly or yearly.
Because these costs aren’t directly related to the cost of producing a piece of jewellery it can be difficult to factor them into your pricing. One method is to work out your yearly overhead costs and then this number can then be broken down into a monthly, weekly or hourly rate. remember to only factor this into hours you spend actually making jewellery not your total working hours.
Examples of over heads costs could be, workshop rent, insurance or website hosting.
Work out your yearly overheads and then divide them by how many hours you will spend making each week. This gives an hourly overhead cost.
CONSIDER YOUR DIRECT COSTS?
Direct costs are all the expenses that are directly related to making and selling a particular piece of jewellery. These are things that would cost you nothing if you didn’t make and sell the piece. Direct costs are mainly materials based and go up and down based on your productivity. These costs are the easiest ones to factor into the price of a piece of jewellery.
Examples of direct costs could be, materials - metals, stones, packaging, selling platform listing fees.
Add together the direct costs for making a piece. this will give you your direct making cost.
HOW MUCH WILL YOU PAY YOURSELF?
Your hourly wage is the amount your pay yourself to make your jewellery and run your business. You need to be paid for every hour you work. As a sole trader you are likely to be responsible for all the roles within your business and it can be difficult to incorporate those hours into what you charge. The tricky part is, these things aren’t easy to quantify and without keeping a very detailed record of what you do and when (and that’s just another job for you to do) how can you build this into your pricing? The answer is to think carefully about all the different tasks you do to keep your business going and guess-timate how much time you spend on these background roles and how much time you spend making.
Decide how much you want to earn per week and how many hours you will spend working each week. Then decide how many of those hours a week you will spend actually making.
Divide your desired weekly wage between your making hours to give a wage that will pay your for the other things you do as part of your business. This will give you your hourly making cost.
CALULATING YOUR PRICES
Once you have your hourly overhead costs, your direct piece costs and your hourly making cost you can combine them to create a cost price for a piece you have made.
HOURLY OVERHEAD COST + DIRECT COST + HOURLY MAKING COST = COST OF A PIECE
PROFIT AND RETAIL MARK UP
Working out your cost in this way means you will cover what it cost to make a piece and pay yourself to do it but you also need to add some profit into your calculation in order to grow your business and to cover any unforeseen costs you might incur. The profit margin is how much money your business will be left with when it has paid the costs and your wages.
If you are planning to sell work through shops or galleries, you will also need to remember that they will add a markup onto the price they pay you. Usually they will multiply your cost by 2.5.
If you do sell through shops and galleries then you can't sell work directly to your customers for less than a gallery would sell them so you also need to add the retail mark up to the pieces you sell.
COST OF A PIECE X 2.5 = RETAIL PRICE
RATIONALISING THE PRICE
Rationalising your price means adjusting pricing across your whole range to make sure it all feels balanced and cohesive. It also means comparing your pricing to the pricing of other, similar jewellers to make sure you aren’t pricing outside of your customers expectations, over-charging or undercutting other makers. It doesn’t mean you should ignore the calculations you have just done - they help you make sure things are profitable - but it does mean using some common sense and averaging out the prices so they are realistic and rational. This means you will make more profit on some items and less on others but it should all balance out across your business.
RETAIL PRICE rationalised against competitor pricing and over your entire range = FINAL PRICE
Getting to grips with pricing can be a tricky thing to master and we recommend you regularly review your pricing to make sure your business stays healthy and competitive. And of course if you need any help in your pricing or any area of your business you can sign up for one of our business classes or for mentoring and ongoing business support.