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Jewelry manufacturers help calculate your jewelry making costs
Calculating the cost of your jewelry can be catchy, but it is an essential step you must take to turn your jewelry making into a profitable business. It’s not as hard as you think and you can gradually make it more detailed as your business grows.
First things first.For your jewelry business to be profitable you should strive to have big incomes and little expenses to yield greater profits. That’s the objective of any business, so taking care of your hard earned money is a key step in your jewelry making learning curve.Income – Expenses = Profit What do costs mean? What are they?Generally speaking, costs are all the things you have to pay for (expenses, outlays, charges, fees) to obtain a desired result (you jewelry).Costs and expenses are the disbursements necessary to produce and sell the products manufactured by your business. But there’s a difference between costs and expenses that you should know before going any further. Costs are related to the production of your jewelry and Expenses (overhead) are associated to managing your business. So there’s a difference between making things (jewelry) and the paraphernalia to make that making of things possible (administrating your biz, even if it’s only you at your bench). Example of costs: raw materials, findings, components, tools, equipment, hardware, software, salary of apprentices or other jewelers involved in production, electricity, water, gas. Example of expenses (overhead costs): salaries of administrative staff, sales people, rent, office supplies, telephone and mailing, publicity, transport, office furniture, workshops attended. Why is it important to differentiate the two?
As your business grows you can calculate which of these two may be out of proportion and diminishing your profit. To be able to make maximum profit your costs and expenses should be as low as possible. It would be wise to know if at any one time your costs or expenses have gone way too high (are your bead strands too expensive? Could you find cheaper bags or tags? Is there a studio nearby with a less costly rent?).
Types of costsWithin costs there are two different types of costs that in jewelry making are pretty obvious: variable costs and fixed costs.Variable costs are those that may go up or down in value depending on an increase or decrease in production and sales. Fixed costs are those that will remain the same because they don’t depend on the amounts produced or sold. For example, you have your own studio with all your tools, equipment, raw materials, everything you need to make jewelry. You can make one necklace a day or 20 a day, right? If you make one necklace a day you’ll use (spend) a strand of beads and say 10grams of silver. But if you make 20 necklaces a day you’ll use (spend) twenty times those materials. That’s an example of variable costs. The more jewelry you make, the more materials and supplies you need to make them, so your variable costs of materials and supplies will increase (but so will your profits!) On the other hand, your fixed costs will remain the same, because you can make one or 20 necklaces with the same tools and equipment you already have. Your fixed costs will remain unchanged while you are able to increase your production without requiring extra tools or labor, for example. Of course maybe your design is so successful that you need to make 50 of those necklaces a day; only then would you consider hiring people to help you out, buy more tools or even rent a larger studio. In summaryYou should try to keep your costs and expenses as low as possible to maximize your profits.When you’re beginning jewelry making or setting up your studio or buying your basic tool kit, you’ll have a sudden increase in expenses but that’s the cost of setting up your business (we’ve all been through that) and it will all pay off in some months after you start selling. You’ll spread their costs out on your jewelry through time. As crafters we tend to put our prices by multiplying by 2 or 3 our jewelry making costs, but there’s more to that if you want to build a sustainable business.
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