The Art and Science of Pricing your Jewelry

Pricing jewelry is a vital part of your jewelry business.

Your goal is to profit from your jewelry making, which means selling your jewelry for more than it cost you making it.

But there’s more to pricing your jewelry.

The example used for this pricing formula is this abalone bead necklace shown in the jewelry costs article.

You learnt how to calculate its cost and now you’ll determine the overhead costs and the time spent doing it. Then add all that up to determine its base price and lastly calculate its final selling price.

Pricing your jewelry for a fair deal

To determine the base price of your jewelry you must first calculate the cost of your jewelry (or cost of goods sold, COGS), multiply by 2; then determine and add the overhead cost (operational cost, 10%) and finally add the cost of your labor (hours put into making the necklace). Multiply by two the result of this formula to determine your base price.

Here it is step-by-step:

1. Determining your COGS

The COGS of your necklace are: US$16,56

2. Determining your overhead costs

This is a popular and easy method to compensate for expenses needed to run your business, such as rent, electricity, office supplies, tools, equipment, fees, etc.

Keep track of all the purchases you make to run your business. Keep receipts of all the tools, materials, supplies, payments and other disbursements you make to run your jewelry business. Add up transport, gas, entry fees, absolutely everything.

You could put all these expenses in a spreadsheet to keep an inventory of your tools and other payments to know how much you have paid for them. You’ll want to spread these costs out across your sales.

If you have a storefront, you’ll have to add up additional costs and consider other issues such as employee fees, utilities, taxes, photography studio, web-site maintenance, paper work, publicity, etc.

As I said, the best way to do this is by deciding upon a percentage to add to your jewelry costs. Adding a 10% overhead cost is the most practical way of compensating these expenses.

So, you’ll add a 10% overhead to the total cost of this necklace. The overhead cost of your necklace is 10% of US$16,56 = US$1,66

3. Your hourly labor rate

For some jewelers, this is a tricky issue and an uncomfortable part of pricing your jewelry.

Pricing your jewelry must compensate you for your time, experience, originality and overall uniqueness of the jewel being made.

There are lots of ways to calculate your hourly labor rate.

Some jewelers put their hourly rate associated to minimum wage (nothing less!), others add up other criteria like the ones listed above.

You may take into consideration the following aspects to calculate your labor rate:

• the time spent doing the actual jewelry piece,
• time spent designing (doodling, drawing, making models, etc),
• the effort and complexity of the manufacturing of the piece (rare tools needed, specific and unique techniques)
• the recognition or “fame” you have acquired,
• the originality and exclusivity of the jewelry made (one-of-a-kind jewelry)

For the sake of the exercise, let’s say you took 2 hours to complete this necklace and that your hourly labor rate is US$18.

Labor rate for your necklace: US$18 x 2 = US$36.00

Determining the base price of your jewelry

Calculating the final selling price

You can round it off to US$280.

To determine the retail price (when you’re selling your jewelry directly to the public) multiply by 3 your base price.

You can round it off to US$420

See Kitco´s live charts of silver prices I have posted for your convenience. You can check silver prices any time you like, here. And of course live charts for gold prices are also set-up for you in this page.

Jewelers Xpress is packed with useful resources for your jewelry business and career. Don’t miss great info about:

• why and how people buy jewelry,
• how to deal with “difficult” clients,
• the secrets of selling success,
• home parties and much more