How to price your jewelry so you can pay your rent every month!
Are you pricing your jewelry to
incorporate your overhead? Do you even think about it, or do you just
throw a number out there and hope for the best? Staying positive and
having faith are great on an energetic level, however, if you are
trying to run a business, you’ll probably want to price your
product with a solid understanding of your expenses and your goals.
My business partner, Robin Kramer, and
I are asked about pricing all the time. Pricing your jewelry is a
very touchy subject for many of reasons. If you price it too low, you
cheapen your brand and can become stuck in the low pricing syndrome.
If you price your work too high, you risk pricing yourself out of the
market until you have an established brand. How do you actually find
the sweet spot with your pricing so that you can cover your expenses
AND make a profit every month.
You need to understand a few things
before you get started.
What are the COGs associated with
each piece you design? COGs are things like materials and labor.
What are your total monthly
expenses for your other costs in your business? Or what is your
overhead?
Once you understand your costs, you
need to take a look at your volume.
Do you sell roughly the same
amount of pieces every month?
Or does your volume vary
significantly month over month?
I ask these questions because these are
the markers that will determine how to incorporate your overhead into
your jewelry pricing.
(Pin me!)
Let’s take option #1. If you sell
roughly the same amount of pieces every month, you can use this
method.
Calculate your total overhead.
Divide that number by the number
of pieces that you sell every month.
You’ll end with a per piece
overhead price.
For example, if you had $1000 in
overhead and you estimated selling 100 pieces per month, you would
add $10 to each piece as you were pricing.
Now let’s look at option # 2. If
you have a business where the pricing range per piece of jewelry
varies widely or you sell a different number of pieces every month
the formula in the first option won’t work. In this case, you need
to work backwards.
Figure out your monthly expenses
first.
Take a look at the margin in your
pricing so you can understand exactly how much profit you make.
Then make sure that you sell that
volume in order to cover your expenses.
For instance, I use this method in my
current business model. I understand what I need to bring on from a
profit stand-point, instead of per item. So let’s say I have an
overhead of $1000 a month and a margin of 50% on my work. My average
piece of jewelry costs $1000 and the cost to make it is $500. I would
need to sell 2 pieces at $1000 to cover my monthly overhead of $1000.
Pricing your jewelry is a bit of a
dance. You may need to adjust your method from time to time.
Unfortunately, it’s not an exact science.
The key to pricing your jewelry for
profit is to start with the end in mind. If you start every month
with clearly defined profit goals, you are able to work backwards to
understand what you need to sell in order to make those goals. The
big picture is a lot more detailed than a simple pricing formula
regardless of your business model. It’s important to look at your
profit goals first, make sure you account for paying yourself and
work on generating cash flow to cover your expenses along the way.
Tracy Matthews is a bespoke luxury jewelry
designer and founder of
Flourish & Thrive Academy, an active community of dynamic jewelry designers who share design
tips, sales successes and marketing secrets.
F&TA began as a
solution to a problem many new jewelry designers face: how to treat their
business like a business instead of a hobby. It has evolved into an answer to
the plea,
“I wish there was somewhere I can learn everything there is to know
about starting a jewelry business so I can focus on being creative and work on
the big picture.”
Find Flourish & Thrive Academy on Twitter, Facebook and Pinterest.
Tracy and Robin are offering a free Q&A call for any designers who have business
questions.
Do you have any burning jewelry design questions?
Sign up for their live Q&A call……it’s FREE
The call is Wednesday at 12 noon EDT. They'll be on the phone to answer questions.
Click here to sign up for the free coaching call and don't miss this great opportunity!
(This is an affiliate link, the Art Bead Scene is a proud partner with Flourish & Thrive Academy.)
