We just ran across a great little booklet on improving your jewelry business, and it focused primarily on social marketing, and also how to price your work. You can download the booklet in its entirety here: http://www.beadingdaily.com/jewelry-business/
In the meantime, since we've done a previous post on tips regarding various social media sites (What are the best online venues for jewelry sales?), we'll summarize some of the critical points on pricing.
If you're trying to determine what to charge for your work for the first time, it's important to do it as accurately as possible. Suzanne Wade, author of the booklet, says "the worst thing to do is sell your work for less than it costs to make it".
If you really want your jewelry business to be more than a hobby and to pay for itself, you must determine fair prices for your work. And the formula is really pretty simple: Labor + Overhead + Materials + Profit = Fair Price.
We'll take each factor in turn, and illustrate how to calculate the share of each in the final price. (And off to the right you can see some sample pieces of Etsy artisans in the price range we discuss here*.) If you read the original article from Jewelry Making Daily, you'll note my instructions are somewhat different – adjusted to address a modest operation fitting you, my audience – the single-proprietor/designer producing custom, high quality, one-of-a-kind jewelry items. I also adjusted to factor in use of semi-precious gemstones, but to delete any assumption of work with any significant amounts of precious metals such as gold and silver. The original article gives you a different method if you are working with high end/high cost materials.
To figure out Labor cost, you need to know what your own 'hourly rate' is, as well as the number of hours it takes you to make a piece of jewelry. Do this by keeping a log of all the time you spend working on a piece, including time spent designing and selling, and keep track of all your expenses. Apply a 'fair wage' to these hours. What if you were working for another jeweler? What would your hourly rate be? And don't forget to factor in compensation for benefits. Another employer would be obliged to do this, and you shouldn't shortchange yourself. What should you be adding in for money you should be saving or spending on insurance, FICA, vacation pay, and sick pay? Since many employers are paying lower wages these days, you might assume an hourly wage of no more than $10 an hour, but factoring in benefits might raise your rate for total compensation to $15 - $20 an hour. (For the purposes of our example, let's make it $20.)
To calculate Overhead, add up the cost of operating your studio for a year (even if this is a second bedroom in your home, a corner of your efficiency apartment, or a shed with a work table). Look at the going rate/s for rent in your area and make a calculation on what it would cost to rent the square footage you are using (yes, even if you're not really having to rent the space). Add to that anything it takes to maintain a reasonable working environment: utility payments for electricity, water/sewer/trash removal, light bulbs, paper towels, business cards, postage, boxes, bubble wrap, beading magazine subscriptions, your annual business license with the city, etc. If you are a metalsmith or lampworker, this includes the cost of gas for your torch, glass or metal, solder, polishing compounds, and a reasonable percentage of the cost of your tools and equipment. For example, if you buy a torch you think will last for five years, make sure each item you make contributes some amount toward its cost; you might simply say your annual overhead will include one fifth of its price, with all your sales paying 'their fair share' toward that purchase.
Once you have an estimate of what it costs to operate and produce your jewelry for a year, then I suggest you determine what this overhead is per total items to be produced. In order to do this, divide your annual overhead by the total number of items you are expecting to produce in a year. Here's a sample:
Value of Rent for Square Footage in Home-based Work Area: $1200
Postage and shipping materials: $800
Beading string, findings and gemstone beads for necklaces: $4900
Booth Fees, business license, subscriptions, etc.: $500
General Supplies (business cards, boxes): $500
Advertising Fees: $3000 (a good rule of thumb for marketing expenditures is approx. 7 - 8% of your revenues)
Wear and tear on tools: $100
Grand Total: $11,000
Overhead (based on projected number of Items to be produced in a year): $110 ($11,000 divided by 100 [items])
The cost of Materials is relatively easy to figure. Make sure to keep track of everything you use in your pieces, whether it is stringing material, crystal beads, silver clasps, or whatever. For purposes of this example, say a necklace with high quality semi-precious gemstones has cost you:
$100 for bead strand/s
$50 for findings and spacers
$10 for string
Grand Total: $160
After all these other calculations are made, think about what Profit you feel you should be entitled to. Remember, you're in this to get out of your day job, right? You could have saved that money and invested it; instead, you're at risk of losing all the money you put into the project, unless you make an acceptable profit. What is an acceptable level? One good rule of thumb is to figure in a 10% profit. That's your 'take-home' after paying all the bills and covering all costs. So you would add 10% to the total cost of all your calculations. In the case of the example here, you would have:
$20/hour for Labor, 6 hours of work = $120.00 for Labor
$110.00 for Overhead
$160.00 for Materials
10% for Profit = $39.00
Final price for item: $429.00
Now, you're not quite finished. Once you've come up with this 'almost final' number, step back and consider whether or not the price seems reasonable. We recommend you seriously consider the prices charged by competitors for similar pieces. Your items should be within 10% to 20% of their cost (higher or lower). Don't focus on price too much, though. If you're going to 'compete' with a competitor, focus on your quality and design, always trying to make your items better than the rest!
What do you think? Do you have observations/experience in pricing your work? We hope you'll share.
Until next time,
*1st photo: Russian Seraphinite, 24k gold vermeil necklace from JKDK Designs on Etsy: https://www.etsy.com/listing/73956693/seraphim-song?ref=shop_home_active_1 ($1500)
2nd photo: Chinese carving with coins & Chrysoprase beads necklace, from gretchenschields on Etsy: https://www.etsy.com/listing/203496462/chinese-carving-with-coins-chrysoprase?ref=shop_home_active_8 ($700)
3rd photo: Turquoise & Amber tribal necklace from beadartaustria on Etsy: https://www.etsy.com/listing/195153375/ethnic-tribal-dragon-necklace-with?ref=shop_home_feat_4 ($365)