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David Geller

3 Ways to Save Money in the Shop

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Want to make your shop more efficient and boost your cash flow? Here are three ways to do it.

FIRST MONEY SAVING TIP:Hire a High School Kid As a Polisher

Have a high school or college kid do your polishing. It only takes 30 days to train a high school or college kid to polish 80 percent of what jewelers do. If the jeweler wants to polish the 3-carat emerald ring, fine, but no need to polish sizings, heads, chain solders, earring posts, etc.

Look at it this way. The bench jeweler should be producing $100 to $150 an hour depending upon speed and skill. Every hour a jeweler polishes (because you don’t charge to polish the repaired item), you lose $100 for the time spent polishing. Pay  a high school kid $10 an hour to start. While the polisher is polishing at a cost of $10 an hour, the jeweler is still producing $100.

SECOND MONEY SAVING TIP:Don’t Roll Your Own Sizing Stock

If you don’t have enough hours in the day, then don’t roll your own sizing stock. I just went to Stuller’s site and 1 ounce of casting grain cost $772.34. I looked at buying a piece of 14K sizing stock equaling 1 ounce and the sizing stock is less than 2 percent more at $782.97 per ounce to be produced. The end result is that it costs $10.97 to have someone else’s machine make you 1 ounce (32 inches) of sizing stock. If you have more work than you can finish in the day, it’s not worth giving up $100 production income to save $10.97 for the hour. 

Let me address a question you’ll bring up: “I buy it cheap off the street!”

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Today, Stuller is charging $39 a pennyweight for sizing stock. You could say “I buy my gold at $25 a pennyweight.” If you send your old gold in for credit against new sizing stock, they will charge you a fee to refine it and of course a few bucks to mill the sizing stock.

So, your cost rises from $25 to $32 or $35, but still less than $39. Meanwhile, the jeweler is producing $100 per hour rather than trying to save so many dollars per ounce. And, the metal will be better quality because it’s been refined. Bottom line?  Not enough time; don’t roll your own. Sitting on your hands? Fine, roll your own.

THIRD MONEY SAVING TIP:Cash in Extra Findings

All of the findings  lying on your bench, in drawers and Ziploc bags that you think you’ll use one day?  Cash ’em in.

When you need to replace a head, maybe you order a 6mm and 6.5mm just in case. But do you send the unused one back? 

I visited a shop once where the jeweler needed an 8.55mm wide piece of gold to size a ring just two sizes larger. He took a 6mm wide piece and rolled the whole darn piece out to 8.5mm! Now we had an 8.5mm wide piece that was 10 inches long and no longer had any 6mm wide piece in the house!

That piece had been sitting on his bench for seven months with him thinking, “I’m sure I’ll use it.” I scooped up all of the gold stock/heads/parts/pieces he was saving, and when gold was $800 an ounce, his bench top had over $5,000 at cost of unused findings and sizing stock! I gave it to be melted for money.

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David Geller is a consultant to jewelers on store management. Email him at dgellerbellsouth.net. 


This article originally appeared in the June 2017 edition of INSTORE.

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David Geller

This Small Yet Logical Fee Can Add Big Profits to Your Bottom Line

This small yet logical charge can add big profits to your bottom line.

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I’M GOING TO GIVE you a tip that will make you $29,400 right here and right now. Here’s how:

Let’s say you take in 4,000 jobs a year. Of the 4,000 jobs, 75 percent of them (or 3,000 jobs) have five or more stones in them.

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Gene the Jeweler’s Rule: Never Buy the Same Piece Twice
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Gene the Jeweler’s Rule: Never Buy the Same Piece Twice

In your shop, you check and tighten up to four stones on any job, no charge. But if a piece contains five to 20 stones, you charge an extra $28 to check, tighten, and retighten if they get loose within 12 months (or replace melee if they fall out within the next 12 months). If there are 21 to 35 stones, you charge an extra $35.

This is worth it to both you and your customer.

I don’t care if the stones come in loose or tight, you charge the fee because you are on the hook. Whether they come in tight or not, you keep the $28. Therefore, your sales staff doesn’t have to check stones on take in; the jeweler does it at the bench.

When told this, 30 percent of customers will say, “No way, José.” So you write on the job envelope, “No guarantee; customer didn’t want to have stones checked and tightened.” You’re off the hook.

With that said, 70 percent of the 3,000 jobs with five or more stones will gladly pay the $28. That means you get to charge 2,100 customers an extra $28. That’s a staggering $58,800 you’d take in just because you asked!

Don’t complain how much it costs to replace a stone anymore. Don’t tell the client it’s her fault. You checked and tightened, and therefore you took in $58,800. Can’t you afford to make it right, even if it’s not your fault?

But maybe you’re still scared to do this. Let’s say just half of those clients said, “Yes, I want the guarantee.” Half of $58,800 is $29,400.

Do you know that is money that goes right to the bottom line, net profit on your P&L? Know what it takes to get an extra $29,400 in net profit? If your net profit is 5 percent of sales, you’ll need to do an extra $588,000 in sales to have that net profit.

In other words, just adding the $28 fee produces the same result as opening another store that does half a million dollars per year.

You’re welcome.

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David Geller

If Your Sales Are Acceptable But You Have No Cash, Look At Your Inventory

It’s an extremely simple formula.

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“IF I MADE that much money, where the heck is it?”

After getting one’s tax return back from the CPA, this is the usual question. Jewelers often tell me they aren’t making any money when, in fact, most I help do make a profit in the store.

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But making a profit and having money are two completely different things.

Let’s just talk jewelry sales. If you sell $500,000 and earn keystone, your gross profit is $250,000.

If expenses are $200,000, then your net profit is $50,000, which is 10 percent of sales. Awesome!

“But I have no money!”

Easy. Look at how much inventory you have. At keystone, the amount of inventory you should stock is about equal to your gross profit from selling jewelry. So, if your gross profit was $250,000, then $250,000 should be about inventory level. If inventory is $400,000, the extra $150,000 (which you’ve been overbuying for a few years) hits you in the behind.

Take that $150,000 “too much inventory” and divide by half to three-quarters (leaving either $75,000 or $110,000). Then go look at your QuickBooks or accounting program and add up your accounts payable, credit card debt, bank loans, and loans from owner.

And you’ll see excess inventory is equal to debt, give or take.

In the jewelry industry, a good inventory turn is 1.0 (one time per 12 months). For every month after 12 that stale item sits in the case, the selling price (at keystone) must be increased monthly by 4 percent to make the same amount of profit after a year. If an item cost $100 and sells for $200 and is a year old, then each month starting with month 13, you must add $8 to make up for the second year’s missing profit month-by-month. By month 18, you’d need to raise the price by $48. In two years, it would need to make you $200 instead of just $100. And just think: you could have invested that money into new inventory!

Note: If you have this kind of old inventory and have less debt, I’m betting you do a large amount of shop sales (which requires virtually no inventory) or buy/sell a lot of scrap. These are “free money” departments, requiring little inventory while throwing off good profits. But why work your tush off in one place to help pay for a debt-ridden department someplace else in the store?

Most jewelers think jewelry (including diamonds) doesn’t go out of style. Wrong. Jewelry goes out of money.

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David Geller

Here Are the New Inventory Rules of Jewelry Retailing

In today’s business climate, doing things the old way will kill your store.

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Did you previously work for your parents or a long-time jeweler? Because it’s not your grandfather’s Buick anymore!

When your parents or your old boss were younger, they enjoyed the luxury of “blowing money to the wind” on excessive inventory. Then they taught you how to manage a business, but now your livelihood is not as good as theirs was.

Back in the day, your parents or boss didn’t have to compete with Internet pricing and maybe didn’t have to worry about a “Rap list.” 

Back in the day, a store’s gross profit was 55-70 percent! Yes, stores got keystone on diamonds and four-time markup on color and gold. In the 1970s, I worked at Neiman Marcus as their jeweler, and I remember them selling a $100,000 diamond at triple key. Your parents or old boss may have told you, “Keep old inventory; it’ll sell.” And they may have said, “No one will pay higher prices for repairs; it will only hurt diamond sales.”

Not only are these things not true, but in today’s business climate, they will kill your store. Overall store gross profit margin percentage today is about 43-48 percent, and margins on diamonds continue to shrink. 

With that in mind, you can’t keep inventory for more than 12 months. Stock balance with vendors anything not selling within a year, or clear it out yourself. Additionally, you must increase your turn to compensate for low margins. Reorder anything sold within six months of stocking it. 

Lower gross profit margins on products means every department has to stand alone as an income and profit source. That means the shop is no longer a giveaway department; it must make its own money and it should be a 50 percent gross profit margin department.

Back in the day, high markups saved the day and you could be fat and lazy. Today, you have to be a lean, mean fighting machine. Your overall stock inventory amount at these lower margins needs to be about equal to a year’s gross profit dollars from selling this stock.

Be lean and mean and have more money and lower debt.

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