PHEW! THANK GOODNESS last year is over, now what?
On Facebook jewelers groups, I saw 2022 was mixed, up, down or same. Sounds like every other year.
What to do in 2023? I can tell you when I had my store I have only two regrets.
1. Instead of paying rent for 25 years, I wish I had bought a building. Jewelers who also own real estate retire richer and maybe those who have a small strip ownership make extra money from rent.
2. I should have raised my repair and custom prices even higher than my price book suggested.
My Geller Blue Book uses a three-time markup formula. I should have raised my prices even higher as myself and hundreds of jewelers who have my book have found repairs aren’t price sensitive, they are trust sensitive.
What would I suggest for you this year? I know the pain level of many of you and it’s this:
- Your low pay.
- Low bank account balance
- A lot of debt
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Where does this come from? Most think their overhead is too high, payroll is too high. Not what I’ve seen. Your poor cash flow comes from a minor area and a HUGE major area.
Minor: Undercharging for the shop. Raise your repair and custom prices. You wouldn’t believe how many jewelers tell me I was right and many more say “David: I charge more than your book.” This is low hanging fruit. Really.
Major: Too much dated inventory. I want to tell you right now …
You are wrong! You can’t make correct profit on items after 18 months because 18-month-old inventory turns into 2- and 5-year inventory. If you buy a $500 item in January and retail it for $1,000, it should sell “about” within 12 months and make you $500 in profit. Then buy another one in January to restock and sell it again the next December. So in two years, a $500 item should have provided you with $1,000 in profits. If you keep it for two years and sell it for keystone at $1,000 and think you made a profit, you are wrong. You should have made $1,000 in that two years, not just $500.
That’s why your accounts payables are so large and bank account is low.
I help stores with QuickBooks so I get to see everything, and you wouldn’t believe how many stores that are heavy in shop sales use a portion of shop profits to buy inventory that doesn’t sell. Stop that!
You don’t have to scrap older merchandise, although that’s an option. Incentivize your customers and staff to get the items out of the store after a year. How?
- When an item gets to be 12 months old, first see if you can exchange it with your vendors for merchandise that will sell better. If not, put it on sale in a 20% off case.
- At 18 months, up it to 25% to 30% off. Still making a profit, but you are looking for inventory turn to kick in.
- 24 months? 40% off and give the staff 10% of what they sell it for.
- After 24 months, either scrap it or take the stones out to be used in the shop and sell the metal for scrap. Do this and all that will happen is
- You’ll have lower debt
- Higher bank account balances. Not so bad, eh?
What could you do with extra cash from turning inventory and scrapping?
Buy a building.
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