I’ve run a successful repair and custom shop, at least in terms of turnover. But high labor costs leave me with very little profit — my net margin is barely 3 percent. With the economy picking up, orders have increased nicely recently and I need to seize this opportunity to boost the productivity of my bench. I’m thinking a profit-sharing plan is the best way to go?
We suspect the issue may not be so much what you’re paying your jewelers but what you’re charging your customers. If orders are growing fast, there may be room to hike your rates.
We suggest doing the following:
- Work out cost of your labor dollars. Find out how here: instr.us/4141
- Work out the gap between where you are now financially and where you need to be by the time you retire. Find out how here: instr.us/4142
- Start experimenting with higher prices. Use David Geller’s industry standard Blue Book as a guide.
As for profit sharing, be careful about what you promise. Any incentive plan must guarantee net profit increases. Forecast the financial impact of incentive payouts and have a fallback plan in case the market changes.
Also consider bringing in a consultant. An outsider can compare your operation with custom shops around the country and give you an idea where you’re possibly losing money. He or she can also set up the goals for the business and each employee and help explain to staff why everyone’s financial security is at stake.
Finally, high wages and low prices suggest you’re avoiding some hard managerial decisions. (Many entrepreneurs look to incentive plans as a substitute for management and leadership.) An outsider can be the bad guy if this is an area you identify as a personal weakness.
If I upgrade my LEDs, can I use the existing track that holds my current lights?
Generally speaking, most LED bulbs can be used in the tracks most commonly seen in jewelry stores, says Howard Gurock, president of Econo-Lite, a maker of LED lighting products. “If the track is line voltage, as opposed to low-voltage, and straight, as opposed to a curved or flexrail track, then there should be no problem using an LED in an existing track,” he says.
I was looking to buy an engraver but have been a bit shocked by the prices — $25,000-$50,000. Can you actually make that money back?
To be sure it’s a hefty investment and at an average charge of around $30 per job (the Geller Blue Book recommends a minimum charge of $15) it means you’ll need to do a lot of work to pay it off. But by offering engraving you also open up the possibility of meeting a lot of new customers including corporate and industrial clients. If $25,000 is beyond your budget, you could consider a second-hand machine, which you might be able to pick up for around $10,000. However, if you’re new to the game, seriously consider the training, support and financing provided by a big manufacturer.
My partner and I are taking three of our staff to Vegas to check out the trade shows. We are paying for their travel, rooms and all meals. Should we pay them for half or full days?
It’s Vegas, it’s one of the country’s top vacation spots, it’s a chance for your team to get out of the store … but it’s still their time, and — as pleasant as it might be — it’s still work. Not only are you breaking the law (see the Fair Labor Standards Act; it generally requires you to pay for time spent on training, travel and nearly any business-related activity), but by not paying them, you’re likely to torpedo store morale. Instead of looking to cut costs, think of going the other way. Pay for their tickets, their lodgings, their food, give them a per diem for taxis and coffee and take them out for one extra nice meal. That will give you a happy, excited, team that is eager to attend seminars and energized to sell the goods you buy, when you get back to the store.
Where can I find good salary information for the jewelry industry?
When it comes to salaries, location matters. Every second year, INSTORE publishes salary information in our Big Survey (see last year’s at instr.us/7), which breaks down salaries by job description, store type and state. Online services like salary.com’s Salary Wizard can also provide you with averages based on job title and ZIP code. But salary levels in two communities 50 miles apart can diverge widely. Start at your local chamber of commerce, many of which publish detailed annual wage surveys. Also, talk to fellow business owners. If you’re looking for a bookkeeper, for example, they should be happy to tell you what they are paying.
What’s the Brain Squad?
If you’re the owner or top manager of a U.S. jewelry store, you’re invited to join the INSTORE Brain Squad. By taking one five-minute quiz a month, you can get a free t-shirt, be featured prominently in this magazine, and make your voice heard on key issues affecting the jewelry industry. Good deal, right? Sign up here.