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David Geller

David Geller: $100,000 Question

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If you’re not recording values when taking in a customer’s jewelry, you could be in for an expensive lesson, says David Geller.

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[h3]$100,000 Question[/h3]

[dropcap cap=C]ould you afford to write a check for $100,000? Yep, a check for $100,000 … right now, direct from your pocket, for no return.[/dropcap]

If you’re not, then read this column.

In my business, there are only a few things I always tussle with when speaking to store owners — and one of them concerns putting values on customers’ jewelry while it’s in your store in a job envelope.

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[inset side=right]Now’s the part where I jump into your head and tell you what you’re thinking.[/inset]I’d say over 75% of you do not give the customer a receipt with a stated value and description. You think it’s too much work and you don’t want to give out “free appraisals.” Many of you think you’re saving yourself by writing on the receipt “yellow metal, white stone” and either “no value” or “value is $75 or less”. And then you forget about it, thinking “Hey, they signed it!.” Dumb move!

Now’s the part where I jump into your head and tell you what you’re thinking. Look here, David. We can’t be expected to know what every customer’s jewelry is, whether it’s real or not. We’re busy. Funny, you wouldn’t let a supplier sell you goods that you didn’t inspect first, would you? You’re supposed to be an expert in the jewelry business … so be one.

The reason I asked if you could write a check for $100,000 for no return is that I just spoke to a jeweler who did exactly that.

He was burglarized. Despite the fact that he had a dial-up burglar alarm, a backup cellular phone, TL-30 safe and insurance. They came in from the roof, cut a hole, disarmed the phone lines and cellular backup. In addition, they destroyed the alarm bell so that when it did go off, it didn’t make any noise.

Obviously, these guys were professionals.

Then, without any fear of getting caught, they used a laser torch and opened the safe. Removed $325,000 in inventory from his safe. And took all 100 job envelopes — jewelry from the store’s customers that had been sent in for repair.

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After the investigation, the jeweler was reimbursed for the stolen inventory — every cent. That’s because he had a point-of-sale program which had each piece listed.

But he was was under-covered for his customers’ jewelry. Why? Because he never asked his customers the value of their jewelry.

That mistake ended up costing him 100,000 hard-earned dollars.

In his words: “Thank goodness we are a strong company, otherwise it would have put me out of business.”

Here’s how this jeweler handled take-ins in the past. (See if this sounds like you.) He used the coin envelopes with the numbered stub on top that is given to the customer. No description at all, and of course, no value. Phew! That approach makes take-in a breeze, doesn’t it? Sure, it does … but watch out, it might cost you $100,000.

And guess what? He was lucky … lucky it was only 100 job envelopes.

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Now he does exactly what I have been preaching for years.

[dropcap cap=1.] He bought three-part job envelopes from Impact Specialties (call 800-543-4264 or go to www.isiprint.com).[/dropcap]
[dropcap cap=2.] He fills in the description of every item in the envelope.[/dropcap]
[dropcap cap=3.] He gets a value from the customer, or corrects the one the customer states if it’s too crazy, or he tells the customer what it’s worth.[/dropcap]
[dropcap cap=4.] The customer gets one copy.[/dropcap]
[dropcap cap=5.] The second copy is removed for safe-keeping at an outside location.[/dropcap]
[dropcap cap=6.] That leaves the envelope, with the third copy and jewelry inside.[/dropcap]

Now he knows the values of all items in his store, periodically adding them up to tell the insurance company how much insurance he needs to cover his customers’ jewelry while it’s in his possession.

That’s the safe approach. So start training your staff to start getting values. Do it now… please, don’t wait until it’s too late.

Here’s how. After writing up a take-in form, ask: “What value shall I put on your jewelry while we have it in our store?”

Notice I didn’t ask the customer what their jewelry was worth. (The inevitable comeback from the customer would be “I don’t know, what do you think?”) If they answer that they don’t know, then ask if it’s covered under their homeowner’s policy or if they have an appraisal. Or ask if they remember what they paid for it.

If there’s still no answer, and they persist in trying to get you to tell them what you think, just say: “We’re not trying to do an appraisal, just having appropriate values for our insurance coverage.”  

Finally, if all else fails and no input is forthcoming, say “Well, in our store, this type of item is tagged for around $900. I’ll put that down if it’s OK.” Most times it will be.

[inset side=right]Notice I didn’t ask the customer what their jewelry was worth.[/inset]But what if the customer has a 3/4-carat round, J, SI2 and tells you the value is $15,000? No, don’t laugh into your fist and try to disguise it as a cough. Instead, briefly educate the customer as to what such an item would sell for in your store. If the customer won’t accept your value, you might have to (politely) tell them: “We are responsible for theft while in our possession but that amount is way beyond what we deem necessary. We’ll have to decline working on your ring. I’m so sorry.” That usually solves it.

Back in the day, my store did almost 9,000 jobs a year. And we never more than a half-dozen problems a year using this method.

So start now: get descriptions and values, keep receipts separate from job envelopes, and add values four times a year. And while you do it, repeat the mantra, “This will save me $100,000 … This will save me …”

David Geller is an author and consultant to jewelry-store owners on store management and profitability. E-mail him at dgeller@bellsouth.net.

[span class=note]This story is from the January 2005 edition of INSTORE[/span]

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David Geller

Why You Should Never Discount Your Shop Labor

It doesn’t have “turn”; it only has “time.”

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YOU CAN DISCOUNT merchandise, whether stock or special-ordered (like parts to custom make a ring) because merchandise has turn.

But discounting labor is different. Labor doesn’t have turn, it has time.

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If you discount inventory, you can still do well if you sell it many times a year. Labor, on the other hand, can’t be sold many times a minute or hour. If you charge $100 to do something in an hour, you have your income of $100 and whatever you or the jeweler is paid is the cost for that hour.

If you discount that $100 by 20 percent to $80, your profit margin percentage decreases and you can’t make it back unless you:

1. Do the same job 20 percent faster.

2. Reduce the jeweler’s pay by 20 percent.

Neither one is going to happen, and we both know it. Instead, make it a policy never to discount labor. Here’s how you do it.

When quoting a custom job, break the pricing down into two columns: “Material” and “Labor.” List the individual diamonds, gold casting grain, and gemstones under “Material” and add that up in the first column. Under the “Labor” column. list your CAD/custom fees, setting, and engraving heads and add them up.

Now you have a total of material and total of labor.

As I mentioned above, material has turn. Let’s say you get an order for a custom ring on the first day of the month and deliver it on the last day of the month. Do that every month, and these items you specially ordered have a turn of 12. With such fast turn, you can discount material. But you can’t work any faster, so don’t discount the labor.

Here is how to present the price if the customer is resistant. Let’s assume material is $1,500 and labor is $1,200 (total = $2,700). You’ll have three prices on the sheet easily visible:

Material $1,500.00 | Labor $1,200.00 | Total: $2,700.00

You give this to the client. If they resist, you may respond, “As you know, we can’t discount labor, but maybe I can give you a small discount on the diamonds and gold.”

Why “as you know?” Because everyone knows that the plumber, electrician, car mechanic and appliance repairman don’t discount their labor.

If you discounted the $2,700 by 20 percent, you’d lose $540. By discounting the material only by 20 percent, you give away $300 but make it up in turn, keeping $240 more in labor.

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David Geller

Why Taking Another Day Off Could Help More Than It Hurts

Cutting your work week to four days could ease your mind while maintaining your bottom line.

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IF YOU’RE LIKE ME, you’re a workaholic. Some just love their work; others have nothing else to do.

When I owned a store, I always worked six days. Even though the store was closed on Mondays, the shop was working on Monday. We did try a four-day work week in the beginning. The reason was selfish. When we started in 1974, we were open on Saturdays. With no kids, I had a hobby: remote control airplanes. Had to do home chores on Saturday so I could fly on Sundays.

At the time, I had six employees and we were open five days, but all employees worked four days a week, 10 hours a day (7 a.m.-6 p.m.). Admittedly, it was tough getting people to work on time at 7 a.m.

There was one less day of breaks and lunches. The jewelers were more productive and enjoyed having three days off. We rotated, and every other weekend, they would have three days off in a row (otherwise, they had two days off together and one day off in the middle). The schedule stayed that way until we moved to a larger shopping center and we went to five 8-hour days. Don’t remember why.

What about the owner working four days? You are the boss, aren’t you? When I started creating my price guide, I took a day off from the store weekly and worked at home. Still working, but uninterrupted. Got a lot done.

Why won’t most store owners shorten their work week?

I know because I was a culprit.

You might make most of the store sales and figure that if you’re not there, sales will drop. Or maybe you don’t trust your staff. Or maybe you wouldn’t know what to do with yourself.

Before selling my store, other jewelers asked me to go to their stores to help them, and I was also speaking at state associations. I was absent a lot. What I learned from being away from the store was this: given the opportunity, the staff would step up to the plate and do a great job. We had store meetings bi-monthly, so the staff was already trained. By letting them take over, they learn even more and are eager to earn your trust.

Although sometimes I didn’t like a decision they made, it all worked out. It gave me the freedom to “think” and do better.

Many of the most successful stores I have visited are owners who “let go” and don’t micro-manage everything. Trying taking off during the week on your slowest day and see what that does for you for 30 days. You’ll be amazed.

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David Geller

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

It’s worth it to both you and your customer.

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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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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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