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David Geller

David Geller: Book Club

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David Geller shares the secrets of organizing your books to show what areas of your business are really making money.

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[h3]Book Club[/h3]

[dropcap cap=Y]our goal for the year: for the first time, ever, to really know how well your store is doing. Knowledge is pure gold. And knowing what areas of your business make you money lets you run it more profitably with less stress.[/dropcap]

To figure it out, you’ll need to correctly set up your point-of-sale or accounting software. Some POS programs have an accounting program installed with it but, if not set up properly, it’s just “mish-mosh” numbers. This article is the first in a series of how to set up QuickBooks for Jewelers. But you can apply this strategy to whatever program you use, whether it’s Peachtree or your POS accounting program. (As a QuickBooks Pro Advisor, I just find QuickBooks to be the easiest program to use.)

[h4]Let’s begin: First, a jewelry store should have its POS system and accounting program divided into three major income sales divisions.  
Showcase Sales: Sales of merchandise that we own. Our stuff.
Special Order and Memo/Consignment Sales: Sales of merchandise that we don’t own.  
Shop Sales: Repairs, custom design, appraisals, engraving watch repairs.[/h4]

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Most stores have one income account: Sales Revenue. This does you no good. You’re a jeweler — you’re special! And you have to organize your books in a special manner.

[h4]To go with these three sales divisions, you will also need to create three matching “Cost of Goods” accounts:

• Showcase Sales Cost of Goods
• Special Order/Memo Cost of Goods
• Shop Cost of Goods.[/h4]

These cost of goods numbers come from the POS program. “Cost of Goods” for merchandise is not entered when you enter a bill or pay for the merchandise. “Cost of Goods” is arrived at on the day the piece is sold.
(Important point: most jewelers pay for merchandise and call it “Cost of Goods.” It is not a cost. It’s an investment in your business. Therefore it’s called an asset account — “Inventory Asset.”)

Continuing on … the Shop Cost of Goods does not come from the POS system. Most jewelers will scratch their heads, trying to figure out the cost of sizing the ring. If you pay the jeweler an hourly wage and then charge the customer a single price you’ll never know what your cost is. Stop trying to enter into your POS system the repair cost … because you don’t know it!

What you do know, on the other hand, is the weekly pay for the jeweler. So the only way to setup the shop in QuickBooks is to compare Weekly Shop Sales versus Weekly Shop Costs.

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You know how to get the weekly shop sales: just add up last week’s repair invoices.

Then, to calculate cost of goods for the shop, add the following: weekly gross pay for the jeweler (move his/her pay check up from “Payroll Expenses”); the matching taxes you paid on the jeweler; your share of his/her insurance; findings bought this week, repair stones, gold; shop supplies, gas and oxygen, buffs, etc.

Now you can see if the shop is profitable. In fact this is virtually the only way. It’s the way I set people up when I do store visits and, for the first time, they have black-and-white numbers for the shop.

Organizing product sales in the manner above lets you clearly identify your Gross Margin Return on Investment (GMROI). By setting up the two product groups (Showcase and Special Orders/Memo/ Consignment) we will be able to see, by category, if the items we actually own make us money based upon the store’s inventory, not based upon if we made money on individual sales. If you have $25,000 invested in wedding bands from Vendor A wedding bands, any sales made from this category should be listed as “Showcase Sales/Department WB.” You own these bands. If they don’t sell, you know it — not to mention, feel it.

[inset side=right]You’d probably be better off to drop Vendor A’s line and stock Vendor K instead. Or maybe get out of the wedding-band business altogether![/inset]Further, if a situation arises where you need to special-order bands from Vendor A (you don’t have the size she needs, customer wants more diamonds, etc.), you should still list these as Showcase Sales/Department WB. That’s because, even though this was a special order, you wouldn’t have made it without having that vendor’s inventory in your case. So the inventory did make you money — and that’s the performance standard we’re trying to find. (However, if you have to order the wedding band from a different vendor, let’s call him Vendor K, whose tattered catalog you have on hand for such situations, you should not list that sale as Showcase Sales. Instead, it should go under Special Orders/Department WB.)  

This is the best way of finding out how a category is performing from you. To show you how misleading figures could be if you organize your books any other way, take the following situation as an example: If you stock 24 vendor “A” bands and with those showcase sales and special ordering from that vendor you sell a total of 18 bands in a year, the turn would be low — you sold less than you stocked.

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But if you lump all wedding band sales into one single category called “Wedding Bands” (WB), the sale of an additional 30 special-order bands from that tattered catalog you keep pulling out will make the WB department look like it sold 48 bands (18 + 30) and you’d think your investment with wedding bands, and particularly Vendor A, was a good one. It wasn’t. You’d probably be better off to drop Vendor A’s line and stock Vendor K instead. Or maybe get out of the wedding-band business altogether!  

Next month, we’ll dive into this even further. We’ll continue to talk about how you actually enter your sales income into QuickBooks. It doesn’t come from enter the Visa/MasterCard entries either! That’s money — not sales. Those are two totally different things.

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 February 2005 edition of INSTORE[/span]

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In this episode of Jimmy DeGroot’s satirical Gene the Jeweler series, Gene learns that it was Hawaii Day at his store. At least that’s what his employee, Jeremy, says. But Jeremy’s answers aren’t quite adding up. It’s hard to say what this “Hawaii Day” was really all about.

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David Geller

Close More Sales, Courtesy of David Geller’s Uncle Irv

These four “tricks” from an old sales pro will help you make more money in your store.

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MY UNCLE IRV WAS the No. 1 car salesperson for every single dealership he ever worked for. When he retired in 1987, he was the No. 1 Jaguar salesman in the United States. Here are some tips I learned from Uncle Irv that will help you make more sales today.

TRICK 1

My Uncle Irv had a Rolodex, and while the salesmen on the floor waited for a “hot one,” Uncle Irv was calling his previous customers to see if:

  • They had friends looking for a car.
  • Their lease was up and it was time to buy.
  • They were getting tired of the older model he sold them years ago.

He made appointments while the rest sat around and waited.

Tip from Uncle Irv: Call your customers twice a year to just say “hi.” Contact them or their spouse about milestone dates for gift ideas.

TRICK 2

Uncle Irv fought in the Philippines, and at age 26, he was considered an “old soldier.” He told me they were preparing to go to battle and a 19 year-old started to cry. The sergeant came to the private and asked, “What’s wrong?”

“I’m scared, Sarge. I don’t want to go.”

The sergeant replied, “You don’t have to go, son. You just can’t stay here!”

In the 80s, I almost went bankrupt. Uncle Irv told me this story and said, “David, you just can’t stay here where you are now.” So, I got up enough gumption, fired half of my 16 employees, started over, developed the price book, and a year later, started to make it back.

Tip from Uncle Irv: You can’t keep doing things the way you have been. Times are changing and you must change, too.

TRICK 3

When Uncle Irv was the sales manager of a big Chevy dealership here, he had to motivate and train the sales staff, but also give them confidence when times were tough. You’ve had the same feeling: it’s getting close to having to make payroll, funds are low and you’ll take any price to get money into the bank account. Uncle Irv didn’t want to have the salesmen look at a walk-in customer as their last meal ticket and give away the farm.

Out of his own pocket, he gave each salesman three $100 bills to carry around at all times. He wanted them to feel like they didn’t need the sale, so that they wouldn’t discount so much.

Tip from Uncle Irv: In one way or another, throw money and jewels at your sales staff. Make them feel and look richer, and they will sell better. I used to let my staff buy or custom-make any piece of jewelry at 10 percent above our cost and take it out of their paycheck over six payroll periods.

TRICK 4

Uncle Irv told me that many salespeople are afraid of silence. He said, “Tell the customer the price and then shut the hell up!”

Scenario: You tell the customer $1,495 for the ring, and then there’s silence. Twenty seconds go by and you’re thinking “OMG, they aren’t saying anything. They are going to bolt or go online. Maybe I should give them a discount; I need this sale.”

Meanwhile, the customer is thinking, “Hmm, let me see — rent is due Friday, car note next week, summer camp dues in three weeks. No — I’m OK, I can do this.”

The first person who breaks the silence will give up their money to the person on the other side of the showcase.

Uncle Irv also brought his lunch every day. He told me, “I can’t afford a $500 hamburger.” (You’ll get it.)

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David Geller

Here’s How To Calculate How Much Your Jewelry Salespeople Should Earn

But that also requires that you let them make sales.

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A JEWELER EMAILED ME this question: “I have always heard that a jewelry sales associate should sell 10 times what they make as a gross wage. Do you think it is still true today? What about associates with other responsibilities who aren’t always on the sales floor?”

Here’s your answer: 10 times sales as salary (or being paid 10 percent of what you sell) is “sort of correct.”

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The number is actually between 8 to 13 times their pay. If they sell 8 times (or cost you 8 percent of their sales), they are very efficient. If their cost is closer to 13 percent, they are inefficient.

So if a salesperson is paid $35,000 a year, they should sell between $270,000 to $437,000.

But here’s the question: How much do you personally sell out of total sales of the store? That includes product sales, appraisals, repair and custom.

If the store does $700,000 in sales and you only wait on diamond customers and your sales are $500,000, then that leaves a remaining $200,000 available for sales staff to sell. So the salesperson is physically unable to sell even the minimum of $270,000, much less the higher end.

Take your sales away from the total and see what’s left for staff to sell.

Don’t tell me what they could do to bring in more sales. That’s an excuse. Why? Because you have to be the sales trainer.

You’d have to train them to:

  • Increase their average dollar sale.
  • Try to add on to what is sold to each customer. Goal would be add on to 25 percent of their sales.
  • Keep a client book of some type, keeping track of birthdays and anniversaries and contacting customers to remind them to buy something for these events. This starts with sending thank-you cards after every single sale.

If you’re too busy to be a sales manager, then don’t complain that they don’t sell enough.

What about employees who have other duties? That makes it impossible to sell 10 times their pay if they are only on the floor 15 hours a week out of 40. They would be considered “fill in.” Just pay a salary or wage and be done with it.

But if you wanted to pay them some type of bonus or commission plan, you’d figure out what percent of the week they are on the floor. So in this example, if the employee is on the floor 15 hours out of 40, then 38 percent of his workweek is selling. If he makes $35,000 a year, 38 percent of it is equal to $13,000 of his pay to be on the floor selling. Divide $13,000 by 0.08 and 0.13, and his sales should be $100,000 to $162,000.

There are many ways to compensate for excellence in selling. When I was a store owner, I paid straight percent of sales. You can pay a percentage of the gross profit, which ensures that the more they discount, the lower the percent of profit you pay. There are spiffs: sell these things over here and I’ll give you a set amount of money. There is share: if we all reach a goal amount this month, I will give everyone an amount of money. Or you can give things: sell so much or a particular item, and I’ll give you tickets to a show/fancy dinner out/day off/spa day.

All salespeople come to work with their car radio set to WIIFM: “What’s In It For Me.”

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David Geller

Why David Geller Says You Should Sell Lab-Grown Diamonds

You’re a merchant, so sell the customer what they want.

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ONE OF THE JEWELER pages on Facebook has been discussing whether a store should stock and sell lab-grown diamonds. The dad says no, while the millennial son says, “I think we should try it.” The reader vote is split about 50/50.

Can we talk about making a living here for a moment? And selling consumers what they want?

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Customers want to know their options and make their own decisions. Be their personal shopper.

I started in 1974 as a trade shop. I used to do work for a store at our mall, Wellington Jewels. I sized the gold rings they sold and set stones.

What stones? Strontium titanate. It’s a diamond simulant that has colors like an opal. Hardness on Mohs’ scale? About 5.5! But sparkle, oooh weeee!

The store was mostly black walls and showcases, with bright lights to make the stones pop. They made great money, and these are diamond look-alikes with the hardness of an opal. The mountings were 14K gold with real melee diamonds. They didn’t sell much fashion, which I told them was crazy, because a woman can only buy so many engagement rings.

I became friendly with the store manager and she agreed. So I ordered a dozen at a time in fashion mountings from a catalog, furnished the mountings and diamond melee, and she gave me center stones, which I set. They’d sell most of each dozen I gave them within five weeks.

So let’s talk profits on this product. All merchandise was quadruple markup.

They gave a lifetime warranty on these stones. If the stone scratched or chipped or fell out, they’d replace them for 50 percent of the price (so they still made keystone).

This was junk compared to lab-created diamonds. Remember: a lab-created diamond will last as long as the human does.

What about resale value? Well, they can’t get their money out of what they spent on your natural diamond, so try lab-created, make a better margin and keep that young person from buying it someplace else.

When you quote a price to a customer for anything, you may be thinking, “They aren’t talking. Maybe I should come down on the price. OMG I need to make payroll this Friday.”

They may be thinking: “Darn, my student loan note is due at the end of the month. Maybe I should opt for a lab-created diamond. I can’t tell the difference and we need to save for a house.”

Be their personal shopper, make a customer happy and make some money!

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