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David Geller

David Geller: By The Numbers

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David Geller tells you how better planning puts more cash in your pocket.

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[h3]By The Numbers[/h3]

[dropcap cap=B]ack in the old days when you made triple key on a one-carat stone, managing by the seat of your pants did pretty well. But today, smart retailers plan next week, next month and next year. Zales, Jared and the bustling flower shop down the street run their stores by the numbers.[/dropcap]

Here’s how to run yours, with some help from QuickBooks software.

Get your profit and loss statements from your accountant — or from QuickBooks if you’ve been a user for more than a year. You’ll need to know:

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• Percent of sales from selling inventory
• Percent of sales from repairs
• Percent of sales from appraisals
• Gross profit margin percentage from selling inventory
• Gross profit from the whole store

Armed with this information, get into your budget working backwards.  

[dropcap cap=1.] Figure expenses per month first; this will tell you overhead.[/dropcap]

[dropcap cap=2.] Figure the net profit you want to attain. An average jewelry store gets about a 6 percent net profit (bottom line), so use that number.[/dropcap]

[dropcap cap=3.] Add 16 percent to your net expenses, which will give you the amount of gross profit from total sales you need to pay for expenses and still give you a net profit of 6 percent. (Trust me on this 16 percent thing. It works.)[/dropcap]

[dropcap cap=4.] After knowing how much gross profit you need, figure how much you will have to do in total sales to make that gross profit using the gross profit percentage that you’ve made in the past.[/dropcap]

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[dropcap cap=5.] Split the sales up by Inventory Sales, Repair Sales, Custom Design, and Appraisal Sales based upon the percentages you already know from above.[/dropcap]

[dropcap cap=6.] Knowing your gross profit percentage and subtracting from 100 gives you the cost of goods you can expect, because Sales minus Cost of Goods leaves you with Gross Profit.[/dropcap]

[dropcap cap=7.] After plugging in these numbers, you should have a Profit and Loss Budget that will help you run your store better throughout the year.[/dropcap]

[dropcap cap=8.] Take each month’s sales goal and divide them up among the sales staff and owner. If you all do your fair share, you’ll make your sales goals.[/dropcap]

You can do this on a spreadsheet or even with a pad and pen, but it’s not nearly as easy as using QuickBooks, particularly once you’ve been using it a year. Why? Because QuickBooks will enter all expenses for you for the coming year! Of course, it will be last year’s expenses, but you can just change them (some will stay the same).

In QuickBooks, go to the very top menu bar and click on Company, then on Planning & Budgeting and Set Up Budgets.

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You’ll get a box asking to Start from Scratch (for those new to Quickbooks) or Create Budget From Previous Year’s Data (for those with a year’s worth of data).  

Get rid of Income and Cost of Goods in the new budget QuickBooks made for you by deleting the number in January and then clicking on Copy Across. Cool, eh? That’s also how you’ll input numbers like rent.  

What’s in front of you is last year’s expenses. Look at expenses and type in for each month a number that seems realistic. In QuickBooks, if you need to increase an expense by either a dollar amount or percentage, just click in the first month to adjust and click on Adjust Row Amounts to change the whole year.  

The sad news is that QuickBooks doesn’t add up the budget for you at the bottom. Keep the budget open and go up to Reports, then Budgets & Forecasts, and then choose Budget Overview. Then follow through clicking Next and Finish at the end. If you saved your budget, then it will add up on the overview. The overview, like the budget itself, has no income or cost of goods, just expenses. So if you scroll to the bottom, expenses will be added up for you. Net profit will be a negative as you have no income — yet!  

Next month, I’ll discuss how to establish sales goals for yourself and your employees based on how much net profit you want to make. You’ll be in for a surprise: You may just find that you have to raise your prices.

[componentheading]BREAKOUT[/componentheading]

[contentheading]Coming Up Next…[/contentheading]

Your budget says you’re losing money. Maybe you’ll have to:
• Cut expenses.
• Raise markups, add a few bucks to every loose-stone sale, buy diamonds off the street, find lower priced vendors, raise shop prices.
• Focus on certain months. You may have to light a fire under your staff in April, July and September.

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 2007 edition of INSTORE[/span]

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David Geller

Want to Make 2020 Your Best Year Yet? Here’s How, Says David Geller

It’s about managing your inventory and marketing correctly.

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HAVE YOU EVER made something that should have been easy difficult? Maybe you overthought it, or you were afraid to try. Or you were worried what someone else would think.

Salespeople tell me all the time, “I tried that and it didn’t work.” But my observation is that people often try something once, fail at it, and then give up. They’ve proven to themselves that something new does not work.

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You have to want to make the effort and put in the time and practice to build new habits, especially when it comes to what I call “needle movers.”

Needle movers are actions that put money in the cash register immediately. The three big needle movers are closing, adding on and wowing clients. These should be easy, but we make them hard because of fear, lack of experience, or lack of selling skills.

It’s time to get over that fear of change. Have your team write 10 new closes, and make sure they’re not statements. For example:

Statement: “That is a beautiful diamond.”

Close: “She’s going to love wearing that beautiful diamond, and you’re gonna be glad you gave it to her.”

Then have them write 10 lead-in lines for add-on sales. Do not say, “Can I,” “May I” or “Would you like?” Clients can say no to all of these. Examples of lead-in lines to create add-on sales are:

“We have what matches.”

“This is part of a set.”

“She won’t wear this without the matching.”

“Tell me something else she’s always wanted but you haven’t purchased yet.”

Then, have your sales team write 10 lead-in lines to create a sale from scratch. This is what you say to a client when they’re waiting for a battery or repair. Examples include:

“Guess what’s in the vault?”

“Gotta show you my favorite.”

“Guess what just came in.”

These must be said with passion and enthusiasm. They allow you to wow the client and change their experience while they wait. Remember: You have to do something to make something happen. Clients buy on impulse all the time.

Practice with your team and make these phrases come naturally. Start all of these presentations with a lead-in line, and the rest will happen by itself. Clients do not get mad when you show them something gorgeous.

But you have to hold yourself accountable, and there has to be consistency. For some reason, it’s easier to fall back on old bad habits than keep good ones. Winging it doesn’t work. Practice with each other over and over until the simple truly is simple.

Creating is better than waiting. Get comfortable with your sales skills. Be the sales associate your client wants you to be.

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David Geller

What You Can Learn From Insurance Companies to Make More Money in Your Shop

Charging more to every customer helps pay for damages that your store covers.

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REDOS, STONE LOSS and breakage are the bugaboos of any shop. Stuff happens, but who pays for this?

Do you think Allstate pays for a car repair when you wreck your car? No! All Allstate customers share in that repair, which is built into their premiums. We all pay.

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That’s how stone loss, breakage and redos should be paid in every store: by charging more for all repairs to cover these procedures.

Let’s talk profit-and-loss statements for a moment. As a reminder, here’s the breakdown:

  1. Sales minus cost of goods = your gross profit
  2. Expenses are paid out of your gross profit
  3. After paying your expenses, what you have left over is net profit

Let’s say you size a ring and months later the customer comes back and says, “Hey! You sized my ring I had for 12 years, and 30 days later, my 5-pointer fell out. Now take care of it!”

We’ll assume you will give her a new 5-point diamond at no charge. Your cost probably $30. Where on your P&L does the $30 cost come from? It comes out of your net profit.

The typical American jewelry store has a net profit of 5 percent. So, the “Allstate question” is, “Who’s going to pay and by how much?”

It’s simple really: Just divide the cost of this problem (the lost diamond) by your net profit percentage.

$30.00 divided by 5% (“0.05”) = $600.00

Your store will have to do an extra $600 in sales, above and beyond your goal, to have $30 left over to pay for the lost $30 diamond!

The easiest way to get this extra $600 is by charging customers an additional fee for the jeweler to check all stones, tighten any that are loose and guarantee them for one year against loss.

You charge this same fee if:

  1. All stones are loose when ring comes in.
  2. If just a few of the stones are loose.
  3. Even if none are loose, because we are still guaranteeing after we work on the ring that the stones won’t get loose or fall out in the following year.

Sounds like Allstate, doesn’t it?

Here are our current Geller Blue Book prices to check and tighten stones:

  • Up to 4 stones, no charge.
  • From 5 to 20 stones = $34
  • From 21 to 35 stones = $52
  • From 36 to 50 stones = $70
  • Each additional stone over 50 = $1 per stone

The typical store will take in an additional $18,000 to $40,000 with this extra income, whereas typical store losses in a year are less than $5,000.

Like Allstate, you’d make money on crashes. Imagine that.

Is your store in good hands?

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David Geller

Want to Raise Repair Prices? Train Your Staff to Sell Them First

Confidence and knowledge will convince clients it’s worth it.

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A JEWELER ONCE TOLD me, “Our unspoken principle in the shop is that we do not want anyone to think they have paid too much for a repair.” I get your point, but how does a jeweler know that a customer is about to pay too much? That’s a jeweler’s brain, not the customer’s.

I’ve visited many stores and connected to their books, and I usually see that their shop numbers are too low. When I tell them their prices are too low for the work, many will say, “My customers won’t pay.”

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How do you know? How many times did you ask? And how many really said “no” before you decided that the price was too high?

Before we decide on a metric for determining your repair pricing, let’s look at your expectations of selling out of your showcase. If you see 10 customers and only three buy, you don’t think you failed in selling, even though 70 percent of those people walked! Fail or not, you have decided a 70 percent walk rate is good because “I sold a few pieces.”

Now, let’s look at selling repairs. Repairs typically have a 90 percent closing rate because repairs are not price-sensitive. What if you charge more and the closing rate drops to 80 percent, and you now at 80 percent take in more money than you did at 90 percent? Are you charging too much? Why not work less and make more?

Even if your repair closing ratio hits 70 percent (I see this all the time), it’s never ever that you’re charging too much.

The staff’s selling skills suck because they think you charge too much or they are not explaining to the customer the difficulty and expertise required in this repair. (And yet, even at 70 percent closing ratio, you’re doing twice as well as selling from the showcase.)

In 1986, I did $830,000 in sales, of which 75 percent was from our shop. I had a 95 percent closing ratio. But we were failing due to debt. Our prices were too low, among other things.

That’s when I wrote the Geller Blue Book. Once printed and used, our closing rate dropped a bit because we were all scared of quoting these much higher prices. After I started sales training and I personally went to a Harry Friedman class (on being a sales manager and trainer), our closing ratio went back up and sales went up.

Every time I have spoken at a jeweler’s meeting, I ask the attendees, “What do you charge to size a typical 1-carat, six-prong, 14K yellow gold engagement ring smaller?” Their answers range from $22 (yes, 22) all the way up to $65 and even once $85 dollars.

Guess what? All of them achieved a 90 percent closing ratio, and none of them thought they were overcharging.

People will pay for quality work, and charging more is the only way to fix the shop’s profitability, which should be keystone or better. Of course, you can lower the jeweler’s pay, but I don’t think that would go over well.

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