David Geller: Put Your Jeweler on Commission
Your profits are nearly guaranteed.
BY DAVID GELLER
Published in the May 2012 issue
Many stores ask me about putting their jeweler on a commission system rather than paying an hourly wage. There are a lot of reasons to do this and the two most important are to:
- Make more money for the store, and almost guarantee a good profit for the shop.
- Pay the jeweler more or to just make his/her pay equitable with his contribution.
Many store owners want to do commission to force the jeweler to increase output. In many cases the jeweler is often behind in getting their work out. Sometimes the owner is looking to use commission as a punishment: “If you don’t put out more work I’ll put you on commission.”
Commission should be a “win/ win.” When I went to commission in 1987 we had five jewelers. We started the system on a Monday and by Saturday had two jewelers left. The three who left knew they were overpaid and the two who stayed knew they were underpaid. Within six months the two who stayed were making 50 percent more money and our productivity was up. It used to take six weeks to size a ring and eight weeks to make one. After moving to commission, it came down to two weeks to size a ring and four weeks to make one.
There are many things that come into play when considering commission. First, you must look out for the welfare of the jeweler. He/she is now getting pay for their time and if their time is being used to speak to customers or listen to a story about your mother-in-law then they can’t make money for themselves or the store.
To go to a 100 percent commission plan for the jeweler:
- They must have more work available than they can complete in one day.
- They must not be interrupted for 85 percent of the day.
- They must be paid a fair commission on each job and get paid that amount no matter what you charge the customer or if it’s a freebie. If the job is done incorrectly, then the jeweler must redo it with no pay.
- Jewelers are not responsible for stone breakage or loss. They should have to put the stone(s) back in at no charge but they can’t make enough money to pay for broken/lost stones.
Commission can increase the jewelers’ pay, boost shop profits and increase output. Yes, you need to keep a careful eye on quality but items are given back to the jeweler at no charge if not done correctly. A few numbers for you:
- A “typical” jeweler’s bench should produce $180,000 to $250,000 per year.
- Gross profit from the shop should be around keystone.
- Figure out bench sales versus costs: sales should be at least double costs.
- Jewelers’ pay in our price book is 26 percent of the labor cost. Once you add in matching FICA/Medicare and benefits, the jeweler’s cost is 33 percent and that’s why we strive for a threetime markup on labor.
Try the system for a month. Each pay period, ask the jeweler if he wants commission or the old hourly rate. No pressure. Then after four to six weeks, evaluate how it is working for both of you.
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