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David Geller: Track Your Bench Costs

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David Geller: Track Your Bench Costs

David Geller: Track Your Bench Costs

Monthly totals will tell the story, not individual jobs.

BY DAVID GELLER

David Geller: Track Your Bench Costs

Published in the February 2014 issue.

Over the years, I, along with many other jewelers, have concocted ways to track costs to see if I was making money on repairs and custom design. For the most part it’s a waste of time.

How can that be? We track costs, sales and thus profits for selling diamonds and rings. Why not repairs? The answer is pretty simple: because you have no clue what your labor cost is, and neither does the jeweler.

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“Yeah, but I’ve been doing this for 20 years,” he might say. “And I know how long it takes.”

Sorry, Charlie, you don’t. There are three numbers to estimating labor cost:

1 The amount of time you “thought” it took to do that job. It typically takes 25 to 50 percent longer than what you figured.

2 The downtime where you didn’t do any work. Talking to the staff, answering phones, rolling emery paper, changing lightbulbs.

3 Freebies: sizing a ring from the case at no charge, redoing returned work that may have broken, and then there’s just plain old doing nice things for nice customers.

I’ve done time studies on my bench and what I discovered was that we paid a jeweler for an eighthour day but they only did 5.5 hours of bench work. That means if your jeweler said it took him one hour to do the job, it really took 1.3 hours (one hour and 20 minutes).

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So if the job supposedly took one hour and he’s paid $20 an hour, you think your cost is $20. That $20 should be marked up just like merchandise.

If you’d sell a $20 cost chain for $60 then the jeweler’s work should sell for $60. (Actually it should sell for $70 because of freebies.)

Triple key on $20. Pretty good, eh? Wrong!

It didn’t take one hour — it took one hour and 20 minutes. So your cost has now gone from $20 to $26. You also forgot about your matching Fica/Medicare, vacation, sick pay and unemployment benefits. You need to add 25 percent more to that $26 number to cover those costs. The $26 cost is now $32.50. All from a guy making $20 an hour.

So if you’d triple key $20 to $60, would you also triple key $32.50? If yes then the jeweler’s work shouldn’t sell for $60 but $97.50.

That means your pricing was 38 percent off the mark.

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Want a simple way to see how your shop is doing without keeping track of all of these numbers?

Track everything by month, not by job. Then compare total shop costs to total shop sales. If shop sales are at least double shop costs (keystone), then you’re doing a good job. Go for more? Great! But doing this by totals takes into account all of the freebies and redos.

So on your P&L, spreadsheet or legal pad, the numbers might look like this:

See how much easier it is to determine how the shop is doing without counting pennies? This also means you probably shouldn’t ask a jeweler how much to charge. Just ask, “How long will it take?” Say thanks, then add 25 percent to whatever he said, and multiply the time by $100-$125 an hour for your time. Most findings will be triple key added to the labor.

If you’re not getting at least keystone, it’s time to raise your shop prices. That’s the only way to fix your problem unless you can lower the jeweler’s paycheck. Good luck with that!

Now you’ll be making money without having to worry. You’ll keep your closing ratio because … repairs are not price sensitive, they are trust sensitive!

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SPONSORED VIDEO

When the Kids Have Their Own Careers, Wilkerson Can Help You to Retire

Alex and Gladys Rysman are the third generation to run Romm Jewelers in Brockton, Mass. And after many decades of service to the industry and their community, it was time to close the store and take advantage of some downtime. With three grown children who each had their own careers outside of the industry, they decided to call Wilkerson. Then, the Rysmans did what every jeweler should do: They called other retailers and asked about their own Wilkerson experience. “They all told us what a great experience it was and that’s what made us go with Wilkerson.” says Gladys Rysman. The results? Alex Rysman says he was impressed. “We exceeded whatever I expected to do by a large margin.”

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David Geller

David Geller: Track Your Bench Costs

mm

Published

on

David Geller: Track Your Bench Costs

David Geller: Track Your Bench Costs

Monthly totals will tell the story, not individual jobs.

BY DAVID GELLER

David Geller: Track Your Bench Costs

Published in the February 2014 issue.

Over the years, I, along with many other jewelers, have concocted ways to track costs to see if I was making money on repairs and custom design. For the most part it’s a waste of time.

Advertisement

How can that be? We track costs, sales and thus profits for selling diamonds and rings. Why not repairs? The answer is pretty simple: because you have no clue what your labor cost is, and neither does the jeweler.

“Yeah, but I’ve been doing this for 20 years,” he might say. “And I know how long it takes.”

Sorry, Charlie, you don’t. There are three numbers to estimating labor cost:

1 The amount of time you “thought” it took to do that job. It typically takes 25 to 50 percent longer than what you figured.

2 The downtime where you didn’t do any work. Talking to the staff, answering phones, rolling emery paper, changing lightbulbs.

3 Freebies: sizing a ring from the case at no charge, redoing returned work that may have broken, and then there’s just plain old doing nice things for nice customers.

Advertisement

I’ve done time studies on my bench and what I discovered was that we paid a jeweler for an eighthour day but they only did 5.5 hours of bench work. That means if your jeweler said it took him one hour to do the job, it really took 1.3 hours (one hour and 20 minutes).

So if the job supposedly took one hour and he’s paid $20 an hour, you think your cost is $20. That $20 should be marked up just like merchandise.

If you’d sell a $20 cost chain for $60 then the jeweler’s work should sell for $60. (Actually it should sell for $70 because of freebies.)

Triple key on $20. Pretty good, eh? Wrong!

It didn’t take one hour — it took one hour and 20 minutes. So your cost has now gone from $20 to $26. You also forgot about your matching Fica/Medicare, vacation, sick pay and unemployment benefits. You need to add 25 percent more to that $26 number to cover those costs. The $26 cost is now $32.50. All from a guy making $20 an hour.

So if you’d triple key $20 to $60, would you also triple key $32.50? If yes then the jeweler’s work shouldn’t sell for $60 but $97.50.

Advertisement

That means your pricing was 38 percent off the mark.

Want a simple way to see how your shop is doing without keeping track of all of these numbers?

Track everything by month, not by job. Then compare total shop costs to total shop sales. If shop sales are at least double shop costs (keystone), then you’re doing a good job. Go for more? Great! But doing this by totals takes into account all of the freebies and redos.

So on your P&L, spreadsheet or legal pad, the numbers might look like this:

See how much easier it is to determine how the shop is doing without counting pennies? This also means you probably shouldn’t ask a jeweler how much to charge. Just ask, “How long will it take?” Say thanks, then add 25 percent to whatever he said, and multiply the time by $100-$125 an hour for your time. Most findings will be triple key added to the labor.

If you’re not getting at least keystone, it’s time to raise your shop prices. That’s the only way to fix your problem unless you can lower the jeweler’s paycheck. Good luck with that!

Now you’ll be making money without having to worry. You’ll keep your closing ratio because … repairs are not price sensitive, they are trust sensitive!

Advertisement

SPONSORED VIDEO

When the Kids Have Their Own Careers, Wilkerson Can Help You to Retire

Alex and Gladys Rysman are the third generation to run Romm Jewelers in Brockton, Mass. And after many decades of service to the industry and their community, it was time to close the store and take advantage of some downtime. With three grown children who each had their own careers outside of the industry, they decided to call Wilkerson. Then, the Rysmans did what every jeweler should do: They called other retailers and asked about their own Wilkerson experience. “They all told us what a great experience it was and that’s what made us go with Wilkerson.” says Gladys Rysman. The results? Alex Rysman says he was impressed. “We exceeded whatever I expected to do by a large margin.”

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Most Popular