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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!

Advertisement

SPONSORED VIDEO

Wilkerson Testimonials | MSG Jewelers

Wilkerson Takes the Worry Out of Closing

MSG Jewelers has always treated its customers like family. When owner Mike George decided to retire and close the doors of his St. Louis, Missouri jewelry store, he selected a company to manage his going-out-of-business sale that treats its customers like family, too. That’s why he chose Wilkerson. “Wilkerson was able to do all the things that we needed,” says George. In the end, the bittersweet store closing was so much easier with Wilkerson at the helm. From marketing to pricing to inventory, Wilkerson does it all. “It’s a package deal,” says George.

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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

Wilkerson Testimonials | MSG Jewelers

Wilkerson Takes the Worry Out of Closing

MSG Jewelers has always treated its customers like family. When owner Mike George decided to retire and close the doors of his St. Louis, Missouri jewelry store, he selected a company to manage his going-out-of-business sale that treats its customers like family, too. That’s why he chose Wilkerson. “Wilkerson was able to do all the things that we needed,” says George. In the end, the bittersweet store closing was so much easier with Wilkerson at the helm. From marketing to pricing to inventory, Wilkerson does it all. “It’s a package deal,” says George.

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Most Popular