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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

Wilkerson Testimonials | Sollberger’s

Going Out of Business Is an Emotional Journey. Wilkerson Is There to Make It Easier.

Jaki Cowan, the owner of Sollberger’s in Ridgeland, MS, decided the time was right to close up shop. The experience, she says, was like going into the great unknown. There were so many questions about the way to handle the store’s going-out-of-business sale. Luckily for Cowan, Wilkerson made the transition easier and managed everything, from marketing to markdowns.

“They think of everything that you don’t have the time to think of,” she says of the Wilkerson team that was assigned to manage the sale. And it was a total success, with financial goals met by Christmas with another sale month left to go.

Wilkerson even had a plan to manage things while Covid-19 restrictions were still in place. This included limiting the number of shoppers, masking and taking temperatures upon entrance. “We did everything we could to make the staff and public feel as safe as possible.”

Does she recommend Wilkerson to other retailers thinking of retiring, liquidating or selling excess merchandise? Absolutely. “If you are considering going out of business, it’s obviously an emotional journey. But truly rest assured that you’re in good hands with Wilkerson.”

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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 | C. Aaron Peñaloza Jewelers

Wilkerson Paves the Way for the Future

After serving the San Antonio, Texas community for decades, C. Aaron Peñaloza Jewelers closed its doors earlier this year. Aaron and Mary Peñaloza, the store’s owners, chose Wilkerson to handle their retirement sale. “In the first six days, we did six months’ worth of business,” says Aaron. “In the first three weeks, we did a year’s worth of business.” Mary Peñaloza says Wilkerson’s ability to tailor the sale to their store’s requirements really made it all so much easier. “They are professionals,” she says. “They know what they’re doing. They have a plan, but they will listen to you and adjust that plan to your needs.”

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