WHEN I STARTED MY shop in 1974, there was no “Geller Book” for pricing repairs and custom. You relied upon your best guess, copying other people’s price lists or calling around to find an average amount to charge.
Although I didn’t know how much to charge, I quickly learned how much I would have to pay for salaries, rent, findings, advertising, etc.
By 1978 or so, my accountant just reconciled the books. He couldn’t help at all with my problem of making money. I had difficulty paying bills on time and paying myself a good wage.
By 1986, we had a thriving business doing repairs and custom. We had 16 employees, but still we were always behind the 8-ball. We did $830,000 in business, 75 percent from the shop, but we owed $250,000 in accounts payable, $65,000 to the IRS for payroll taxes and another $25,000 to the state for the same thing.
On Christmas Eve, I fired half of the employees, and during the following week after paying whomever I could, we still had the same amount of debt.
Don’t tell me about your bad day.
January 2nd, we opened up with half the number of employees and $125 in the checking account.
Don’t tell me how you had a bad month.
Summer of 1987, the IRS put a lien on both my home and the store and twice wiped out the balance of our business checking account to try to pay our payroll taxes. So, to ward off the inevitable, I paid an attorney $5,000 to help me declare bankruptcy.
Don’t tell me you had a bad year.
The next month, a diamond setter friend sent me his accountant. This guy had been an accountant, gave it up, became a watchmaker for 7 years, then went back to doing accounting.
This was the first accountant I had hired who knew how to make money with his hands.
First thing he did was work out a payment plan with the IRS and the state. So I didn’t have to follow through with the bankruptcy, but the attorney who had done nothing kept his $5,000 deposit.
Next thing the accountant did was teach me how to price labor. Pricing a lobster claw is easy. Labor is tricky, so he had me do something many of you would never do: I stopped paying the jewelers a guaranteed salary. I paid them 100 percent commission based on retail labor. That fixed my cost, and now I knew my labor cost to the penny and I could mark that up.
If the commission on any job was too low for the jewelers, then we raised the retail price so they would be paid correctly. This philosophy led me to write our first 250-page price book for our store in 1989.
By 1991, I put the sales staff on 100 percent commission as well. Both the jewelers and salespeople’s earnings increased, as did productivity and profits. We finally paid everyone off and became cash flow positive and profitable.
Years later, our top salesperson asked to buy the store, and meanwhile I was being prompted by the Scull consulting group to help other jewelers. So, I created Geller’s Blue Book to Jewelry Repair and Design and went to work helping my fellow jewelers be profitable in the shop. The store succeeds and thrives today.
Tough spot? You betcha. All of what transpired was scary and a huge change in business practice. But, the next step was liquidation by the IRS of my home and business, so what did I have to lose?
What would it take to get you to change your ways?