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David Geller

This Small Yet Logical Fee Can Add Big Profits to Your Bottom Line

It’s worth it to both you and your customer.

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I’M GOING TO GIVE you a tip that will make you $29,400 right here and right now. Here’s how:

Let’s say you take in 4,000 jobs a year. Of the 4,000 jobs, 75 percent of them (or 3,000 jobs) have five or more stones in them.

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In your shop, you check and tighten up to four stones on any job, no charge. But if a piece contains five to 20 stones, you charge an extra $28 to check, tighten, and retighten if they get loose within 12 months (or replace melee if they fall out within the next 12 months). If there are 21 to 35 stones, you charge an extra $35.

This is worth it to both you and your customer.

I don’t care if the stones come in loose or tight, you charge the fee because you are on the hook. Whether they come in tight or not, you keep the $28. Therefore, your sales staff doesn’t have to check stones on take in; the jeweler does it at the bench.

When told this, 30 percent of customers will say, “No way, José.” So you write on the job envelope, “No guarantee; customer didn’t want to have stones checked and tightened.” You’re off the hook.

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With that said, 70 percent of the 3,000 jobs with five or more stones will gladly pay the $28. That means you get to charge 2,100 customers an extra $28. That’s a staggering $58,800 you’d take in just because you asked!

Don’t complain how much it costs to replace a stone anymore. Don’t tell the client it’s her fault. You checked and tightened, and therefore you took in $58,800. Can’t you afford to make it right, even if it’s not your fault?

But maybe you’re still scared to do this. Let’s say just half of those clients said, “Yes, I want the guarantee.” Half of $58,800 is $29,400.

Do you know that is money that goes right to the bottom line, net profit on your P&L? Know what it takes to get an extra $29,400 in net profit? If your net profit is 5 percent of sales, you’ll need to do an extra $588,000 in sales to have that net profit.

In other words, just adding the $28 fee produces the same result as opening another store that does half a million dollars per year.

You’re welcome.

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David Geller is a 14th-generation bench jeweler who produces The Geller Blue Book To Jewelry Repair Pricing. David is the “go-to guy” for setting up QuickBooks for a jewelry store. Reach him at david@jewelerprofit.com.

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David Geller

Why David Geller Says You Should Sell Lab-Grown Diamonds

You’re a merchant, so sell the customer what they want.

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ONE OF THE JEWELER pages on Facebook has been discussing whether a store should stock and sell lab-grown diamonds. The dad says no, while the millennial son says, “I think we should try it.” The reader vote is split about 50/50.

Can we talk about making a living here for a moment? And selling consumers what they want?

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Customers want to know their options and make their own decisions. Be their personal shopper.

I started in 1974 as a trade shop. I used to do work for a store at our mall, Wellington Jewels. I sized the gold rings they sold and set stones.

What stones? Strontium titanate. It’s a diamond simulant that has colors like an opal. Hardness on Mohs’ scale? About 5.5! But sparkle, oooh weeee!

The store was mostly black walls and showcases, with bright lights to make the stones pop. They made great money, and these are diamond look-alikes with the hardness of an opal. The mountings were 14K gold with real melee diamonds. They didn’t sell much fashion, which I told them was crazy, because a woman can only buy so many engagement rings.

I became friendly with the store manager and she agreed. So I ordered a dozen at a time in fashion mountings from a catalog, furnished the mountings and diamond melee, and she gave me center stones, which I set. They’d sell most of each dozen I gave them within five weeks.

So let’s talk profits on this product. All merchandise was quadruple markup.

They gave a lifetime warranty on these stones. If the stone scratched or chipped or fell out, they’d replace them for 50 percent of the price (so they still made keystone).

This was junk compared to lab-created diamonds. Remember: a lab-created diamond will last as long as the human does.

What about resale value? Well, they can’t get their money out of what they spent on your natural diamond, so try lab-created, make a better margin and keep that young person from buying it someplace else.

When you quote a price to a customer for anything, you may be thinking, “They aren’t talking. Maybe I should come down on the price. OMG I need to make payroll this Friday.”

They may be thinking: “Darn, my student loan note is due at the end of the month. Maybe I should opt for a lab-created diamond. I can’t tell the difference and we need to save for a house.”

Be their personal shopper, make a customer happy and make some money!

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David Geller

How Geller’s Blue Book Came Out of Abject Failure

David Geller’s failure in business led to success as a retailer and later as a consultant.

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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?

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David Geller

Here’s Why Coin Dealers Make More Profit Than Jewelers

It has a lot to do with a willingness to move quickly.

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WHO’S BETTER AT BUSINESS: a coin/bullion dealer or a jewelry store owner?

Odd question, right?

I recently had a conversation with a store owner whose operation did $3 million in total sales, which were divided into two income streams: $1.4 million in fine jewelry sales, and $1.6 million in coin and bullion sales.

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I asked this store owner a few questions, and his answers were intriguing.

“What’s your margin in jewelry sales?”

“About 45 percent.”

“What’s the margin selling bullion and coins?”

“Anywhere from 8 to 12 percent.”

“OMG, really? That low?”

“Yep, you buy it, turn it fast and make a quick 8 to 12 percent profit.”

“When it comes to coins and bullion, when do you consider them old?”

“Two weeks. At such low margins, we can’t hang onto them. If a Canadian Maple Leaf coin stays here for two weeks, we’ll melt the sucker!”

I did not ask what percent of inventory is scrapped versus sold. But let’s assume one-third is sold a tad above cost and the rest at break even, and see what kind of money we could make if that’s all we did.

Let’s average the profit to an even 10 percent. Calculating one-third of 52 weeks means we will make a 10 percent profit 17 times a year. So say we buy a one-ounce coin for $1,300 and make 10 percent profit ($130). $130 made 17 times a year means we make $2,210 in gross profit.

Jewelry has its own “numbers” like coins/bullion do, just different ways of counting. So, similar to the coin example, let’s start with a ring that costs $1,300. Let’s say that $1,300 ring after a year sells for $2,600 and we make a gross profit of $1,300.

The coin dealer is doing better by almost twice as much, even though he only made 10 percent per sale and the jeweler made 50 percent.

Most jewelers look at the gross margin only. “Yeah, I made keystone.” But they’re not considering the turn ratio. And what if it took more time — like, say, two years? When you wait that long, the bad stuff starts showing up as debt. Your accounts payable go way up, as does credit card debt.

A coin dealer is better in business because he is forced to liquidate quickly. They think in terms of money, whereas jewelers think in terms of “it’s gold and diamonds; it will be in good shape and salable long after I’m in the ground.”

Jewelry is old in 12 months. Coins are old in two weeks.

Jewelers just shove their old crap to the left side of the case and stuff more crap in the case. I had a jeweler friend to whom I explained this, and he said he had a buddy who owned a furniture store. The furniture store guy said he never had a problem with old inventory. He said, “Where in the hell am I going to put extra beds???”

Learn something from the coin/bullion dealer. The faster you turn the item, the better for your cash flow.

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