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David Geller

What is a Strong Bench Jeweler Worth? David Geller Tells You

Make sure you pay your workhorses right.

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Should you “overpay” for a bench jeweler? You might ask, “Why would I ever want to overpay to hire anyone?” The answer: because you want to keep them, and keep them happy.

There are two types of people in the world: racehorses and workhorses. Racehorses are people who love to sell; they bring home the bacon. Workhorses, on the other hand, get things done. They include bench jewelers. There’s no “crossing the finish line,” unless you count emptying their to-do box.

So what’s the pay value for each of these jobs? 

Salespeople: These are racehorses. They want to win. An excellent salesperson has people skills and is courageous. They are unafraid to ask for the sale, even if they’ve already heard two “nos.” They also try to upsell and are not afraid to show higher-priced pieces. What value can you put on this person?

An easy start is paying them a percentage of what they sell. The sky’s the limit. They are the reason for store sales to be what they are. Don’t be afraid to pay for a star.

Jewelers: These are workhorses, yet they are workhorses with a special skill set — a skill set that is slowly dying out. The starting pay is so low that it’s hard to get young people to enter our field. 

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Today, an auto mechanic is reading a computer screen and replacing parts manufactured to fit. Hard worker? Yes. Special skill? Not in my mind. On the other hand, a jeweler might just replace a manufactured part, but now he must solder in a head and set an emerald in a way that it won’t come out, catch on clothing or crack the stone in the process. This is a skill that takes time and training.

So what’s a jeweler worth?

1. Percentage of shop sales (determined by the staff and traffic). A jeweler’s bench should produce $185,000 to $250,000 in sales a year. If you spend $1,000 month on findings, supplies and tools, then before salaries you’re left with $173,000 to $238,000 in gross profit. That’s almost a 70 percent gross profit — more than enough room to add $50,000 or more for a jeweler’s salary. Add another $10,000 for taxes and vacation, and your shop costs would be $72,000. With sales at $185,000, that’s a 60 percent profit margin.

2. If you own a store that doesn’t have enough work to keep a jeweler busy full-time, some of this “extra pay” is just what you have to pay to have someone available to set the diamonds you sold. Just another cost of business.

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

Want to Raise Repair Prices? Train Your Staff to Sell Them First

Confidence and knowledge will convince clients it’s worth it.

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A JEWELER ONCE TOLD me, “Our unspoken principle in the shop is that we do not want anyone to think they have paid too much for a repair.” I get your point, but how does a jeweler know that a customer is about to pay too much? That’s a jeweler’s brain, not the customer’s.

I’ve visited many stores and connected to their books, and I usually see that their shop numbers are too low. When I tell them their prices are too low for the work, many will say, “My customers won’t pay.”

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How do you know? How many times did you ask? And how many really said “no” before you decided that the price was too high?

Before we decide on a metric for determining your repair pricing, let’s look at your expectations of selling out of your showcase. If you see 10 customers and only three buy, you don’t think you failed in selling, even though 70 percent of those people walked! Fail or not, you have decided a 70 percent walk rate is good because “I sold a few pieces.”

Now, let’s look at selling repairs. Repairs typically have a 90 percent closing rate because repairs are not price-sensitive. What if you charge more and the closing rate drops to 80 percent, and you now at 80 percent take in more money than you did at 90 percent? Are you charging too much? Why not work less and make more?

Even if your repair closing ratio hits 70 percent (I see this all the time), it’s never ever that you’re charging too much.

The staff’s selling skills suck because they think you charge too much or they are not explaining to the customer the difficulty and expertise required in this repair. (And yet, even at 70 percent closing ratio, you’re doing twice as well as selling from the showcase.)

In 1986, I did $830,000 in sales, of which 75 percent was from our shop. I had a 95 percent closing ratio. But we were failing due to debt. Our prices were too low, among other things.

That’s when I wrote the Geller Blue Book. Once printed and used, our closing rate dropped a bit because we were all scared of quoting these much higher prices. After I started sales training and I personally went to a Harry Friedman class (on being a sales manager and trainer), our closing ratio went back up and sales went up.

Every time I have spoken at a jeweler’s meeting, I ask the attendees, “What do you charge to size a typical 1-carat, six-prong, 14K yellow gold engagement ring smaller?” Their answers range from $22 (yes, 22) all the way up to $65 and even once $85 dollars.

Guess what? All of them achieved a 90 percent closing ratio, and none of them thought they were overcharging.

People will pay for quality work, and charging more is the only way to fix the shop’s profitability, which should be keystone or better. Of course, you can lower the jeweler’s pay, but I don’t think that would go over well.

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David Geller

Here’s What’s Really Keeping Jewelers From Having More Money

If you think it’s low margins, you’re wrong.

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I WAS READING THE Big Survey in last month’s issue of INSTORE, and one question popped out at me: “What will be your greatest priority next year?”

Thirty one percent of respondents said, “Boosting profitability.” The money-savvy ones (21 percent) said, “Clearing old inventory.” Most jewelers just don’t get that there is a big difference between making money and having money.

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Someone once taught you that margin was your most important metric. Yep, that was a good thing when everyone made two and three times key, but no more. What hampers you from having money is not low margins as much as inventory level.

Your debt typically equals one-half to three-quarters of your inventory that’s more than a year old. It shows up as accounts payable, credit card debt, lines of credit, and money owed to you (the owner) for money you’ve personally loaned the company.

Having money depends on your ability to keep that debt to a minimum. How can you do that? As a jewelry store/shop owner, there are a few options.

  1. Repairs. This is a revenue stream that requires very few resources to produce income. Your ongoing costs are findings, small stones and your jeweler’s paycheck (plus the occasional equipment upgrade).
  2. Buying scrap. This really only requires several thousand dollars of cash on hand to make a profit. Buy it on Monday, mail it on Wednesday, get a check on Saturday and you’ve made a profit and replenished your cash to do it again.
  3. Inventory sales. This is likely your biggest cash outlay, and it needs to throw off revenue monthly. All of it must throw off revenue at least once a year. All of it. You can’t wait two and three years to have money come in to pay a bill or check tomorrow.

Look at 1 and 2 above. The amount of money required is small. You don’t keep scrap very long and most people order “just enough” in findings for jobs this month, maybe a few extra items.

But inventory piles up for years and causes debt. In a jewelry store, your average inventory level should be somewhere between your cost of goods sold and gross profit amounts for a 12-month period. Any amount above that will show up as debt and poor cash flow.

Keeping inventory within these two numbers (give or take) will increase positive happy cash flow, increase your checking account balance, lower total overall debt, remove stale and outdated inventory, and may actually increase sales as you have more leverage to buy new fashionable jewelry that pleases your customers.

That would be a good thing, right?

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David Geller

Can You Make Money at 12 Percent Margin? Yes, But Here’s What It Takes

As one factor decreases, another must increase.

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CAN YOU MAKE a living on a profit margin of just 12 percent? Did the word no come to mind? You’re wrong.

For coin or bullion dealers, 8-12 percent gross profit margin is the norm, and they make a lot of money with little debt.

The “magic triangle” includes profit margin, inventory turn and inventory level. The combination of all three tells your future in a store, how much money will be left over to pay all bills and have money in the bank.

Let’s take a simple store math example for a year using keystone. A typical jewelry store would have a net profit of 5 percent. Here’s how a P&L would look:

Total Product Sales: $500,000
Cost of Goods: -$250,000
Gross Profit: $250,000
Expenses (45%): -$225,000
Net Profit (5%): $25,000

Are you making money? Absolutely. Do you have any money left over after paying expenses? Depends.

Imagine if last year, you sold everything at Christmas, not a stitch of inventory left. January 2nd, you fly to New York with three suitcases and buy the $250,000 of inventory that the cost of sales above pays for. You’ll have no debt. If something sells within six months, you have the money to reorder the replacement for the case, thus always having a stocked showcase.

Divide $250,000 in cost of goods by inventory of $250,000 and you get one turn a year.

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Now assume the same figures above, but instead of three suitcases costing $250,000, you bring five suitcases and bring back $600,000 of inventory for the store. Same sales and profit numbers as before. Did you make a profit, make money? Yessiree Bob! Do you have money? No! You bought $100,000 more inventory than the sales you took in. So how do you pay for it?

  • Owe vendors way past the due date
  • Put it on credit cards
  • Go to bank and take out a line of credit
  • Personally skip paychecks
  • Take money from your personal checking accounts

In this scenario, your inventory is $350,000 higher than the cost of goods sold. Divide cost of goods by inventory level, and it shows you have a 0.41 turn. A turn of 0.41 means this store has more inventory than needed for two years.

So, what’s the secret to having money?

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The long and short of it is, if you’ll keep your inventory levels approximately equal to the gross profit dollars you’ll make over a year, you’ll both make money and have money.

The lower the profit margin, keep inventory lower, or if you must have a higher inventory level at lower margins, then turn it faster. Instead of taking 12 months to sell it, sell within nine.

It takes all three for The Magic Triangle to work magic in your store!

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