Salary & Pricing Study for Bridge Jewelry Design Proprietors

When you are starting a jewelry business, it is more than a full-time job. Even though you may be self-employed, you still should plan for a living wage for your labor including both jewelry production time and administrative time. Industry magazines and books cover this topic with great frequency because it is such a common problem in the world of jewelry and American crafts. Many designers do not calculate a sufficient salary into their pricing scheme and end up barely covering their costs. Moreover, many other overhead costs are similarly ignored.

There is no one hourly wage or annual salary that fits every operation. As an entrepreneur, it is easiest to start with the standard of living you are accustomed to and work backwards through the numbers to determine your price per item. Salary should be considered along with your pricing in order to match your revenue needs with a cost analysis. We have developed the following simplified worksheet to help you analyze your finances.

Fundamentally, your costs are divided into overhead and variable costs. Overhead costs are fixed and do not vary based on the number of items you produce. Nonetheless, they are still business expenses that must be covered by your sales. Variable costs are the labor and materials that go into each piece of jewelry. These costs depend on your production volume and the specific designs being made. Both figures should be calculated into your pricing scheme.

You will probably have to make some assumptions if you don't know all of the numbers required, or if you are projecting rapid growth. Play with various figures to get an idea of how they affect the pricing formula. We recommend counting your administrative salary separately from your hourly production wage, even if you perform both duties. If you are creating a nationally branded line you will eventually need to hire manufacturing employees and this labor will be a separate expense. It is better to plan for that ahead of time and make sure your pricing covers staffing. Likewise if you are currently working out of a home office but will need to expand into a studio space soon. Think ahead when planning your costs.

Step One: What is your monthly overhead?

Monthly salary for administrative work 
Studio Rent 
Equipment & maintenance 
Office supplies 
Marketing & advertising 
Utilities 
Non-Salary personnel expenses (benefits etc) 
Fees to contractors, service providers 
TOTAL 

Step Two: What is your average overhead add-on?

How many jewelry items do you sell monthly 
Divide the Step One Total by the above number
TOTAL 

Step Three: What are your variable costs per item?

Jewelry supplies and materials cost 
Packaging costs 
Hours to complete __________ x Hourly wage  
TOTAL 

Step Four: What is your base price per Item?

Add the Step Two Total with the Step Three Total
SUGGESTED BASE PRICE 

This worksheet yields your minimum price to break even and cover your expenses. It leaves you no working capital to invest in the creation of new product lines or business development activities. It does not cover losses from dead inventory that never sells or sits on the shelf for many months before converting into revenue. Furthermore, it does not yield a net profit after paying your bills. It should be your bare minimum price.

We have filled in the worksheet with example numbers below to illustrate how the calculations work.

Step One: What is your monthly overhead?

Monthly salary for admin work (pre-tax)$2,500.00
Studio/Office Rent$400.00
Equipment & maintenance$150.00
Office supplies$50.00
Marketing & advertising$500.00
Utilities$100.00
Non-Salary personnel expenses (benefits etc)$300.00
Fees to contractors, service providers$350.00
TOTAL$4,350.00

Step Two: What is your average overhead add-on?

How many jewelry items do you sell monthly200
Divide the Step One Total by the above number
TOTAL$21.75

Step Three: What are your variable costs per item?

Jewelry supplies and materials cost$25.00
Packaging costs$0.10
Hours to complete ____1______ x Hourly wage $10.00
TOTAL$35.10

Step Four: What is your base price per Item?

Add the Step Two Total with the Step Three Total
SUGGESTED BASE PRICE$56.85

Many designers are surprised when they see the resulting figure in this analysis. Remember, this number is only a starting point. Complete the worksheet for several items in your production line. The overhead portion will not change, but the numbers in Step Three will vary with each design since these are the variable costs.

Notice that your salary is, by far, the largest cost component in the calculations. If you delete salary, your base price in this example would drop 22% to $44.35. If you leave salary and instead double the number of pieces sold per month, the suggested base price similarly decreases to $45.98. There are many factors to consider and balance when analyzing your costs and establishing prices.

It is important to realize that most small domestic operations cannot compete just on price with the $15 earrings on sale in department stores. You will not be able to make a living. That is why branding your line as a designer product is so critical. You will need marketing savvy to boost the price point you can charge for your items and the volume you can sell in order to be profitable. Working for a living means putting money in the bank, don't do it for free!

** A working copy of this pricing worksheet is available in Excel, please email feedback@halsteadbead.com to request the file.

Copyrighted by Halstead Bead, Inc, a trusted source for wholesale jewelry findings.

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