Does it seems like no matter WHAT you're always baffled about how to price your jewelry?
Am I pricing too high?
Am I pricing too low?
And then that controversial question: how should I account for overhead into the pricing of my jewelry?
Overhead: the ongoing expenses of running your business.
These include rent, utilities, officer’s salaries and any other fixed (consistent) expenses.
So how do you figure out the best way to price your jewelry?
Truth is, there is not one right or wrong answer for this question. Jewelry designers need to account for their costs in different ways.
But there are two methods that can be used: the “work backwards” method or the “included in the price” method.
Pricing Jewelry for Wholesale
If you're selling jewelry wholesale, you're going to love the Work Backwards Method. When I hired consultants to save my business, this was the method they taught me.
I loved implementing this because selling felt like a game! To use this method, you need a clear understanding of what your monthly profit needs to be in order to cover your overhead.
This method is useful for all types of businesses, but can be a little more complicated to figure out until you understand cash flows and have a strong grasp on making sales numbers.
Here is how it works:
1. You need to calculate your total fixed overhead expenses and come up with a number. Overhead does not include COGS (or the materials you purchase to make your jewelry). That number can be readjusted if your expenses change.
2. Get an understanding of what your profits after COGS expenses need to be in order to cover those expenses on a monthly basis. For Example, if you had an overhead expense of $1000 you need to profit $1000 a month in order to cover your expenses.
3. You can then take a look at your average margins depending on your business model. Typically a wholesale business has about 50% margins and a retail business has about 75% margins.
4. Take your monthly sales and divide by your margin percentage to figure out how many units (or sales volume) you need to produce per month to cover your overhead.
The Work Backwards Method is a little more complex but ultimately very accurate if you have a clear picture of your numbers. Plus, you can make it a fun sales game to hit your sales numbers.
Pricing Jewelry for Selling Online
The “included in the price” method is useful for designers and makers who sell online with about the same number of units per month (or close to), year round. I say it's best if you're selling online because you're getting individual orders rather than bulk wholesale orders.
If there is a significant discrepancy in what you sell in February as opposed to what you sell in December, then this probably won’t work as effectively. Conversely, if you have a custom business like mine, it doesn’t work well because of the varying costs involved in making a piece as well as the small number of units shipped.
How it works:
1. Find an average for the number of units sold over a period of time. You can take this in 3 month, 6 month, or yearly increments of time.
2. Take your total overhead cost and divide by the number of units in your average.
3. Add this small amount into the cost of each piece of jewelry when pricing.
This works well for designers with consistent sales. As your business grows, you need to adjust the overhead included in each piece.
For more tips on pricing your jewelry, download our free Jewelry Pricing Cheat Sheet!
Each business is different, with this cheat sheet on your side you'll be on your way to the perfect jewelry pricing formula for your unique brand!
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