There has been an on going thread on the forums about what we feel out time is worth and how we pay our selves and I realized tonight that my reponse would make a better blog than an answer. Even though I majored in Chemistry in college, my whole background is business and that was allot of years. I ran a small business - my husband's dental practise - I had a consulting business for dentists on how to manage their practises and integrating computers into their business. When you run a small business, you are in actuality running a huge business on a small scale...we had do to all the things that larger businesses do, but we didn't have departments, we had me. I did payroll, taxes, training, computer implimentation, oversaw collections, billing, I did or could train someone else to do everything and anything that that office needed on a daily basis except dentistry. So I feel that I have a pretty solid background for commenting on these small business that are flourishing on the web.
I was floored by some of these responses in the thread that I referred toÂ - I think that allot of people need to reevaluate..or maybe just evaluate why they are doing what they are doing. If your goal is a business, within 3 to 5 years of startup you should be making aÂ profit, and the only way to do that is to cover your expenses with what you are charging. That's it - business school in a nutshell. You can not make a profit by charging too little for your product. You cannot make a profit by not paying your laborers(yourself) a fair wage. You cannot make a profit without fiquring out your overhead and recovering some of it on every piece that you sell. You can not expect to ever make a profit selling widgets if they cost you $20.00 to make, market and ship and you charge $19.00 for them. In order to ever make a profit - you must know your costs per piece and the time that it takes to make it -and work backwards to a price. You can never say I want to see what others are charging and go from that as your price because for all you know that person gets her widget parts for free from Uncle Wally.Â You can not say I'm going to charge $30.00 for this widget because that is what I personally would be willing to pay - that is no criteria at all. At this point in my life, I cannot afford to buy my own jewelry, but that doesn't mean that I should price it differently.Â Lots of other people like it and buy it at the prices that I have set with my formula and I am able to make a profit.
I am a minutia person and I think that really helps jewelry makers. I have no idea how manyÂ pieces of material that I have in my studio - but counting every little bead and bauble, I am sure that it is in the 100's of thousands, and there is not a piece in my studio that doesn't have a price on it. As materials come in or are purchased, they are not put away without their pricing. Stones are either priced by the piece or the strand. Wire is priced by the foot and the inch and those numbers are kept on a list by my workbench. Findings are priced by the piece.Â I keep a notebook at my bench and when a piece is finished, it is priced immediately, while everything is fresh in my mind and the amount of time used is also calculated. Be very detail oriented in setting up your materials and you will never cheat yourself on what you have invested in the widget you are making in both time and materials.
Selling anything should be formulamatic - and there are lots of formulas out there. You arrive at a wholesale price that pays you twice what you paid for materials, something for your time, something for overhead, and I always add something for profit. Always work off of a wholesale price to arrive at your retail price. According to what I have read, never set your price and cut it in half for your wholesale price, because you may be cheating yourself.Â Get a wholesale price for your product and double it for your retail price.Â If this price seems too high or too low, fiddle with it, but NEVER, EVER fiddle with your wholesale price. The wholesale price must be the bare minimum price that you need to recieve to make a profit on your widgets. Never forget that that is the goal of this whole enterprise...to make a profit on those widgets that you dream about, sweat over, and put together with loving care. As I said in an earlier blog, PROFIT IS NOT A DIRTY WORD, but in order to make a profit, you have to put allot of work into pricing both your widget and the time that it takes to make it.