How to determine fair market value for your jewelry pieces
What is value?
When we look for the right quotients for fair market value and pricing, let me be clear
about the difference between price and value.
The price charged for an item is the determined monetary amount required in cash or
currency for that item or service to leave the possession of the owner and become the
new possession of the buyer. It could be $10 or $657,851.46.
What makes a person pay a certain price is the value they place on the item.
Value is determined solely by the buyer. How much time is this item worth; meaning
how many hours/weeks/months would I need to work in order to pay the price? Is the
item worth effort to me? Would my spouse leave me if I buy this new boat? Is the boat
worth sleeping alone? If I choose to travel Europe for 2 months, my children will not go
to the private school of choice for this school term. Is the experience of travel worth the
cost of the private education of my kids for a year? That answer equates to the value
you place on the trip, or the education.
Handcrafted items are largely paid for because of perceived value. You can, by using
the appropriate methods, increase the value of the item. But first, you need to have an
idea of what the item cost you to make so that the price you charge the customer reflects
profit.
Determining Factors for Price
PROFIT: whatever money you can put in the bank after you buy the materials, pay the overhead, cost our your time, cost out the time of any employees working on the project, and any reductions you offer in the final price, either to the customer direct or to a retailer wanting to purchase from you at wholesale prices.
1. time – your time to make
2. creativity-your talent to design unique designs
3. materials
4. overhead expenses
5. skill to make the jewelry
Rena Klingenberg suggests in her book Jewelry Booth that jewelry artist.s increase
profits mainly from cutting costs and learning how to buy smart. However, she also
suggests a formula that works for her and encourages her readers to determine their
own winning formula.
Possible Price Formula:
Add the Base Price (materials and packaging x4) + your pro-rated hourly rate+ 10% of
the above costs for your overhead costs = final price.
(See the book Jewelry Booth for detailed description.)
With all the variations in the market, it can get complicated.
There is however an easier way.
You can have the pricing figured automatically by using a software tool designed
specifically for the home-based jewelry business called Bead Manager Pro.
With Bead Manager Pro, you enter the products you purchased from your supplier
including the date, the cost, the number of pieces etc...
As you can see below, your entry allows you to not only begin the pricing strategy but
keeps your inventory up to date:
Once you have entered the parts, you can begin making jewelry and knowing exactly
what each piece cost you to make in raw materials.
You simply choose the parts from your stock that were required to create a piece. The
total cost of materials is calculated for you instantly (these parts are also instantly
deducted from your stock so keeping inventory is a snap), all you have to do is put in
your labor cost and any other miscellaneous costs.
Be sure, when you are posting your labor and overhead fees, to allow enough margins
for you to sell your products wholesale at a 25-50% reduction, and still make a profit.
On the next tab after cost Bead Manager Pro automatically prices your items for you
at wholesale, direct and retail pricing, depending on the formula you choose to use.
Each of these fields is fully customizable so you can change the markup values to suit.
You can learn a lot more about Bead Manager Pro at www·beading-software·com
P.S One more thought about profit and value= you increase profit when you increase
the perceived value in the eyes of your customers.
Custom designs, historic symbols, trademark stones, detailed packaging, “sets” verses
individual pieces, and even celebrity reviews or photos add value to your products but
don.t have to result in increased costs in production.
That clearly amounts to profit, no matter who you ask!