Jewelry Pricing Formula

It's a simple equation:

Base price =

(cost of materials + packaging) x 4
+ your pro-rated hourly labor rate

then + 10% of that total for overhead costs.

For this example, let's say that:

• you made a necklace using $5 of supplies
  
• your packaging (tag, box, bow, bag, and business card) for this piece totals $1
  
• the necklace took you 30 minutes to make
  
• your hourly labor rate is $20 (of course, your own labor rate may be much different, depending on your medium, your speed, and your skill level).

Now let's calculate:

1. First, figure out your pro-rated labor cost:

   Your 30 minutes of labor equals half an hour. So half of your $20 hourly labor rate equals $10 of labor on this necklace.

2. Next, add up your cost of materials:

   $5 of jewelry supplies + $1 of packaging = $6 subtotal.

3. Now multiply your total cost of materials by 4:

   $6 x 4 = $24.

4. Then add your pro-rated labor rate to that:

   $24 + $10 = $34.

5. Now figure your overhead, which is 10% of that:

   $34 x .10 = $3.40

6. Finally, add the overhead to our $34 subtotal:

   $34 + $3.40 = $37.40.

7. Our base price for the necklace is $37.40, which we'll round off to $37.

   That means we can't price the necklace below $37 without losing money on it. Now we can adjust that retail price up a little or a lot - depending on the uniqueness and overall outcome of the necklace, how easily we could replace the components if we wanted to, and how much our intended market would be willing to pay.

Many jewelry artists price their work by simply doubling the cost of their supplies - charging $10 for that necklace made from $5 of jewelry supplies. Unfortunately, it's impossible to have a profitable business with that kind of pricing. It doesn't cover all of your costs.

When you sell your jewelry, you need to be paid for the time, effort and craftsmanship you put into all the various aspects of your jewelry business, plus the cost of all of your overhead expenses, if you want to stay in business.

Your overhead expenses include things like your jewelry business website fees, jewelry displays, tools, insurance, merchant account fees for accepting credit cards, receipt books, digital camera (and its batteries) for photographing your work, jewelry magazines, workshops, etc.

If you're in business, your jewelry has to pay for all of those expenses as well as your jewelry making supplies.

And after all the expenses are paid for, you'd like to have a little left over to pay yourself too.

That's what I like about my jewelry pricing formula - by finding the base price, I know I'm not losing money when I sell my jewelry; and the final price more accurately reflects what the piece is worth to its buyer.

Thanks for asking!

Multiplying your cost of materials + packaging x 4 in my jewelry pricing formula sets your retail price high enough so that if you sell your pieces at wholesale or on consignment to a shop, you'll still make a profit.

Wholesale and consignment prices are typically 50% to 60% of your retail price. So the $37 retail-priced bracelet in this example would be wholesale-priced at $18.50.

The shop owner who buys it from you at wholesale would then turn around and retail-price the bracelet at $37, and sell it to a customer who comes into the shop.

Your $18.50 wholesale price gives you a much smaller profit margin on your bracelet. So wholesale pricing usually requires the shop owner to purchase a minimum quantity of 6, 10, 12, (or however many) items at a time.

When you make and sell multiples of an item, your manufacturing and selling costs are lower, and you make up for the smaller per-item profit by selling more items at a time.

In contrast, when you're selling jewelry pieces one or two at a time to individual customers (at shows, home parties, etc.), you'll need to charge retail pricing to stay in business.

That extra money you receive when you sell your bracelet to a customer yourself (retail-priced at $37) gets eaten into quickly by booth fees, party hostess incentives, travel expenses, wear and tear on your displays, and other costs of selling directly to the public.

So multiplying your cost of materials + packaging x4 gives you the minimum retail price you can charge without losing money.

It also clues you in to the minimum wholesale price (usually half of your retail price) you can charge without losing money when you sell your jewelry to shops or other wholesale buyers.

You may also be interested in a nifty downloadable jewelry pricing tool invented by jewelry artist Eni Oken - the Jewelry Price Calculator for Excel.