written by David Geller
Many Americans have received their two stimulus checks. But did you know there is a THIRD STILUMUS check just for jewelers?
Yes, previous checks paid for overhead, food and clothing. But the Jewelers Stimulus Checks are specific to paying for jeweler’s wages, lost and broken diamonds!
Jewelers have financial needs too. We need to make payroll, pay rent and advertise. Where do we get that money? From selling product and services for a profit. But what happens if you spend money but don’t expect to get anything in return?
Selling jewelry gives us profits. Advertising brings in more potential customers. Payroll related employees make sales.
If you size a ring and the jeweler breaks a diamond or months later the darn thing falls out, this costs you money without any thing in return. Some jewelers argue with a customer that “everything was just fine when I returned it to you, you must have slammed the ring in a car door!” (Have you ever read the book “How to wins friends and influence people?” This is not the way.)
I’m a bench jeweler and have been since the age of 10. I can tell you two things:
Just to only size and polish a ring smaller pictured above will take an amount of time, let’s just say “20 minutes”.
I can also tell you that during the sizing procedure if the stones get loose, it could take 3/4 to the same amount of time to tighten the stones as it did to size the ring, 15 to 20 minutes.
- Sizing a ring smaller in our book is $50.00 and in 20 minutes you’d get $50.00.
- But if it took another 20 minutes to tighten the loose stones, smooth the prongs with a rubber when and buff just the prongs shouldn’t we get MORE money, another $34 to $50 for those 20 minutes? ABSOLUTELY! All we have to sell is our time.
That’s why in our book to check and tighten 5 to 20 stones (whether they are loose or not) we charge an additional $34 to the original repair.
My car insurance company has had the audacity to charge me a yearly $900 premium for the last 9 years, and I haven’t cost them a cent! It used to cost them a stamp to mail the bill, but now getting it by email I’m a free ride.
So how dare they charge me in a year when I didn’t cost them a dime? Well 10 years ago I was in a wreck, my fault and they paid out $2500.00 How can they afford that when I only paid them $900?
Because collectively, all of the people who cost them nothing paid for my $2500.00 expense!
You should charge this extra money whether the jeweler has to tighten the stones or not, because one day it will HAPPEN! A wreck! A lost or broken diamond.
The question is this: WHAT DOES A LOST DIAMOND COST THE STORE? Let’s use a ¾ million dollar a year store Here is a very typical Profit & Loss Statement.
|Typical Jewelry Store Profit & Loss Statement||Percentages|
|1. Total Sales||$750,000||100%|
|2. Total Cost of Goods||-$412,500||55%|
|3. Gross Profit||$337,500||45%|
|4.Total expenses (rent/payroll/supplies, etc.)||-$135,000||40%|
|5. Total Net Profit||$37,500||5%|
If we assume the princess cut falls out and its 10pts, at $981 a carat our cost to replace that diamond is $69.00.
If we assume the round diamonds are 4 pts, at $481 a carat the replacement diamond will cost us $19.00.
So tell me, where on our profit & loss statement will we get the money to give away a free diamond?
Will it come out of?
#2: Cost of Goods Sold?
#3: Gross Profit?
#5: Net Profit?
Choose which line you want, no matter what the $69 or $19 diamond cost it will come out of net income.
The 3rd column shows a very typical percentage on a P&L. So it’s not how much will the lost diamond cost us, rather it’s:
How much extra SALES will we have to do after paying cost of goods and expenses to have either $69.00 or $19.00 left over to pay for a free replacement diamond?
Its easy. DIVIDE the cost of a free diamond to give away by YOUR STORE’S net profit PERCENTAGE on your P&L.
- So how much in extra sales to give away a $69.00 princess cut 10 pt. diamond?
Divide the $69.00 by 5% and you’ll have to do an EXTRA $1,380.00 THIS month, above and beyond your sales goal, just to give away a free $69.00 diamond!
- So how much in extra sales to give away a $!9.00 round 4 pt. diamond?
Divide the $19.00 by 5% and you’ll have to do an EXTRA $380.00 THIS month, above and beyond your sales goal, just to give away a free $19.00 diamond!
When I was shown this by my accountant who had also been a watchmaker, I went into the shop and YELLED at the jewelers:
“Hey, can you do a better job of checking the stones before they leave the shop?”
They all looked at me and said:
“Crap happens David.”
That’s when we started the additional fee to check and tighten stones if an item has 5 or more stones in it (we didn’t want to penny Annie people on 4 stones or less, its’ sort of built in)
Going back to the pictures above if we size those rings smaller for $50.00, we add another $34 to it and charge the customer $84.00 total.
No…. We don’t tell them we will charge extra IF THEY ARE LOOSE or get loose. Like my car insurance company, we charge because it has diamonds that could come loose or fall out.
So, what will this do for your store? Let’s do a bit more match.
- If a store takes in 90 jobs a week (we took in almost 175 a week), which is $4,680 a year.
- 70% of those jobs have 5 or more stones in them = 3,276 jobs.
- You told all customers its an extra $34 and if 75% said “don’t want to”, you’d mark on the envelope “No stones loss guarantee, customer didn’t want stones checked and tighten.”
- You’d be charging the remaining 2,457 customers an extra $34.00 which brings in a whopping $83,538.00 that you didn’t expect but received because you asked.
- So how does that hit the P&L again? Simple: divide the $83,538.00 by your net profit percentage. Let’s divide by 5%.
- In this example, the $83,538 hits the next profit it will do the exact some thing to your bottom line as if you OPENED A 2ND LOCATION AND IT DID $1,670,760.00 IN sales!
- Another way is by adding this money to your stores bottom line. It would mean in the above example the store’s $37,500 net profit would soar to $121,038.
- $121,038 net profit at 5% would mean that would be the same net profit as if you increased this store’s total sales from $750,000 to $2,420,760.00!
- All from charging the extra $34 to check & tighten.
Now that I gave you all of this money (gosh, even if you got only half of it) couldn’t you unconditionally guarantee stones loss for a year? Even larger ones?
YES you could.
Get on the bandwagon, stores doing this STILL have a 90% closing ratio and so will you.
Director of Shop Profits