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So, You Want to Put Your Jewelers on Commission?

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So, You Want to Put Your Jewelers on Commission? So, you want to put your jewelers on commission? The purpose of placing your jewelers on commission is not punishment. It’s to improve the company’s shop profits while allowing the jeweler to earn a better living. When you first mention “commission” to a bench jeweler, their first impression is “wages of a sweatshop.” Nothing could be further from the truth. For a jeweler to be on commission it must be fair and good for the jeweler. It’s its not you could very easily lose a valuable employee, we don’t want that. This doesn’t mean if their pay drops we go back to salary either. More on that later. “Fair and good” is defined as the following: 1. There must be more than enough work to keep the jeweler busy. If there is a lack of work it’s not fair to pay commission, as there would be no pay when it’s slow. 2. The jeweler shouldn’t be interrupted, for the most part. Inherit in our field is the jeweler getting asked questions. Training the sales staff will reduce that, I’m pointing more to having the jeweler wait on customers, call vendors for their own part needs, etc. If you can reduce or eliminate these “pay robbers”, then you’ll do well on commission. 3. You must charge the correct prices. You’re going to give the jeweler a percent of the retail labor charge. If that percentage doesn’t pay well, you’re under charging. Stop that now! In our store we had developed the jeweler’s commission with the help of an accountant that had been a watchmaker (and still is today). This was the first accountant I had ever hired that could help me with pricing. The break through cam when he asked me if I knew “what percent of store sales goes to salaries?” I didn’t know and he told me typical for jewelry store was 20-25%. So we chose a number in the middle and we paid 22% of every labor dollar to the bench jeweler. Our commission system was off and running. We have always had a separate polisher so our jewelers don’t do the polishing. If your jeweler does the work plus polish, you should pay 26% of the labor price. So if you charged $10.00 to do something, the jeweler gets $2.60. Why 26%? Simple, once you add in matching FICA, Medicare, workers comp, health insurance, etc – you will have paid collectively 33%. You are looking for a 3-time markup on repairs, aren’t you? Once we started paying commission our profits from the shop soared, as did productivity. Before commission we kept 350 jobs in the shop. It took 8 weeks to make a ring and 4 weeks to size it. After commission we kept 450 jobs in the shop, 6 weeks to make a ring and 2 weeks to size it. But many of our jewelers complained that certain jobs didn’t pay well. Why? We used “comparative pricing”. You know, calling the store down the street to see what they charged. We decided that was crazy as repairs aren’t price sensitive, they are trust sensitive. PH: (404) 255-9565 | Fax: (404) 252-9835 | [email protected] 510 Sutters Point Suite 100 | Atlanta | GA | 30328 © Copyright 2004 Jeweler Profit So we bought each jeweler a time clock and had him or her clock in and out on the back of envelopes. Now we knew how long it took, and then added 25% to that for down time. Our correct price book assumes we will pay $40,000.00 to $50,000.00 a year for a jeweler and multiplies that cost times the time study. Thus we get a 4- time markup on the labor initially and we added to that a 3-time markup on the finding. When we did the time study we found out that charging $10.00 to do something and paying the jeweler $2.60 didn’t pay the jeweler enough money. So with the time study or by asking the jeweler we found that we had to pay the jeweler (as example) $3.50 to do this procedure rather than $2.60. This paid them fairly. So now we know we should pay $3.50, but what should we charge the customer? Simple. Divide the $3.50 pay to the jeweler by 26% (or .26) and we find we now have to charge $13.50 rather than $10.00. In our book we carried this further as we didn’t want to pay the jeweler a percent of the finding. As an example we charge $47.00 for a 2mm round 14kt barrel clasp furnished and soldered to the customer’s chain. It takes two solders to install it and that’s what we pay the jewelers commission on. To solder a jump ring closed we charge $12.00 per solder. Therefore the installation of the clasp is 2 x $12.00 = $24.00. The jewelers get 26% of the $24.00 solders, or $6.24. With matching taxes, our cost for labor is approximately $7.80, 1/3rd of the $24.00. So in our price book we laid out the retail for the clasp and a coded column for the jeweler’s commission. Under our commission system our jewelers earned 30,000 to $60,000 the last year I owned the company, with 2 earning in the mid $40’s. Others I’ve helped with commission have found most of the time the jewelers get an increase in pay while profits go up. There are a few times when pay might decrease. Assuming the jeweler isn’t bothered a lot and the prices charged are correct you probably have a slow jeweler. One thing this will bring to life is the lack of profits in the shop. You have several options: 1. Raise your prices so the pay the jeweler gets receives in commission increases. Your gross profit would too. 2. Increase the percent the jeweler receives. At 26% the cost is about 33%. If you paid the jeweler 33% rather than 26% your cost with benefits would be approximately 42%, a little less than a 2.5 markup. I’m not in favor of this option; shop work needs more profits to pay for mistakes. 3. Train the jeweler to be more productive. I’m a big proponent of sending your jeweler to any of these 5-day courses to brush up on advanced setting and repair techniques. This will repay you in increased profits within 90 days. 4. Replace the jeweler. My last resort but hey, would you keep low performing sales people? It took me 2.5 years, 30 hours per week just to put our pay and sales formulae in a book form to be sued for the staff. It paid off handsomely for us as well as the jewelers. Once instituted I had some jewelers leave. But the ones who stayed increased their incomes by 50% within 6 months. It turned our company around in profitability almost immediately. We did have to look closer at quality, some people liked to rush. But I’ll take more inspections while being profitable over unprofitable “perfect work” any day of the week. The commission system is built into our price book. It should be a win/win situation for the store and the bench jeweler. PH: (404) 255-9565 | Fax: (404) 252-9835 | [email protected] 510 Sutters Point Suite 100 | Atlanta | GA | 30328 © Copyright 2004 Jeweler Profit .
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