How to Price Jewlery

I may think $75 is a fair price for one of my necklaces, but what is it really worth? When I sell a piece of jewelry I need to be making money on it but often that means pricing it above what I personally may think it is worth. I suppose what really matters is what my customers think it's worth but that's a subject I'm going to dedicate a whole 'nother entry to.

Different artists value the same piece differently. Here's the same bracelet (materials and design) priced at $20 and $50 by two different artists. It also happens to be a design I make, though not in bracelet form. So what's reasonable pricing?

"Home Jewelry Success Tips" has a formula here and there are many articles linked to here at "Make for Business" most of which I haven't gotten to dig through yet. All the formulas can be broken down to include materials, packaging, labor, overhead, and profit. The formula in the first link is as follows:

Base price = (cost of materials + packaging) x 4 + your pro-rated hourly labor rate + 10% of that total for overhead costs.

The first question I had was why are the materials multiplied by 4? Well, the business needs to make a profit, above what you pay yourself hourly. This way you can buy new materials, packaging and tools. If you only pay yourself for the materials you used you can only buy enough new materials to make one more piece, much less any tools you may need to buy or replace. If you multiply your material cost you give yourself funding to buy more materials to make more pieces, and buy any tools you need.

So let's take the piece I feel should sell for $75:
My materials cost for that piece is $8 plus $2 for packaging. Times that by 4 gives me $40
Research shows that most independent jewelers pay themselves $20 per hour. This piece takes me 4 1/2 hours so right there we're at $90. Plus the $40 and we're at $130. Wow, and we still have to add 10%.

So my "$75" piece is calculated to sell at $143. Gulp. Most emerging artists tend to undervalue their work, and it seems I am no different.

So now I have some options.

• Sell the piece at the calculated price. This is the most profitable but also the scariest option. If there isn't a customer who also values the piece at that high of a price then I have no sale to show for my materials and work.
• Adjust my formula. I have never been paid $20 an hour in my life. In fact, when I was working, I was working for half that, and doing something much more difficult than making jewelry...long story. So, while I may be worth $20 an hour, I have a very hard time making myself believe it (Have I mentioned my low self-esteem yet?). So I can adjust my hourly wage. I can also adjust my profit margin, but no less than materials times 2.5, below that and I'm likely to be losing money when buying new tools and materials.
• Toss the formula out and sell the work for what I think it's worth. While this is an option it won't be the one I'll be taking. Not only will I not be making any profit, I will likely lose money through overhead costs. I also won't be making much at all for my time (I may not think my time is worth much but at least I know it's worth something). Not only would this option hurt my business, it hurts the handmade jewelry business as a whole since it leads customers to expect cheap prices when they aren't sustainable for the artists.
  
• Adjust the design. By adjusting a design to use less materials or to simplify it so it takes less time to make you can bring down the price of the piece. This works nicely for some pieces, and some actually benefit from simplification. Others, like the one I have in mind, just can't be slimmed down anymore than they already are.
• Work more efficiently. This is another subject I'm going to post separately on because it's so important. There are countless ways to make your life easier and make your work go faster in the studio. If you can cut down the amount of time a piece takes to make you also cut down the cost.
  

To wrap up, because it's getting awfully late and my head hurts (math was never really my thing), I will probably adjust the formula until I come up with a price that makes me a decent profit and won't make me feel like I'm ripping people off.