Profit Margin for Handmade Jewelry

Profit margin is a measure of how well your jewelry business is doing. To calculate profit margin, subtract your costs from your sales, or gross income; the result is net income. Divide net income by gross income and multiply that figure by 100 percent; the result is profit margin. To raise the margin, you must keep your business costs low and price your jewelry so that it’s profitable.

Making jewelry is labor intensive, even for the most skilled crafter. Your collection likely includes one-of-a-kind pieces. Factor into your price the time you spend designing and assembling each piece. Set your price to reflect your skill as a jewelry maker.

Lower your labor costs and raise your profit margin by speeding up your production time. Your potential sales volume increases with faster production. Jewelry makers typically pick up speed with experience.

Set prices that cover the cost of materials and labor to raise your profit margin. The range of materials for making jewelry is broad and so are the costs. Base your prices on whether you use precious metals, for example, versus base metals for earring hooks and clasps. Use the same strategy if you prefer low-cost acrylic parts over semiprecious stones for beadwork. Set appropriate prices for environmentally inspired jewelry; even no-cost recycled materials have greater value when crafted into jewelry.

Tools also range in variety and cost. Decide whether you need a high-quality stainless steel wire cutter with thick padded handles for your work or if a lower-priced, good-quality cutter would suffice and keep down expenses.

Where and how you sell your handmade jewelry can raise or lower your profit margin. A business website with a reasonable monthly fee might be an economical way to showcase your handmade jewelry. Commercial selling or bidding websites can post your jewelry for a nominal fee.

Renting a brick-and-mortar space allows customers to see your work up close. Instead of renting space, however, you might offer retailers a commission to sell your jewelry in their shops.

Jewelry is a popular-selling item at craft fairs. Local events sometimes are free. Others charge application/booth fees of up to $500 for a two-day event. Craft-fair expenses also include travel and set-up time. Determine whether craft fairs can generate enough sales to cover your costs and raise your profit margin.

Finding cost-effective ways to market and promote your jewelry business can raise your profit margin. Using email advertising instead of buying costly newspaper ads is a no-cost promotional strategy. Blogging on fashion and jewelry websites is another. Participating in business expos and other community-based events are low-cost ways to promote your jewelry.

Craftspeople often have trouble setting prices for their goods because they don’t know what their creative work is worth. They often underprice their jewelry to keep from scaring off customers. They reduce prices when their pieces aren’t selling, or when they’re financially strapped and eager for a sale. Consider pricing your jewelry by the “cost of goods sold” or the “what customers are willing to pay” methods. Under “cost of goods sold," you mark up your jewelry by a percentage of the cost of materials and labor. With the "what customers are willing to pay” method, your profit margin is likely to be higher if your customers believe your work is worth the asking price.