Daily Wire Tip Jan. 3: What is Real Time Pricing?

Daily Wire Jewelry Making Tip
January 03, 2010

Question:

In one of your replies you mentioned ‘real time’ pricing.  What is this?

Answer:

What I mean by ‘real time’ pricing is to price your work using the prices that you will need to pay to replace the stock you used in that piece.

Answer contributed by Dale “Cougar” Armstrong

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6 Comments

1. 

   Gail Fryer

   January 3, 2010 at 9:11 am

   For instance?
   • 

     dalecgr

     January 3, 2010 at 11:00 am

     For example, if you paid $29.39 for 10 feet of 20g round sterling wire and made a pair of earrings that used a total of 6-inches, personally I would round the wire price up to $3 per foot so the wire cost is $1.50. I then add in the cost of any other supplies used in the finished product, like handcrafted ear wires using 4 inches of 21g round at $23.83/10ft (rounded up to $2.40/ft or $0.20/inch) so their cost = $0.80, and the beads used may cost $1.60, so the ‘real time’ cost of supplies for this hypothetical pair of earrings would be $3.90. I then multiply this cost by 3 (once to replace supplies at real time cost, once to cover any price increases until my next supply order and/or incidentals, and once to cover studio expenses) and then add in my labor cost at whatever per hour (for most things I personally use $25/hr,) so my labor cost for this pair of 15 minute earrings would be $6.25, and the ‘real time’ retail price of the finished earrings would be $17.95. Because I am paying myself, I can lower my retail price as much as I would like if needed, or sell on consignment and still make a profit.

     Most of my students begin their rates at $10/hr and then increase as they become more proficient with their skills and work more quickly. In this way a well-made wire jewelry item is offered for sale because the student is not worried about how much profit they are making while on a learning curve. For example, if two pair of these hypothetical earrings have been made, one by me in 15 minutes and one by a student in 30 minutes, the retail ‘real time’ price would be about the same, and the customer would be looking at two well made earring products. As the student becomes more proficient with their skills and works more quickly, still producing a well-made product, and sells the earrings at the original price, they are then making more per hour.

     This is just what works for me and most of my personal students, you may have another way of pricing. Remember that YOU have to feel comfortable with whatever pricing formulas you use.
2. 

   Val Bogdan

   January 3, 2010 at 12:15 pm

   Thank you for making this easy to figure out. I have been doing that to an extent and have been selling my work using that formula, but always felt guilty about multiplying the cost by 3. I won\’t anymore! Val
3. 

   Juan M Colon

   January 3, 2010 at 8:39 pm

   Thanks, I think this is a good method for pricing. But, what about
   new ideas with new pattern, new ivention. Should we use the same pricing method?
   • 

     dalecgr

     January 4, 2010 at 9:54 am

     Juan, when working out something new, I consider that the ‘learning curve’ and I do not charge for that, neither do my students. We usually work out the design first, often using less expensive supplies and making notes and diagrams as we go, to remember exactly what was done, corrections made, etc. Then make the piece again with resale in mind.
4. 

   mary

   January 4, 2010 at 9:50 am

   Okay, another way, is cost plus figuring. Using Dale’s figures as follows. $3.90 for materials and $10.00/Hrly Rate for labor (minumum 1 hr.) = $13.90. Now, take that figure and multiply by 1.15% Overhead, which covers misc. items like packaging, or such. Comes to $15.95, then multiply that by 1.10% Profit and it comes up to $17.58, fairly close to what Dale had. Round it off to $17.95 and there you are.