Sales Terminology
Used in Business

The purpose of sales terminology: Before looking at the formulas for pricing and figuring costs, you need to have a basic understanding of the meaning of the cost factoring terms used in business.

    Material Costs
    The total cost of all raw materials and finishing products used in making an article.

    Labour Costs
    Labour is the value placed on the time you, or someone else, spends in making an item.

    Overhead Costs
    Above and beyond the cost of materials and labor, which are directly related to the jewelry you produce, you must also consider all the costs of being in business. Rent, utilities, phone, automobile, etc, are costs that are indirectly related to producing your work called overhead. In order to stay in business you must include these costs in your pricing formula.

    Selling Costs
    What it actually costs you to make a sale. Your selling costs are any money that you must pay in order to get your product to the final customer. These costs include a wide variety of expenses, such as booth fees, display items, advertising and promotional materials, sales help, your portfolio, etc.

    Gross Profit
    Another sales terminology is Gross Profit. It is the total amount of dollars received before deducting costs of selling your products. If you retail a piece of work at a craft show for $30 and it cost you $15 to produce it, then you have realized a gross profit of $15.

    Net Profits
    The amount you have remaining after deducting operating and selling expenses. Using the example above, your net profit would be less because you would need to deduct the expense of selling your products.

    Indirect Costs
    Indirect costs is another sales terminology and it is the cost of doing business other than the actual cost of the object or materials. Insurance, rent, heat, taxes, etc. Keeping track of these expenses and assigning them to the work you produce can be complicated, but it's necessary if you are to make a profit from your business; that is, take in more money than you spend.

    Direct Costs
    Direct costs is a sales terminology associated with the manufacture of any jewelry piece include money spent for raw materials and finishing products, as well as for any directly related services and labor.

    Variable Costs
    The sales terminology Variable Costs are your direct costs in producing your work, theses costs are variable because they will be different for each distinctive product. Every new product takes a different amount of material and length of time to produce. If you don't make anything you don't have these costs. The more you produce the more you spend.

    Fixed Costs
    These are your indirect costs or overhead expenses that you must pay whether or not you are making or selling anything. They cover all the expense of doing business except for the materials a product is made of and the time to make it. They would include your monthly bills such as rent, utilities, insurance, bank charges & interest and any other operating costs to keep your business going.

    Credit Cards
    Also known as charge cards, are also considered in the list of sales terminology. Allowing your customers to use their VISA or MasterCard to purchase jewelry from you substantially increases sales.

    You can apply for this charge card service through your local bank. There will be a fee to process your application and you will be subject to the regular checks that banks do whenever anyone opens an account at any bank, including a credit check. Once your application has been approved the bank will issue you an electronic and/or a manual card imprinter, merchant # and plate.

    You will be charged a service fee ranging from 1.8% to 3% on all transactions to your account. The rate varies according to the volume of sales you record each month.

    Credit cards also come in handy for your own personal or home business use. These can be especially valuable when you are out of town or are making a purchase by phone. Many jewelry designers use charge cards for all their expenses away from home because the bills are sent to their business and provide a clear and concise record of all their business-related expenses.

    Terms of Sales
    Making a sale to a retail store or some other wholesale customer usually requires an agreement upon payment terms or condition of sales. With this sales terminology, these are the most common terms and conditions that should appear on your price lists and invoices:

    • Payment Term. Net 30 days is the most common payment term and simply means that the customer must pay the invoice within thirty days.

    • Cash Discounts. 2/10-net 30. (2% 10 Days Net 30 Days) This term rewards the customer for prompt payment by giving him a 2% discount if he pays within 10 days, otherwise the full amount is due in 30 days.

    • Quantity Discounts. These apply if a total order either exceeds a certain dollar minimum or is based on specific quantities of a specific item.

    • Minimum Order. Specify whether you have a minium order. What are the extra charges if the order is below the minimum?

    • C.O.D. This is another way of collecting your money. C.O.D. stands for cash on delivery, and means that your order will not be delivered to your customer until the delivery agent collects the full value.

    • Shipping Charges. You must specify who pays the shipping charges. This charge is usually paid by the person ordering the goods. If in doubt note on your invoices that all orders are shipped F.O.B. (the location of your studio). If your studio is in Toronto your invoice would read: All Orders Shipped F.O.B. Toronto, Ont.

    • Returns and Claims. Specify claims limitations, such as "Returns or damage claims are not accepted unless made within ten days after Receipt of Merchandise."

    Exclusive Rights
    Exclusive Rights is another sales terminology you may see. Some shops will ask for an exclusive right to sell your work in their particular geographical area. Sometimes it is in your best interest, sometimes it is not. If it is a quality shop in a rural area or in another state or province, you probably would be safe in granting an exclusive. If, however, a shop in a metropolitan area wants an exclusive and there are ten other shops selling jewelry of equal quality, you should think twice about getting tied down to an exclusive.

    If you do decide to grant an exclusive, a few precautions are advisable:

    • Make sure the exclusive arrangement is in writing. Include a termination date of no longer than six months or a year. If sales are good then it can easily be renewed after that.
    • Define exactly which jewelry items that are covered. If you make a line of semi-precious stone bracelets and a line of lampwork bracelets, are all your bracelet products included in the exclusive arrangement?
    • Indicate the exact geographical area that is covered.
    • In the agreement have a certain minimum volume that the store must purchase or sell.
    • Spell out what advertising and other promotion activities the store will engage in to promote sales of your work.

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