Becoming a part time dealer
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Let's call this a thought experiment. You collect coins and you decide that you want to try your hand at a little dealing. You have $1000 starting capital. The goal is to see how far you can get in one year. What do you start with in the numismatic world? Morgan dollars? Low grade keys? Gold? Moderns? Silver bulion? How would you begin to solve this puzzle?
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This will be a lengthy discussion but in a nutshell... eye appeal is mandatory especially with the common stuff like Morgans... Other than that, key & semi-key dates of the more popular series is always a good idea.
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Start with what you understand, and that you have a reasonable expectation of being able to acquire at a price that allows for you to earn a profit reselling.
Just a bit of information I have seen posted here in the past. "How to make a small fortune in coin dealing." "Start with a large fortune!!"
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With $1k to start with, you have to start pretty small (assuming you’re not selling out of your collection).
A few smaller deals with decent margins and plow it right back into inventory. If you’re considering this, you must already have some connections on both the buy/sell sides and you’ll have to lean hard on them. As stated above, what do you have access to and what do you know? Morgan’s are easy if you can buy them right. Semi-keys should be available and turn quickly. Gold might be tough in the beginning. Might as well just do bullion (instead of coin dealing)…that’s my experimentation with thought. I’m exhausted.
Learn varieties and hope that when you cherry pick a PNG dealer/ “ Top 100 most influential dealers” and pay for the coin they fulfill their obligation.
If you're not competent, you can lose money doing anything.
I suppose let me start with a story. At the beginning of 2021 I bought $1000 of an S&P index. Juxtaposed to that I purchased $1000 worth of Magic the Gathering cards. The intent was to hold each for a year and see which performed better. The cards went up so fast I flipped them for a couple months, dropped the proceeds into securities, and called it a day.
So I'm considering a similar challenge for 2022. Drop $1000 into an index fund. Then take another $1000 to see if I can out preform by flipping coins for a year. I have an idea how I'm going to approach it. I'm curious how other would.
You buy coins that you can sell for more money. $1000 is broke is todays coin dealer realm. Vest pocket dealer? If you want to become a vest pocket dealer-never tell your BM dealer that you are one. I made that mistake once and that dealer hated me ever since.
Depends on how much work you want to do.
It all depends on how much work you want to do.
Buy low, sell high.
Interesting. The B&Ms around here that I buy from know I buy to resell and I don't have any problems with them at all. They'll even let me know when they've got stuff I'd be interested in.
Sounds like fun, but this really is just gambling.
Buy at the top of the stock market before a sell-off and you could wait years to break even.
Buy collectables in a rapidly expanding market and rake in easy money. Buy on the downside and you're swimming in worthless Beanie Babies.
The stock market is a better investment than most anything else over the long term, but dollar cost averaging into it is the best way.
On the other hand, you could have doubled your money in an hour or two yesterday if you had bought and flipped the SE set.
stay focused on areas you are up to speed on
id start with rolls of ASEs, lotta ppl filling holes
Morgans, Walkers, certified
Silver bars are a good impulse item
Buy items you can move quickly for a profit. It seems that lower end coins and currency seem to have better margins for me. Key dates and gold generally have lower margins.
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Lower priced items do have better margins, but they are also very time-consuming. You need to find the right balance for you.
I've done well this year with flipping mint products. You have to know which ones to go after though, and it's not an every year thing.
Get a job, put money in your S&P. No work at investing.
Become a part time deal, then full time. Giant Herculean task. Work 7 days a week up to 16 hours a day. Reinvest all of your sales into new inventory growing all the time. Master the skills needed to run a profitable business. After awhile, start diversifying into the S&P
If the objective is simply gaining as much capital as possible, then you will end up working full time and then some. Labor is a very necessary component of dealing, especially when starting out. As someone mentioned above, smaller items tend to have better margins but require more work to generate the same absolute profit as more expensive item.
Since you are extremely capital limited in this hypothetical, I would search varieties and world coins (depending on one's expertise) and flip via quick auctions or directly on the bourse. You won't get fair market price, but it's a good combination of margins and quick sells, if the varieties or world coins are popular enough. Needless to say, this would be labor intensive AND requires knowledge.
An interesting question for sure. Balancing these three factors (labor, capital, inventory turns) is one of the keys to being a successful dealer of any stripe. That and knowledge.
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Almost nobody pays for that though.
OP, the best way to multiply that $1k is to roll hunt quarters for W's right now. Work hard and I bet you can quadruple your money no problem. Once you get your bankroll north of $10k, then maybe start looking at flipping coins.
My inventory is $20k-$30k or so most of the time and I turn that over 5-7 times a year. It's more work than you think.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
I start at local shows with local exonumia as my focus. That would make my table stand out from the others with interesting things. Then I’d have a few choice type coins in the cases and a little bullion.
Some things to keep in mind:
1). Keep records. Excellent records. Not just what you bought each item for and what you sold it for. Record all your expenses.
2). Realize that at the end of each year you'll be required to file the tax forms required for your business (Schedule C).
3). Realize that your net income (profit after expenses) will be taxed at your marginal tax rate; i.e., if your other income puts you in the 22% bracket, your net income from the coin business will be taxed at that rate at least.
4). Realize that you'll also be banged for the "self employment tax". Think of it as a "Social Security tax". At your regular job, you pay 7.65% and your employer pays 7.65%. Your 7.65% is withheld from your pay, so you probably never miss it. When you have income from self-employment (as your coin dealing income will be), you pay the full 15.3% on your net income (profit after expenses).
5). Depending on where you live, there may be state/city income and sales taxes to deal with as well.
Some will likely advise you to conduct your coin business "under the table"; that is, without filing and paying taxes. Dumb choice, it will be hanging over your head forever.
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I do not mean learn high end coin photography to photograph other people coins like some here do.
I mean learn high end coin photography to photograph your own coins. You can make 100% on just the arbitrage between poor and great photography.
1000 is not enough working capital.
Depends on how much time you have and how hard you want to work and your skillset.
I started with a negative amount 20 years ago.
How many coins or bullion do you think you can buy for $1000? Are you going to do shows with 10 $100 coins? or with 20 $50 coins? $1000 is not nearly enough to even consider becoming a dealer in my opinion.
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Funding a coin business with $1,000 is like saying you want to put $10,000 into a real estate purchase.
He who knows he has enough is rich.
If you started selling wheaties from a hot dog stand, maybe a thousand would last a week or so.
There isn’t a niche you should focus on unless you know one in and out already. You should find a repeatable formula where you can add value at a consistent percentage and scour the globe for those opportunities. For example buying raw coins that you know sell for more graded, then buy a bunch or raw coins that fit the margins and get them graded. Find NGC coins that bring more in PCGS, undergrade coins or coins that will CAC…. Something.
Trouble is there are others working similar niches. IMHO raw world coins that move quicker holdered is a rapidly expanding market but you better know your stuff
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The biggest question I have always had for dealers, is where do you get coins from? As a collector I am constantly scouring auctions and dealer websites. It has often surprised me to lose an auction and then see the coin show up on a dealer website. (How do you make money outbidding your own customers for inventory?).
I can imagine well established dealers buying coins from a large network of customers. But for someone starting out... where are you getting coins from, reliably? You can snag a good deal once in a while from something overlooked or underpriced if you find it first. But if you need to turn a million $ in inventory each year on a 10-20% margin to earn a living, where are those coins coming from??
Likewise for bullion dealers. Can you get enough of a wholesale/quantity discount to sell bullion profitably?
It certainly has crossed my mind to one day quit my job and start selling coins instead. But where to find new coins once i've sold the ones I have is always the gaping hole in the business model.
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Open a storefront and pour thousands (and thousands and thousands) of dollars into rent and advertising over a period of years long enough for people to recognize you're there. Spend a number of those years figuring out who in the business buys what, since you won't have local buyers for most of what you're offered. And then, once you have generated a steady stream of customers, you get to read message board posters whining about how you rip off widows.
Ready to quit your job yet?
I agree.
You have to have enough to not have to pass on a deal that could be lucrative.
To even start off small you would need 3-5k, and then you would have to plow all sales back into Inventory that would turn quickly.
What's your angle?
You can't just buy blast white common Morgans or Walkers, or circ buffalo nickels.
How could you compete with the big guys?
Unless you have an in, you will be the fourth or fifth guy snacking on the ribs. How much meat is left then?
You need to stand out from the crowd and handle a different type of inventory in my opinion in order to succeed with low capitalization.
But here's the rub....by the time word gets out to buyers who want what you are specializing in, will you still be in business?
There's a lot of good advice here. A few random thoughts:
You don't compete with the big guys. You find a niche the big guys aren't interested in. And when you do that, you can get coins from them that they don't want to mess with.
I just want to echo what @Crypto and @jmlanzaf said about having a niche. That is the best way to be successful. There's a bunch of guys out there trying to do the same thing, and some of them are very sharp. You would be surprised how much competition you will get. Play to your strengths, and keep learning.
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Especially once somebody sees you make a buck doing something. I used to cherry trade varieties with like maybe 4-5 other people. That number get to maybe 2 dozens and the deals dried up overnight. There are a 1000s niches like that but you have to be the best or most persistent and prepared to move on when the well runs dry.
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Keep good records, data is fun! Then you can look back and shake your head like I do. Taxman can't get you if you lose money right? Also, I tend to not want to sell the really nice coins that I buy, so the data is a bit skewed.
Year TotalSpend Profit MostProfitOnSale LeastProfitOnSale
2018 $5663.41 $517.82 $277.23 $-305.89
2019 $36829.91 $-910.65 $719.98 $-589.87
2020 $21715.95 $-2686.26 $251.50 $-1201.20
2021 $10706.31 $2144.74 $2004.03 $-432.25
That is the point I was trying to make, perhaps a bit clumsily.
To not stock what other guys do.....because if you're small-time, why bother because you can't compete.
I'd be curious to hear how you do when 2022 is over. If one has a bit of money to play with and a bit of expertise with the willingness to continue learning, why not give it a try. Sounds like it could be fun.
You nailed this one! lol
Like so many businesses, the coin game can be really cutthroat.
There are some good suggestions here. Let me attempt to put a cap on this. It is all just a game. The parameters are you have $1000. How would you approach this situation?
My numbers are all arbitrary. I understand that $1000 "isn't enough". When I originally started I had already acquired roughly $1000 worth of cards. My S&P contribution was already planned. It was as good a benchmark as any. My numbers weren't perfect. They were just where I randomly started.
My goal is not to build an empire, I needed something to do. For several reason I don't play cards anymore. I'm not traveling. I'm not playing in tournaments. What am I going to do to fill this time? Let me make up my own game. When I decided to give up Magic I made coins my primary collectible hobby.
I have a rough idea how things will play out for me. I study dimes. I'll travel to shows and probably just look for what I know. If I find something I like or a variety I don't have I'll just keep it. If I find a good deal or a duplicate maybe I sell it.
Succeed or fail it doesn't matter. I am looking for something to challenge myself with in this post pandemic world. Maybe I'll change the rules again in order to refine what I want the challenge to be.
On a busy day in the shop, a 1k bucks wouldnt last 20 min.
I didnt get this deal 2 weeks ago, but I made an offer on a group of $20 gold, at 203k, and my profit would have been 3,500 bucks. But was beat out by an offer that netted the other dealer 2k profit. Talk about thin margins
It's kinda funny. You all have said $1k isn't enough to start with. But yet many of you have said know your market and series. Well, if you had taken @jwitten advice, that bank roll would have been pretty impressive this year with ONLY flipping mint products.
For instance, this week, the $1k could have easily doubled with the help (and payment to) a few friends.
Go back a few more weeks. Easily could have added 50% off the "S" mint proofs.
Go back a few more. Add another 50% for the "W" proofs.
Could be to $4k pretty quick, and that is only 3 releases. And there have been at least 10 moneymakers this year. Oohhff! That bank roll could have been pretty impressive with the help of a few friends, and very little effort.
But ya gotta know the market, yes? And once the bank roll has grown, pretty easy to get into all those other things as well.
Mind you, I have a feeling that lots of people do this in the coin world each year. So obviously, it isn't a big industry secret. Going beyond that tho....takes a wee bit more effort, smarts, and experience.
Surf
And that is why this biz is tough....jeez....1.5% margin? Gotta string a bunch of those to keep the lights on....
Most of the comments here are telling you how to be a coin dealer for a living. I don't think that's your goal. If I read your post correctly, you're just looking to have some fun. Buy $1000 worth of coins, flip them, by more coins, flip them, and see where you are at the end of the year. If that's fun for you, have at it. My guess is at the end of the year you'll have somewhere between $200 and $1200.
Where are you going to buy and sell? eBay? Shows? Auctions?
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He said "part-time dealer". That's different than flipping 1 or 2 coins per year.
In many years, there is nothing flippable.
Yes, but the other way to look at it is it's $2000 for an hour's work.
Market niche😀
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He prolly invested an hour or 3 in the bid. Then he's got to pay all the overhead and shipping insurance, etc, on their way to the next flip. My guess is it is about 5-10 hours of work, and a bit of worry here and there. At least it would be for me.
Not for a dealer. They do this all the time. It was a bunch of 20s. Other than hitting them with a gun, pricing would take under an hour. Sale takes a phone call that was made during the hour that the pricing was going on. Shipping is easy, if you ship all the time. Sometimes you just drive it over, if you are close enough.
We literally did a $100k gold deal (Eagles) in a total of 3 hours and 2 of those hours were the round trip to the Gold Man which is one city over from where I am.
Most coin deals are low margin. For the average B&M dealer, 99% (dollar basis) of margins are under 20% with probably 90% of them at 10% or less. A LOT of that business is usually bullion like the deal discussed where you might do 5% routinely.
There are, of course, high end specialists. But that is a very different business. Most dealers pay the bills predominantly with 5% margin sales. That's why other collectible dealers laugh at the coin model. It's INSANE. You're almost better off selling anything else.