Vest Pocket Dealer Biz Model and Capital requirements?
yspsales
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Divesting alot of my collectibles into coins.
At a crossroads.
Do I just work on a quality 7070 styled collection? 1878 8TF Vam's?
Or as the title says.... deal... because I like the art of a deal.
Thumbnail sketch (input welcome):
Attend local clubs, and local shows. Travels to local B&M's, always looking for a small deal, crackout, Travels to larger shows to sell his finds. Build a network of dealers and trust.
By year three, grow to at least six East Coast shows per year... FUN x2, Dalton, Whitman Balt. x 3
Multiple small shows and vehicle travel to dealers B&M.
Estimate bare bones expenses at about $20K... Travel, submission costs, etc...
Breakeven would be ballpark $200K in sales split between Ebay and shows.
Profits build the collection.
Thinking 2:1 cash to inventory.
Cash $50K
Liquid key/semi key date inventory of $25K
Is it better to specialize?
Be a generalist?
Am I out of my mind?
Input welcomed.
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Comments
Buy on the internet and sell on the internet. Zero travel fees.
Specialize.
Capital requirements. It can be done at any level if you have knowledge of what you are buying.
Being out of your mind is a requirement to being a coin dealer.
Do it however you want...travel, no travel, selective travel, whatever. However, be aware that you will be in competition with an enormous number of other folks who will be hitting the same venues, same dealers and same websites. You have to work and know what you are doing (generally true for both) to do well.
In honor of the memory of Cpl. Michael E. Thompson
With "only" 75K in capital and no loyal clientele checking out your website every day, I wouldn't think about maintaining an inventory. Instead, look for opportunities wherever you can find them, do what needs to be done to quickly turn a profit, and move on to the next deal. Maybe one day when you have a lot more capital and a lot more customers, a standing inventory might make sense, but not yet.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
I'd also encourage you to stop thinking about expenses and income in annual terms. Instead, think about every single decision you make in terms of their direct costs and benefits. Meaning you should think of every single coin deal and every single expense as a standalone decision. You'll make smarter decisions, and you won't delude yourself into thinking your losses are OK because the profits will come in the long run.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
I would think sourcing desirable coins at the right buy price would be a significant start up challenge. Additionally, I'm thinking the market will soften a bit in 2023 onward, therefore your risk to resell will increase.
I hope you've also invested in your grading skills. That would be step one in my opinion rather than just being a slab jockey.
"Got a flaming heart, can't get my fill"
Some show organizers and dealers who have paid for a table may have a problem with you selling to punters who attend the show. After all, you are not a paying player.
Just my 2¢ (US)
USAF (Ret) 1974 - 1994 - The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries. Remembering RickO, a brother in arms.
Most importantly have a lot of buying cash. Making strong money is a must. If your lame on wheeling / dealing or a dummy doing quick, complex math don’t bother. Aggressiveness makes winners. A vest pocket trader friend told me at FUN one time after he flipped me a deal - “Estates - watch out for the crap, junk stuff. Remember - don’t let them hose u - They are getting it for free.”
Vest pocket dealers sell to dealers at shows. They can be a source of inventory a dealer may retail to the public. One I knew specialized in World Material especially World Gold. He had a job that took him all over the world. So he had sources where get stuff really cheap. He would hit many of the major shows like FUN and Long Beach when back in the states. Decades ago I once bought a deal from him of 200 French and Swiss 20 Fr Gold pieces beautiful lustrous BU like 8$ Over melt. Did very well w them realizing 50-100 pct over cost (ones that were real blazers). One gun show (setup with couple cases coins and currency) I did they sold like wildfire.
It takes being real sharp and having a grasp of “the deal.” Convincing sales and savvy negotiation skills a must. Once we were discussing (myself and vest pocket trader) a collector who was offering Slabbed Mod Commem $ mods at 60 pct. Of MV. He said “that’s not a deal 40pct of MV more like it.” When the collector came back to my table we partnered on the deal negotiated 45 pct and divided up the material accordingly.
You can sell to the dealers, however.
But, you are right. If I see someone selling to customers on the bourse floor, I'm not going to cut him any deals if he comes to my table.
It is easy to sell material if bought at the right price. It isn't that hard to buy material. It is, however, difficult to buy $200,000 in material at the right price unless you are already connected.
There's a million ways to do it. Most of them are not highly profitable. If you have to do $200,000 in sales to break even, what's in it for you? I don't think there are a lot of "vest pocket" dealers that do $500,000 in annual sales unless they are dealing in a handful of high end coins. But to do that, you need significant capital and significant connections.
Most vest pocket dealers I've seen are doing fairly small volumes and are mostly small fry who are too cheap to buy a table. If you are trying to do $200,000+ in annual sales, why are you trying to be a "vest pocket" dealer rather than just a "dealer"?
Buying from B&M dealers to sell to coin show dealers would seem to be a tough gig.
LOL. I wasn't suggesting that particular chain of custody. Although you'd be surprised. But even buying from B&M as he suggests would be a challenge. If you get a reputation as a cherry picker, a lot of dealers don't want to be picked. If you are looking for quality, dealers aren't going to give away their premium material. You better have a LOT of B&M dealers in your neck of the woods if you are planning on buying $250,000 premium coins per year.
The OP seemed to be:
"Travels to local B&M's, always looking for a small deal, crackout, Travels to larger shows to sell his finds."
Depends. I do alright buying from B&Ms and selling on eBay. However...
I'm looking to buy things the B&Ms don't want to mess with. Which, for the most part, isn't "premium coins".
Yes, I know. I do the same. There are a million ways to do it. The HARD way is to buy premium material. You have to be better connected to the money players than the dealer himself. The EASY way is to buy the material the dealer doesn't want to spend time on which is often foreign material, proof & mint sets, bulk material, NCLT, etc.
I do spend between $100,000 and $150,000 with B&M dealers annually. However, I'm not cherry picking them or even trying. They know I will buy almost anything that I think I can sell and that I pay a fair price. So when something unusual comes in, they give me a call.
I'm also about the last stamp buyer in the area, so local dealers will let me buy stamp estates that come in if I just throw them 10% or sometimes 20%.
Those are the connections the OP needs. But I didn't want to get into the details because it really depends on what his current expertise and connections are. Someone like @errorsoncoins can do it because he specializes so he can buy error coins at B&M's and auctions and then resell them. There are specialists for all kinds of things that can do the same. But I don't know the OP enough to know if he has the knowledge base in any area to be "The Guy" for X.
That's why I don't bother trying. Of course, you're not prohibited from buying premium material that the better connected money players don't consider "premium" as long as you're not also selling to them. My eBay buyers are more than happy to buy the things I find.
If I see something from the US that's attractively priced, I'll take a chance (local dealer had a bunch of BU/Ch BU BTW and Wash/Carver halves for $15 each and flashy AU/UNC 1942-44 PDS Walking Liberty halves for $12 each a while back) but otherwise, I pretty much stick with foreign. There's too much competition for US stuff.
That's a lot more than I spend, but I agree on the cherrypicking part. I get a fair amount of nice stuff because I'll buy the whole box and not just pick out the better pieces. What I want is for those guys to give me a call when they get something in that they don't really want to fool around with themselves because they know I'll take it all.
I've had dealers on occasion contact me when they were offered something they didn't really want, but thought I might. I'd tell them what I'd pay and they'd tack on something for their trouble and see if they could get the deal bought.
@jmlanzaf @MasonG and others...
Thank you for the feedback.
Been there done that bulk stuff.
Because, I am currently overwhelmed with sports cards, balancing a career, etccc the buying non premium bulk material from dealers was something purposely left out of the equation.
Cherrypicking (for lack of a better term) is more what I had in mind.
Sat down and looked at what $200K would mean.
It basically would be a fulltime job just listing items and shipping.
Guess I dream of being more a Richard Nachbar and less a bulk raw Ebay coin dealer.
On a percentage basis, I make a far larger profit on raw baseball cards than slabbed cards.
I would imagine raw coins could be the same.
Not ideally what I had in mind, but that is a fallback option.
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Richard Nachbar was not a vest pocket dealer and bought a lot of non-premium stuff.
As with any business, the question is what's your value added. With bulk stuff, it's the sorting and stuff. With premium stuff it's either knowledge (classic cherrypicking) or access to buyers.
The only bulk stuff I do are world coins purchased by the pound put in junk box for shows to sell at $1 each. Will even discount them if quantity of purchase 10 or so.
I usually have 2 - 3 cases at a show / slabs, currency stacks (graded and raw), some raw collector coins in binder (about $5-$100). It does not take some huge six figure investment get in the business. It does take being able to retail your material at a decent margin. Good Buying cash is critical. At a local show dealers let in at 8am the first day, public at 11am. So taking advantage of that I get there early, quickly setup, enjoy the free coffee and donuts, and head to the slab wholesalers table see what I can get (he owns shop in another city). Working your angle is key. Or I may go around the bourse see if any deals.
You make your money when you buy. There are a lot of briefcase dealers going from point A to point B that hit local B/Ms on the way to a show etc. hoping to buy stuff they can either sell on their sites or flip for a small profit at the show to specialists, etc. Some do better than others. B/Ms don't have a great local market for certain things that sell better elsewhere. The internet has made it a lot easier to move said items on their own, but, that said... if they just bought a deal containing a lot of such items, they might be more amenable to offering said items at a lesser price for a quick flip if you show interest in buying the whole lot rather than if you want to pick only the best material.
RIP Mom- 1932-2012
The Vest Pocket dealers have done business with did not do big ticket material except on one occasion a PCGS 58 common date $20 Lib. It takes hardly any investment be a vest pocket dealer.
Larry in coin club started setting up at shows in 1988 with a $10k inventory investment. Bought 2 display cases about $100 each plus cart to haul coin show stuff in. It takes 80 slabs fill a case. Extra space can be filled in w inexpensive world currency or pages of raw or junk coins. Hey sometimes the junk does better than the other stuff. A case can hold 480 slabs (stacked 6 slabs high). He already had about 60 slabs but lots nice WPM and some inexpensive world gold coins fill in empty areas until more slabs obtained. From there he increased inventory rapidly from money put aside from his job. He had already read Bowers Book on how to be a successful coin dealer.
Be prepared to tie up a lot of cash for pretty small margins. Balancing the quick flips, long-tail higher margin items and cash on hand is one of the biggest hurdles to get over. Assuming you can find fairly priced items to buy with room to resell.
I've cherry picked a dozen or so coins from B&M's that I sold for 3x to 5x on eBay. Not all dealers are experts in every area. As a result, their pricing can be very whacky. But doing this in any volume is the problem.
Good luck,
Dave