What would it take to become a large volume dealer ?

tennesseebanker

I was wondering how much money it would take to start a card business the size of 4-sharp or Dsl. Would someone be able to make a pretty good living from sales on e-bay or other sources.
Would buying unopened product, submitting to grade and selling on E-bay garner enough income to be a full time dealer? Or would the expenses outweigh the profits?
Any opinions appreciated, Thanks !

mikeschmidt

Just like anything else - quite simply, it depends.

A) You need at least six figures to start up such a business.

It depends on your abilities and your costs.
B1) Do you have a network from which you can purchase quantity of product cheaper than the general marketplace?
B2) Is your grading eye better than the average individual?
B3) Are you close enough to the market to know what is going to sell and what will cause losses?
B4) Do you have a distribution network for sales? Ebay is often *not* the best avenue
B5) Who will do the packing/shipping for you? Who will break open tons of product? Who will sort through what to submit and what not? What about scanning, managing Ebay and other accounts, etc.

It's just like anything else. You can probably do a decent enough job if you became full-time, found a niche and dedicated yourself to it. But you have to ask yourself if you would enjoy it, if you have the patience for it, and if you think there is a niche that is not already taken by others doing the same thing.

~ms

tennesseebanker

thanks mike, very insightful breakdown.
I was thinking about doing this full time and thought about starting a little smaller to see how it goes at first. I think I definately have a passion for it and a very good grading eye. I think if I looked into it further I could probably find a supplier willing to supply product at below what most folks could find it for.
I thought about borrowing about $10 grand buying a few unopened cases and going from there.
Just a thought, I will have to look further into it.

Would anyone want to venture a guess as to what 4-sharp or some of the other big boys take in profit wise??

mikeschmidt

<< <i>
Would anyone want to venture a guess as to what 4-sharp or some of the other big boys take in profit wise?? >>



Hard to say. I am sure that they do well enough to make some good money - because if they weren't, they would likely do something else. Solomon Cramer - one of the smarter businessmen that used to be in the hobby, essentially dropped out of the hobby because he was no longer making much money on the DLS/4SC business model. Definitely not as much money as he can/would make in some of his other ventures.

Also - it is a very tough question to answer, as another outgrowth of 'success' is more atuned to increasing volume/inventory, etc. than simply withdrawing profits. Even if you were able to somehow take a $10k investment and turn it for $25k - what is your profit? You have $15k of gross profit. But then you have interest costs. Then you also have to pay yourself. Your overhead costs, your submission, Ebay, etc. costs. And whatever is left is probably going to be pumped back in to get better volume discounts, to have a larger inventory, etc. It is hard to measure such 'profit' per se, unless you have a constant capital structure [e.g. balance sheet], which you will not.

~ms

tennesseebanker

did some of the larger dealers start this way? Did they borrow $100,000 from the bank or some other source to fund thier business? or did they already have enough capital to start it without a loan ? I was out of the collecting loop for a while but had never heard of 4-sharp corners until E-bay came along. What other outlets does 4-sharp have besides E-bay and thier dozens of accounts?

mikeschmidt

Everyone's model is slightly different.

And I do not know how all have started out. I'm sure some started with loans. I'm sure some had some $$$$ that just multiplied as their business model grew [e.g. my point of success = expanding inventory].

But there are many venues for sales - auciton houses for rarer/high-grade stuff. Direct sales to player and set collectors: Can often be more lucrative than Ebay, less fees, and plus you know what you can/should submit. Then there is Ebay. Plus there are often other avenues besides Ebay for getting rid of the 'bulk'. I think DSL throws a lot of the bulk away - but you can certainly imagine that if you crack open a 'set case', for example, you essentially might be submitting 200-300 cards, and have 12,500 cards left over to do something with.

~ms

ndleo

I think it is safe to say that it would be virtually impossible for an average collector to become one of the large dealers. The key to becoming a large dealer is by having a competitive advantage. Selling on ebay will not get you a competitive advantage. Besides the large capital investment in inventory, you need to have the ability to buy at a rate better than the market. This is where the current large dealers have edge that can't be beat. Are you willing to travel shows to network? Maybe start a hobby storefront? Advertise in every hobby rag to get your name out?

I run a small card business on the side. My total revenue (not profit) is around $20K per year. I am probably earning about $5/hr I spend on it, but I enjoy it. You would be surprised how little money some of the "big names" in the hobby make. Rob Veres at Burbank is one of the bigger names in the hobby, but I was told that he isn't the breadwinner in his house, his wife is a big shot at one of the accounting firms.

onlyanumber

Tennessee--

I too have often debated about doing the graded card business model almost full time. It all depends on volume--the most product at the lowest cost for the most gain. I'm sure a DSL or 4SC is submitting thousands of cards a month. I'm also sure that they are getting a cut rate on the cards they submit. Think about the PSA 9 commons they sell from '76 or '78. They are selling them for what, $6-7 a piece? For them to start them at that price, they have to be making a profit, albeit a small one. All you need is to hit a few cards at a high grade to carry you for the month. A constant inventory turnover is a good thing too.

I've done the submit and sell off game only a few times. I am profit and I have been able to pay for all of my submissions thus far, and I'm sitting on the next group that is going in. I've lost money on a handful of cards because I made poor submission decisions ($13 special killed my profit), but on the cards I profitted on, it was substantial.

tennesseebanker

I appreciate the input here guys, very interesting stuff. I had just given it some thought, I have always thought that I would love to be a "card merchant" Being you own boss and doing what you love, what a dream !

larryallen73

find a supplier willing to supply product at below what most folks could find it for

I think you meant to say "... at SUBSTANTIALLY below...." I think that's the key difference between you buying a few cases from BBC Exchange, even at a "deal", rather than the buy price that BBC, DSL, etc... buy for. Look at gross profit margins for other businesses and you will likely see expenses are MUCH greater than you thought and thus you need to buy cheap. Our law firm is pretty competitive and runs at around 50/50 between costs and net profits.

Best of luck to you.

tennesseebanker

<< <i>Tennessee--

I too have often debated about doing the graded card business model almost full time. It all depends on volume--the most product at the lowest cost for the most gain. I'm sure a DSL or 4SC is submitting thousands of cards a month. I'm also sure that they are getting a cut rate on the cards they submit. Think about the PSA 9 commons they sell from '76 or '78. They are selling them for what, $6-7 a piece? For them to start them at that price, they have to be making a profit, albeit a small one. All you need is to hit a few cards at a high grade to carry you for the month. A constant inventory turnover is a good thing too.

I've done the submit and sell off game only a few times. I am profit and I have been able to pay for all of my submissions thus far, and I'm sitting on the next group that is going in. I've lost money on a handful of cards because I made poor submission decisions ($13 special killed my profit), but on the cards I profitted on, it was substantial. >>




This sounds like what i am doing now, I make enough to cover grading fees for cards I want to keep, and to pay for another round of unopened material, Its an endless cycle but it is fun.

ndleo

Good point Larry. After my first year I was amazed how much my expenses were. My gross profit was $3500 and my expenses were $4100. That only included mileage, show fees, price guides, PSA membership, PSA fees, and supplies. That didn't include Internet or other incidentals you would have to pay if it was a stand alone business.

Now I know why dealers offer 10-20% on most stuff.

tkd7

<< <i>I appreciate the input here guys, very interesting stuff. I had just given it some thought, I have always thought that I would love to be a "card merchant" Being you own boss and doing what you love, what a dream ! >>



I look at my hobby as a diversion from work and other things. If I try to make my hobbies into a career it could be fun, or it could take the life out of it for me, forcing me to find a new hobby.

The nice thing about a hobby is that it really doesn't have any demands, you only get out of it what you put in it. I can leave the hobby for months and come back to it. When it is a job, I don't have that flexibility.

tennesseebanker

The nice thing about a hobby is that it really doesn't have any demands, you only get out of it what you put in it. I can leave the hobby for months and come back to it. When it is a job, I don't have that flexibility


Great point !

Maybe I should keep looking at franchising a Subway instead.

Goodsport40

Tennessee, your really hitting home with me, too. I would love to start a card business full time and deal primarily on Ebay. However, I have shelved that idea for now. The idea of losing my love for this hobby makes me think it would not be worth the risk. Also, the idea of an irregular income without a safety net is scary(if it were the only source of income that I would have).

Like many of you, I will be happy to keep buying, ripping and submitting and maybe sell a few here and there.

Robert

Overrated

Buy all the 52 Mantles you can! this will give you the impact you will need!

Boopotts

<< <i>

<< <i>Tennessee--

I too have often debated about doing the graded card business model almost full time. It all depends on volume--the most product at the lowest cost for the most gain. I'm sure a DSL or 4SC is submitting thousands of cards a month. I'm also sure that they are getting a cut rate on the cards they submit. Think about the PSA 9 commons they sell from '76 or '78. They are selling them for what, $6-7 a piece? For them to start them at that price, they have to be making a profit, albeit a small one. All you need is to hit a few cards at a high grade to carry you for the month. A constant inventory turnover is a good thing too.

I've done the submit and sell off game only a few times. I am profit and I have been able to pay for all of my submissions thus far, and I'm sitting on the next group that is going in. I've lost money on a handful of cards because I made poor submission decisions ($13 special killed my profit), but on the cards I profitted on, it was substantial. >>




This sounds like what i am doing now, I make enough to cover grading fees for cards I want to keep, and to pay for another round of unopened material, Its an endless cycle but it is fun. >>




The other great variable that needs to be considered here is sample size. Most people get an idea like this after 'running well' for a while, which in this case means you've been lucky enough to buy cases that happened to have enough high grade star cards. But unless you've cracked 100+ cases (at least) of a given product you can't say with any degree of certainty that you will make, on average, 'y' amount of profit if you buy those cases for 'x'.

Say you take 10 grand and buy, say, 10 1985 Topps rack cases at $500 each. What will you do if those cases only yield 1500$ worth of cards? You've now lost 35% of your capital. For something like this to work you would have to have a large enough 'bankroll' to overcome the inevitable swings in variance. Otherwise your risk of ruin would be sky high.

Another thing you should do that will prove VERY informative is take a random PSA 10 cert. number from a card 4SC has up for auction and do a cert check on the 50 cert numbers that are higher and lower than that card. The last time I did this I discovered that of the 50 cards below the cert. number of the card I looked at, and the 50 cert. numbers above it, 4SC has 99 PSA 10's and 1 PSA 9 (a 1985 Topps Burt Hooten). Can you hit 99% PSA 10's on a 100 card submission? Or even 80%? Because those are the kind of numbers that the big boys appear to hit.

Lastly, consider how long this market will sustain. At some point the market will reach the saturation point if supply continues to outstrip demand. There's a limited number of people willing to pay 100$ for a 1985T Mattingly PSA 10, and when all those people have one the price is going to drop-- and drop and drop and drop-- because there are still plenty of gem mint Mattinglys out there in private collections, unopened wax and rack, etc. The same is true for virtually every card you can think of where unopened is still relatively plentiful.

The future of PSA grading lies, I believe, in PSA's ability to get more people interesed in modern graded sets; either type sets, player sets or base/ insert sets from a given issue. I would be quite surprised if anyone was making real money by strictly submitting raw post-war cards 5 years from now unless that happens. If it does happen then it opens up a whole new vista of opportunity. If it doesn't the idea of buying raw and grading the cards, and flipping them for a profit, will in large part become an anachronism.

Boopotts

<< <i>find a supplier willing to supply product at below what most folks could find it for

I think you meant to say "... at SUBSTANTIALLY below...." I think that's the key difference between you buying a few cases from BBC Exchange, even at a "deal", rather than the buy price that BBC, DSL, etc... buy for. Look at gross profit margins for other businesses and you will likely see expenses are MUCH greater than you thought and thus you need to buy cheap. Our law firm is pretty competitive and runs at around 50/50 between costs and net profits.

Best of luck to you. >>




I'd be surprised if anyone was getting unopened material at substantially below the going rate on Ebay.

onlyanumber

<< <i>

<< <i>find a supplier willing to supply product at below what most folks could find it for

I think you meant to say "... at SUBSTANTIALLY below...." I think that's the key difference between you buying a few cases from BBC Exchange, even at a "deal", rather than the buy price that BBC, DSL, etc... buy for. Look at gross profit margins for other businesses and you will likely see expenses are MUCH greater than you thought and thus you need to buy cheap. Our law firm is pretty competitive and runs at around 50/50 between costs and net profits.

Best of luck to you. >>




I'd be surprised if anyone was getting unopened material at substantially below the going rate on Ebay. >>



The only way they are is from desperate sellers who have no internet service...

ldferg

boopotts,
great points...

I'd be surprised if anyone was getting unopened material at substantially below the going rate on Ebay.

agreed!!!!

5STAT

1st....$10K is a mere drop in the bucket to what you will need....
I'm $40-$50K into this and am barely treading water..

The product that you will need is going to cost you $10-$25K to start to break...
Then if you start to submit 1K-2K a month....you're going to have to wait for a month to get the 1st load back....lead time is crucial...AND you're another $5 to $10 K depper JUST for grading. Yes..there are better deals....but not as deep an people think!

The other issue...is you have to diverisfy your stock...so you open 5 cases of 85 Topps Baseball.....great if you get the stars as 10's...but what else are you going to sell to the people who don't want/need 85 Topps...

You'll need atleast 5-10, if not more, products by the case...to get started....and hope to expand from there.

Now...great..you're going to sell graded cards....what about the rest of your stock that isn't worth grading? You can't keep it...it costs too much to store...sort....and is just $$ left on the shelves if you don't turn it!! (INSERT PLUG HERE.....who wants 1500 raw sets cheap??)

You will need a wholesale level to sell off unwanted material....a retail level to sell off nice raw and graded material (again Ebay is usually wholesale price...not retail)....and when you get the big hits..you will need someone to maximize your potential.

Now plan on spending most of your days/nights/weekends opening, sorting, inspecting, pregrading, filling out PSA forms, scanning, listing, packing, sending invoices, relisting..and answering emails. Find some time to deal with the wholesalers..other dealers..filling want lists...looking for product to buy..and going to the Post Office.

Now, at 1st you won't be able to afford any help..so you'll have to do it all alone...

Still sound so romantic???

Trust me...it's better left as a side business...or plan on making it a way of life and don't think of an hourly wage!!

tennesseebanker

Uggghh ! thanks 5-stat for the breakdown. After reading the very informative posts to this thread I will definately only do this as a side business. Right now, it is fun to do , but I think to have to do it at a sustainable level would become a headache. Making a few hundred bucks every other week or so isnt so bad and thier is minimal responsibility.

tedh111

I am currenty doing this full time... I specializine in modern cards, and particularly autographed cards... My last year was the first year i was officially in business and i did ok, although i was only doing it part time while i finished up school... I started with 5 grand in capital, and i had a little over 100,000 in sales this past year, mostly though ebay and shows, so it can be done. But it does take a lot of work!!! Btw, what did happen to solomon Cramer? I enjoyed reading his posts!

FYS

<< <i>I was wondering how much money it would take to start a card business the size of 4-sharp or Dsl. Would someone be able to make a pretty good living from sales on e-bay or other sources.
Would buying unopened product, submitting to grade and selling on E-bay garner enough income to be a full time dealer? Or would the expenses outweigh the profits?
Any opinions appreciated, Thanks ! >>



If you are a banker or work at a bank, you could probably speak with your small business loans department and see the business plans submitted. This could be a template for you to put together to start. I think if you actually put together a business plan to start a card business, you would never start. The truth is for 99.5% of dealers that margins/net profit are crap. How many card dealers make a $100,000 salary in addition to contributing to a 401k and paying health insurance? You might as well focus on a career, if your chances of success are smaller than making the big leagues. On the flip side, if are stuck in a $10-$15 per hour job for the immediate future, then you do not have much to loose to give it a shot. Then the questions becomes, how many dealers are there than net a $30,000 salary per year?

SDavid

Why focus on becoming a large volume dealer? Do you want to have a lot of money or a lot of cards?

Dealers who know how to 'play the game' do very well financially with a fraction of the volume carried by some of the previously mentioned "high volume dealers." You can just browse ebay to see who some of these guys are.

A lot of it is the willingness to take risks and having both industry and card knowledge. The strongest barrier to successful entry into this market is NOT money - it's the learning curve. There are ethical considerations as well, of course, and not every 'player' plays by the same rules. However, the money is out there and you don't have to be a scum bag to make it.

ps - the best way to get start up money for a card business is through consignments. A lot of people have sports memorabilia that they're too busy to sell themselves.

NewJerseyMeatHook

Please don't forget about those large submissions that fall into the hands of a grader with whom you don't necessarily agree.

It's tough selling a bunch of 8's and 9's from the 70's and 80's . . . Unless, of course, they're stars.

detroitfan2

Tennesse, what do you think about this:

Instead of buying raw and submitting, what about shopping hard for already graded cards and turning them around with some % (maybe 10%, maybe 20%) markup?

I consistently buy mid-graded 1950's cards at 50% or less of SMR for my collection. I would think it would be easy to mark them up 20% and sell them in an ebay store for 60% of SMR.

As an example, I buy many 1955 Topps PSA 6 "commons" for under $10 per card (including shipping). I've often wondered how I could do listing these same cards in an ebay store with a price of $12 or $13 per card (which again is 60-65% of SMR). As it stands now, you can't touch a PSA 6 common in an ebay store for under $17.

Of course, a profit of $2 per card means you need to sell a lot of cards, but maybe it would work for higher $ cards as well. It doesn't seem hard to beat the ebay store prices that are currently out there and still make a profit.

NewJerseyMeatHook

How about buying up well-centered PSA 9 star/HOF cards from 70s-80s, cracking and resubmitting?

Have to be some bumps in there, eh?

basestealer

20 years in this business, and I don't know anybody who makes a living at it. For most, it's just an expensive hobby where one mitigates their losses by selling part-time. I've turned profits on deals before, but it wasn't really business-like. For instance, I recently sold some unopened '85 vending boxes and wax boxes that I had purchased 10 years earlier. I made a profit, but how long did it take? I got lucky with a Ted Williams card I purchased raw, had it graded by BVG (came back a 9) and sold it for 5 times the money I paid. Those sorts of things are few and far between. As far as buying unopened material wholesale and reselling on eBay, it's a wash. The prices on eBay ARE wholesale! Brick and mortar card shops open and close routinely. Opening boxes and yanking cards to grade them isn't profitable (in my experience) because you can literally buy the already opened and graded cards for less than the unopened boxes they came from!

The methods one can make money at this business that I can think of are rather unscrupulous. Like the Gem elite and Pro grading scams (and numerous smaller operations) whereby dealers buy junk vintage cards for pennies on the dollar, shave them up square, and slap a 9 or a 10 on them, and then resell them to unsuspecting buyers. Then there's the guy who takes black magic marker to his '71 topps, or the kid in the garage with his glue gun and wax pack wrappers, merrily resealing "vintage unopened" product. I've seen it all. Those methods don't last long because of the poor reputation one eventually earns.

Fuzz

This is really an interesting thread.
Two other points, I think. The key is the volume reproducability if you want to do this full time $2 a card, you will be very, very busy and have a phenomenal set of problems. You can be a wide group of specialties but will not make much money.At $10 a card, it is getting better. Less work (fewer cards) but you are clearly out of the modern realm or really high end stuff. Finding nice vintage is it's own problem. You make be able to make these margins blazing trails (grading unloved sets that are easy to get and trying to develop a market --- like high grade 70's non-sport). There will be a limited market and no competition, you may be able to push margins up for awhile but you will have to re-invent your base every few months because if people see you making money and a market develops.... competition will follow. Quickly.
Other than unloved sets, look at many coin dealer models. They are years ahead of the card hobby facing the same problems. There are some guys doing OK there. Those models are likely to stand up better over time. I do not know of any full time coin guys dealing new products or new graded coins making a fortune. The two interesting models there seem to be tare he high end guy where margins are not compressed but sales are slower. I liken that to guys like Rick at Mintstate. I think he is doing OK for himself. OR there is a subculture of crossover/ crack out guys. A few make a decent living at it but you have to have some very specific and weird knowledge (hard grader/ easy grader by cert nnumbers/dates, etc) to do it well. The margins are great on hits and the misses can often be disposed off at break even-ish. I have had some luck building parts of my own collection this way. It is helpful to find the vintage mass submitters and get to them early. For some issues a one grade bump can be 5 to 10X the $. Even at 50% hit, there can be gains at this rate.
Anyway Tennesse,
If you want to do this and I don't think you really do, copy a KNOWN sucsessful model. DSL and 4SC are prolific and they have a lot of great cards. But I don't think anyone here reallly KNOWS how financially sucsessful they are. I suspect this is as much an indictment of their business model as anything else. Start small and part time, you'll figure out what works if you really want to be a dealer.
Good Luck and thanks for starting the thread.


F

FYS

I think the most you can learn is by really evaluating who has lasted in this hobby and what was/has been their focus. The sucessfull people stayed the course during all the different trends. The fad chasers are sexy at the moment and people gravitate towards duplicating their models. This can be certain death. My personal opinion is that GEM Mint cards (Beckett or PSA) is a fad cycle that will not last. The silly prices for relatively modern low population commons is also a fad. Also, the stupid prices for some modern signature and numbered cards. I categorize all three of these items as being very similar to the internet bubble from a few years back. I doubt we see DSL or 4SC for the long haul, unless they really change their model.

Who as a compnay has lasted since the mid to late 80's with a significant presence in the hobby:

1. Larry Fritsch
2. Alan Rosen
3. Kit Young
4. BCW Supplies
5. Ultra-Pro
6. SCD
7. Beckett
8. Mark Murphy
9. Hall's Nostalgia
10. Barnett's Sports Cards
11. Bill Henderson

There are certainly others. The point is, the overwhelming majority of successfull people have stayed the course through trends and are pretty low key (not including the Mint Man).

ToppsCo1lector

^^FYS-Well, I collect Gem Mint graded rookies. I never have paid more than 15.00 for a single rookie graded card. I stick with Topps brands mostly(It's what I collect); but I think if I purchase for low amounts I can flip these in a brick and mortar. Now I agree about the overproduction/saturation thats happening in the market and has for the past 20 years. But the thing is...It'll effect the prices down the road just like it is today. Now if the card companies don't get smart, sooner or later there will be an even larger drop in modern sales. To much product and to many similar cards. I mean how rare are rookies numbered to 500 if there are 3 different brands with 27 releases? But anyway, I think that if you can find deals on graded rookies, good.

EI:
1989 Topps Tim Brown SGC 98. I bought it dlvd for around 10 bucks.
1996 Fleer Lucky 13 Allen Iverson Rc BGS 9.5. I bought it dlvd for 13-14.


Now I have about another 8 examples that I've won in the past 2 months. Thats not a lot, but the way I figure I'll buy 1-2 a month til I get out of school and finish my apprenticeship. After that, maybe 3-7 a month. Same thing, I'm not ever willing to overspend. I missed out on what would've been my most personally valued card(Stupid me, I'll probably never see one in that grade again).

But I don't just purchase modern, I pick up old rookies in all sports, as well as graded cards. Just little by little, this is just a hobby at this point but if 10-20 years down the road eh I might just sell them off or do whatever with them. It's just a hobby for me now.