How much inventory do you need to start a B&M?
TexasNationals
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How much inventory do you need to start a B&M? Do most people use thier own collection to start or get a loan and buy everything thta comes through the door?
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Sorry I did not answer your question
You don't need as much inventory as you think. I specialize in US coins, and don't carry foreign cioins, tokens, paper money, etc. With only US coins, as long as you have a good selection of the most popular series (i.e. Morgan Dollars, Lincoln Cents, Walkers, Buffalos, etc) that should be okay to start with. I didn't have much for inventory in series such as 3-cent pieces, 20-cent pieces, etc. the odd-ball coins. But, you need sources to be able to get coins when someone asks for something. I work with several other dealers and when someone asks me for something I don't have in stock, I immediately check with my "dealer network" and see if I can locate it. But what you will need is a lot of bullion. I have sold a ton of ASEs, 1-oz silver rounds, 10-oz silver bars, and gold. In fact, most of my sales this year are bullion, and not collector coins. You can't make it soley on collector coins right now - you have to buy/sell bullion.
Expect to buy a lot more than you sell. While you don't need a huge inventory to start, you do need a lot of cash for buying. I probably buy 4 times as much as I sell at the store. Store fronts are mainly for buying. Coin shows are for selling. When I was asking the same questions as you, I did get some responses back saying I needed between $100,000 - $300,000 in cash. That was way too high, and I would think $25,000 - $50,000 would do it. I work on smaller profit margins and turn stuff quickly, so I didn't need a huge amount (i.e. >$100,000) of cash. I turned it quick and was able to keep using my smaller cash reserve.
Expect to spend double what you think you will on advertising. I had several dealers tell me the same thing, so I upped what I thought I would spend on advertising....... and I still spent double that!! Phonebook ads, newspaper ads, flyers, etc. it all adds up really quick.
And I did put a lot of my own collection out for part of my start-up inventory. Most people have to.
I would stay away from getting a loan to buy coins - too many people get in trouble that way. However, I do try and buy everything that comes into my down. I don't want to get known as only buying once in a while, being too picky, as people will not keep coming into sell stuff. But, the key is to buy at the right price. For example, the first 6 months I was open I bought over 500 US Proof Sets. During those 6 months, I only sold 3. I have tons of common (1970's - 1990's) that I can't even sell at 25% back of greysheet. I might get flammed for mentioning this, but right now I am buying common US Proof Sets from the 1970's - 1990's at 50% back of greysheet. Why? Because I can wholesale them out to other dealers at 30% back. Otherwise they sit in my store forever. For better stuff, pay better. Again, the key is to know the market and buy at the right price.
PM me if you have any particular questions. Are you thinking of opening a store front yourself?
Some B&Ms don't have very much inventory of collector coins. It looks like they're more active with bullion and the collector coins are a sideline. I'm sure all B&Ms aren't that way but it's what I see when I'm at the B&Ms.
I think i got a red book there but thats because he cant jack the price of that up.
If i were to consider what you are thinking Texas , i think i'd want a healthy inventory before i opened the doors and supplement it with what comes through the door , and it will.
I would imagine most businesses run the same to some extent, and i have been self employeed the last 30 years. The biggest issues i had years ago was always being underfunded or lack of access to fast cash.
My favorite coin store i like probably has at least 60 percent of the same coins that i saw the first time i walked thru the door 7 or 8 years ago. Some stuff looks like it never sells. I would guess they have about 80k in inventory that never moves except to the safe every night.
Good luck, i hope you do well.
Using your own collection is probably a good idea, since you spent a lot of time and effort putting it together, it will show potential customers that you have a good idea of what quality is, and will look good in the store.
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<< <i> I often wonder how anyone makes any money running a shop with all the overhead. Also at shows it never seems like the dealers sell anything. Just my perception I guess! >>
The show I go to charges $70 for a table. I often thought about setting up but can't see how a profit can be made after paying the 70 bucks.
about opening a B&M but there are more important things that should be considered.
Is this something you are doing as a life career change or an extension of your
hobby / fascination with coins. Will you have to live off this B&M ie: rent, food,
clothes you know what I mean or just enjoy seeing all the coins pass threw your fingers.
Then you have to ask yourself, will be able to (for lack of a better word) put up with the
coustomers I will need to stay open. Also ask yourself will people enjoy doing business
with me. How many shops around you do you like buying / selling or even just going into.
We all have them in the cities we live in, the ones that have the greatest and fairest owners
around and then the ones we don't ever go to. What kind of impression will people get
when they first come to you store. I know this sounds like common sense to most but when
it comes right down to it most forget the golden rule.
I say Go For It and Have Fun!!
<< <i>
<< <i> I often wonder how anyone makes any money running a shop with all the overhead. Also at shows it never seems like the dealers sell anything. Just my perception I guess! >>
The show I go to charges $70 for a table. I often thought about setting up but can't see how a profit can be made after paying the 70 bucks. >>
A good point for someone thinking about entering the business. What are the costs?
I asked some people who operate B&M stores to estimate what their fixed costs were. The lowest number I got was $10,000 per month. You have to buy and sell a lot of coins to pay that sum!
An authorized PCGS dealer, and a contributor to the Red Book.
Years ago bought a collection or what you might call an accumulation of Indian cents. The group had some nice coins in it including some 1870, ’71 and ’72 cents and one 1877 that had been lightly cleaned that ended up in an ANACS Fine-12 holder. Those coins sold very quickly, mostly to dealers. The rest which included lots of coins in the 1880s sold very slowly despite the fact that they were not junk (grades ranged from VG to EF), and I was pricing them based on Gray Sheet levels.
A B&M store guy can have money tied up in this stuff for years. But if you don’t have it, you can’t serve the large number of small collectors who might come through the door.
The $10,000 per month overhead sounds about right, to that you need to add another $500,000, at least, in inventory and cash working capital. In reality you really need more like $1,000,000 with enough liquidity to react when the good deal comes along.
<< <i>Geo, the thought has crossed my mind. So say Mike walks into the shop with 150k in coins (I have actually seen this, more than once) and wants to sell them right there. Do you have friends you call? I always assumed you would need a line of credit, say for 250k that you could access quickly. The shops I have spent the most time in, one started with $1000(25 years ago) and kept just going and flipping, back and forth until the inventory is what it is today (about 1.2 mil), the other shop took out a 75k loan 20 years ago and paid it off, then borrowed more, paid, then more...... Currently about 400k in inventory is a safe guess. >>
I would think that if one had a $150K deal walk in the door that he better have a pretty good idea of where to unload a lot of it before committing the funds. One can get coin rich and cash poor pretty quickly.
<< <i>A raw MS63 1804 dollar that you found in grandma's cedar chest should be enough to start a B&M.
As many dealers have learned the hard way, owning great inventory items and having the cash to run the business can be two very different things …
Truer words could only have come from an accountant! You have to cover your fixed costs at a minimum unless you have other funding available (like a day job)if your sales are down. This is why most small business's fail due to an underestimation of cost (especially the fixed componet). How long can you hold old until your business model gets correctly tweaked - if possible. You can have the strongest P&L, balance sheet in the world but without the proper level of cash flow you're sunk!
Capital = 100%
And a sound business plan.
I meet a dealer at a ANA show several years ago
and he had one small case on his table with nine coins in it.
I did some math in my head and I came up with
a figure of 1.2 million. He said he had been doing it for 30 years.
So I guess you don't need a lot of inventory but cash is king!
I had a friend who was a show dealer 20 years ago (now deceased) who traveled with 2 encyclopedia briefcases, one with gold coins in trays, one with $100 bills in bands. He said he had $500k in each hand. He also had a .357 magnum (and his permit) on his belt.
I think a small inventory is OK if you have good show stuff(your own coins) plus good sources. I think there are good sources (some here on the boards) to handle bigger deals. If someone walks in with a $200k collection and won't wait 24-48 hours for you to confirm a backer, you don't want that deal anyway.
<< <i>Good read so far!
I meet a dealer at a ANA show several years ago
and he had one small case on his table with nine coins in it.
I did some math in my head and I came up with
a figure of 1.2 million. He said he had been doing it for 30 years.
So I guess you don't need a lot of inventory but cash is king! >>
I think I met the same guy. Was it in Portland? And did his name begin with a J?
It's great to have a dream, but you got to be very smart these days or your going to loose your shirt. Good luck!
Edited for my crappy spelling, but at least a catch some of it.
Affluence
Population
Competition
If yo are in an average area most of the "hoards" that come in may be insignificant items-------------------------BigE
I opened my store with only $2,200 in cash and a line of credit of $5,000 at my bank, so it can be done. But let me back up a little and mention how I got started......... about 9 years ago I was at a coin show, and asked one of the dealers I had bought from for years "...what is it like on the other side of the table..." and he said come on back and watch. Before the next show he called me asking if I wanted to help him out again at the next show, to which I said yes. I progressed from watching him, to getting coins out of cases for customers, to finally selling them for him. It was a great learning experience and I consider him a good mentor. He helped me go from collector to dealer. I also have developed several good relationships with other dealers over these years. So when I finally went out on my own after "learning the ropes" for all those years, I had a good network of dealers and contacts I could call for help. So when someone comes into the store with a large/expensive collection I do have money immediately available to me (i.e. blank checks from another dealer) that I can use for those larger purchases. I also move my inventory pretty quickly, flipping back and forth, and my inventory has increased a lot in this first year, plus I have been able to build up a little cash. I did take out a small loan ($24,000) that paid for store fixtures, cases, computers, furniture, some inventory, etc when I opened the store in Feb. 2010, but have managed to pay off the entire loan already.
So I would have to say I have done much better than I had hoped for. However, let me qualify a few things. I am basically the only coin dealer in town, as the previous one moved out and retired a year ago. That is why I decided to open my store - there was no coin store in town and the closest one is 150 miles away in the Twin Cities (I am in Duluth, MN). And I wanted to get my store open before someone else came in and opened one.
Also, because Duluth, MN is a smaller town, my overhead isn't nearly as high as most people think. My fixed costs per month average $1,700 only. This includes the lease, electric, phone & internet, security monitoring, insurance and advertising. I have a 1,050 sq feet of space, plus a 1,050 sq feet of basement, and my lease (which includes heat, water, electric) is $750 per month. Advertising is the next biggest expense around $500 per month.
I also work another job, and didn't do it because I needed to make more money. All my profits thus far has gone back into building up my inventory. I was previously working 5 days a week as a geologist, but made a deal with them to work only 3 days a week (Monday, Tuesday and Wednesday) so I could work in my coin store Thursday, Friday and Saturday. I do have a guy working for me on Monday, Tuesday and Wednesday so I have the store open 6 days a week. But I can't call him an employee as I don't pay him anything. Instead, our agreement is that he can have 1-2 display cases to sell his coins/stamps that don't compete with mine. It's actually a win-win situation for both of us.
To summarize, I live in a smaller town and my overhead is much less than most people would guess. I don't have any other competition. I don't need this as my sole income. I spent years learning the trade working under another dealer before going out on my own. I also have been a collector for almost 30 years. I also have a background in management, and work well with the public. I also am quite busy at times in the store, and feel that B&M stores are not a dying breed. If you buy items at the right price, so you can price them at the right price, you can move inventory quickly, and then have a continued source of new inventory. Just today while I had the store open, I sold an 1885-CC GSA Morgan in original case, an 1877 IHC in ANACS G4, 2 rolls of ASEs, several 1-oz silver rounds, some junk Morgans, a few common date BU Morgans, a 2010 Proof Set, 8 Presidential Dollar Proof Sets (2 from each year of issue), a bunch of statehood quarters and NP quarters, and 300 cardboard 2x2's. I had about 25 customers in the store, and about 8 of them were selling items such as ASEs, proof sets and 90% silver. I also PM'd another dealer on these boards and bought 8 rolls of ASEs from him, as I need them for inventory in the store. I do hear the gripes of B&Ms having the same old inventory...... but again, if it is bought at a decent price, and priced to sell at a decent price, you can move a lot of inventory.
I think the people that say you need $500,000 or more in cash, etc. probably deal in higher end coins than I do. I don't have any $10,000 coins. And in some areas like CA, TX, the east coast, your expenses will be much higher than northern MN. So you need to put a lot of this in prospective of where you live, what your costs will be, what do you need to get out of it, etc. Hope this answers a few questions, please feel free to PM me with any questions you may have.
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I think it depends on what type of material you want to ( and are able ) to sell.
Most small B&M's that I know make a living off of buying bullion and lower grade collector coins that walk in the door.That type of business requires a storefront.
With an internet business you wouldn't get to buy that type and quantity of merchandise from the public.
You would buy more from other dealers and resell to the public.
I would think that would be more high end material.
I believe it would depend on your location and competition which way to go.
If you are in an area without a coin shop and a fairly high population, an actual store might be the way to go.
If your closest neighbor is ten miles away, an internet only business makes more sense.