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How to survive as a coin dealer
stevepk
Posts: 238 ✭✭✭
As a collector, I would like to ask the dealers within this forum how to make a living selling coins. I know this is a complicated question with a complicated answer, but I am not expecting anyone to reveal their every secret.
To make a profit in any industry, you need to buy low and sell high. The higher your volume, the lower your necessary margins are to stay in business. For businesses with low margins and low volume, profit needs to be captured in some other creative fashion (example upgrades and extended warranties sold by car dealers).
The key difference between the coin market at say, a retail store, is that there is no mass producer at wholesale prices on rare coins. This means profit is made by either one of two ways; either high volume at low margins, or discovering the secret way to obtain rare coins for low prices. I suspect a dealer is able to find a quality coin at a low price through an arduous process of trial and error and lots of searching. I suspect it is not a 1:1 ratio.
Many rare coins are in the hands of knowledgeable collectors who typically are not so desperate for money that they are willing to sell for a loss. This is unlike a pawn shop that attracts financially irresponsible people who have not done their homework and are willing to sell their gold for a fraction of melt out of financial desperation. The exception are those whom inherit rare coins from diseased relatives who are in a hurry to get rid of them. This probably is not the typical source of rare coins for most dealers.
My perception is that as a dealer, the key is to buy as many quality coins as possible at fair prices (aligned with typical realized Heritage auction prices) and resell each in a timely manner at a 10 to 15% margin. Coins valued at tens of thousands of dollars may have a 2% or 3% margin depending on scarcity. Far more coins will be rejected than purchased in the hunt for a coin that can be resold for a profit. Higher end coins typically have lower margins while lower end coins typically have higher margins. Every dealer will have a number of winners and losers, but the goal is for the winners to outnumber the losers. This can be difficult as there is no price guide that is accurate enough to run your business by. Greysheet is often inaccurate. Auction achieves are a better source and there is no exact pin-point value for any coin. Valuation can be tricky and is often subjective.
Dealers need to also consider the cost of airfare to and from coin shows, the cost to rent a table at a coin show, third party encapsulation fees, travel expenses, hotel expenses, and other related expenses. This obviously cuts into profits.
To my knowledge, there is no secret to obtaining valuable coins at dirt cheap prices unlike in the retail industry. Dealers expose themselves to as many auctions as possible and establish as many professional relationships as possible to help get the right material into the right dealer's hands. A dealer can browse through other dealer's inventory at coin shows with expectations of occasionally finding a coin that can be resold for a handsome profit.
Sales are made through establishing a reputation. Once a dealer has made a name for himself (or herself), sales volume increases as well as quality material the dealer is able to attract.
Another method for acquiring quality material is through consignment. This frees the risk of investing capital in something that may not sell. I would assume margins are lower on consignment material and there may be times an owner's requested realized price leaves no room for the dealer to make a profit. Collectors don't want to take a loss on a coin either.
For the dealer confident enough in his skills and willing to take a risk, there is the option of buying slabbed coins in hopes of re-submitting at a higher grade. Coins in problem holders can be re-submitted and come back in straight-grade holders, and raw coins can be purchased and sent out for certification. Not only is this expensive, but it is risky as a coin can come back in a lower grade or come back in a 'details' holder. Proof sets of the 1950s can be searched in hopes of top-pop proof coin that yields a tremendous profit. Each of these strategies require both skill and luck and are risky.
Once again, these are all just assumptions. I am not a dealer, nor have I ever been. I could be completely wrong. I would like some enlightenment on what it is like to be a coin dealer. My perception of coin dealer success is summarized below:
1. Search through tons of material every day in hopes of a potential resale item
2. Hope your winners outpace your losers
3. Establish relationships
4. Don't expect to find amazing coins at cheap prices
5. Expect to invest lots of money in capital to get started
6. Expect to spend most of your time traveling the country from one major show to another
7. Expect high volume sales at typical 10% to 15% margins before show expenses
8. Hope to get lucky with bullion sales and gold/silver movements in your favor
9. It's not easy, nor will it make you a millionaire overnight
I know I must be wrong somewhere along these points. Correct me!
To make a profit in any industry, you need to buy low and sell high. The higher your volume, the lower your necessary margins are to stay in business. For businesses with low margins and low volume, profit needs to be captured in some other creative fashion (example upgrades and extended warranties sold by car dealers).
The key difference between the coin market at say, a retail store, is that there is no mass producer at wholesale prices on rare coins. This means profit is made by either one of two ways; either high volume at low margins, or discovering the secret way to obtain rare coins for low prices. I suspect a dealer is able to find a quality coin at a low price through an arduous process of trial and error and lots of searching. I suspect it is not a 1:1 ratio.
Many rare coins are in the hands of knowledgeable collectors who typically are not so desperate for money that they are willing to sell for a loss. This is unlike a pawn shop that attracts financially irresponsible people who have not done their homework and are willing to sell their gold for a fraction of melt out of financial desperation. The exception are those whom inherit rare coins from diseased relatives who are in a hurry to get rid of them. This probably is not the typical source of rare coins for most dealers.
My perception is that as a dealer, the key is to buy as many quality coins as possible at fair prices (aligned with typical realized Heritage auction prices) and resell each in a timely manner at a 10 to 15% margin. Coins valued at tens of thousands of dollars may have a 2% or 3% margin depending on scarcity. Far more coins will be rejected than purchased in the hunt for a coin that can be resold for a profit. Higher end coins typically have lower margins while lower end coins typically have higher margins. Every dealer will have a number of winners and losers, but the goal is for the winners to outnumber the losers. This can be difficult as there is no price guide that is accurate enough to run your business by. Greysheet is often inaccurate. Auction achieves are a better source and there is no exact pin-point value for any coin. Valuation can be tricky and is often subjective.
Dealers need to also consider the cost of airfare to and from coin shows, the cost to rent a table at a coin show, third party encapsulation fees, travel expenses, hotel expenses, and other related expenses. This obviously cuts into profits.
To my knowledge, there is no secret to obtaining valuable coins at dirt cheap prices unlike in the retail industry. Dealers expose themselves to as many auctions as possible and establish as many professional relationships as possible to help get the right material into the right dealer's hands. A dealer can browse through other dealer's inventory at coin shows with expectations of occasionally finding a coin that can be resold for a handsome profit.
Sales are made through establishing a reputation. Once a dealer has made a name for himself (or herself), sales volume increases as well as quality material the dealer is able to attract.
Another method for acquiring quality material is through consignment. This frees the risk of investing capital in something that may not sell. I would assume margins are lower on consignment material and there may be times an owner's requested realized price leaves no room for the dealer to make a profit. Collectors don't want to take a loss on a coin either.
For the dealer confident enough in his skills and willing to take a risk, there is the option of buying slabbed coins in hopes of re-submitting at a higher grade. Coins in problem holders can be re-submitted and come back in straight-grade holders, and raw coins can be purchased and sent out for certification. Not only is this expensive, but it is risky as a coin can come back in a lower grade or come back in a 'details' holder. Proof sets of the 1950s can be searched in hopes of top-pop proof coin that yields a tremendous profit. Each of these strategies require both skill and luck and are risky.
Once again, these are all just assumptions. I am not a dealer, nor have I ever been. I could be completely wrong. I would like some enlightenment on what it is like to be a coin dealer. My perception of coin dealer success is summarized below:
1. Search through tons of material every day in hopes of a potential resale item
2. Hope your winners outpace your losers
3. Establish relationships
4. Don't expect to find amazing coins at cheap prices
5. Expect to invest lots of money in capital to get started
6. Expect to spend most of your time traveling the country from one major show to another
7. Expect high volume sales at typical 10% to 15% margins before show expenses
8. Hope to get lucky with bullion sales and gold/silver movements in your favor
9. It's not easy, nor will it make you a millionaire overnight
I know I must be wrong somewhere along these points. Correct me!
0
Comments
EAC 6024
Have a office at which I do the buying. I don't care if I sell anything from out of my office(to general public) even though I have a show case in there (its mainly for legitimacy) I can't tell you how many times I have had a comment, you must not have money to buy if you have no coins for sale, which is quite far from the truth. I have a large customer base that i have treated fair for a number of years, so when they need to sell, they call me back, or they send me referrals. This helps over the longer term.
I buy coins, gold silver and paper money. I turn the bulk stuff fast and keep it moving. One of the biggest things on being successful is knowing were to go to get rid of the varying stuff you buy, everything from wheats up to 20k plus coins. I have lot of vest pocketers that cart away my junk, supply two flea market dealers, and of course ebay(couldn't survive without it) Nice stuff goes to the several national dealers I have met over the course of my years in business. Usually see them at large shows. I have always had the philosophy , leave a little room for the next guy , keeps them coming back and buying more.
I like buying fresh (off the market) larger deals, there always seems to be something in there you come out way good on, but they don't come in as often as you would like.
Once in a while, you hit a homerun or two. This helps with stuff that doesn't do so well.
I don't buy much from other dealers to resale unless I can catch them on an sizeable undergrade or variety (although variety picking is not a strong point of mine) Grading is however.
Liberty: Parent of Science & Industry
im going out on a limb
If dealers are making more than 10% to 15% on their coins, there must be a trick to finding quality coins at low prices I am unaware of. Maybe it's just time and effort. Maybe it is because full-time dealers spend all day, every day searching for coins while I, as a collector, spend a few hours once every three or four months at the coin show browsing for coins.
Spotting under-priced inventory at a dealer's booth isn't easy either. Most dealers do not put sticker prices on their coins. They are usually unmarked. I always have to express interest in one particular coin and wait while the dealer quotes me a price on that one coin. It's not like I can scan a dealer's table from left to right looking for something that is priced slightly under market value. The likelihood that that exact coin I am interested in just happens to be priced below market value is slim.
If dealers typically make more than 10% to 15%, what is a better estimate of that number? Let's assume we are talking about coins valued between $200 and $2000. I realize a $20 coin may be sold at double the dealer's purchase price while a coin purchased at $18,000 may be sold for only $19,000.
I no longer have a store for walk in of the street traffic, but
Have a office at which I do the buying. I don't care if I sell anything from out of my office even though I have a show case in there (its mainly for legitimacy) I can't tell you how many times I have had a comment , you must not have money to buy if you have no coins for sale, which is quite far from the truth. I have a large customer base that i have treated fair for a number of years, so when they need to sell, they call me back.
Ill finish after dinner!!
...IDK but if you are jimdimmick on eBay...I just bought a bad azz coin from you about a month ago and I have been checking your inventory ever since...if not, then forget everything I just mentioned
Its me, what you get, I'm glad for you, I can't know everything.
Erik,
Its me, what you get, I'm glad for you, I can't know everything.
...1921p in 63PL and I'm not kidding when I say that she has the deepest mirrors for that date that I have seen so far in person! Thanks again buddy
edit to add: not a rip by any means...I won at auction and may have even overpaid in the minds of many...but I'm a pure collector at heart, and I was hella stoked when I opened that package up and used her as a mirror to pluck my eyebrows from two feet away
im going out on a limb
If dealers are making more than 10% to 15% on their coins, there must be a trick to finding quality coins at low prices I am unaware of. Maybe it's just time and effort. Maybe it is because full-time dealers spend all day, every day searching for coins while I, as a collector, spend a few hours once every three or four months at the coin show browsing for coins.
Spotting under-priced inventory at a dealer's booth isn't easy either. Most dealers do not put sticker prices on their coins. They are usually unmarked. I always have to express interest in one particular coin and wait while the dealer quotes me a price on that one coin. It's not like I can scan a dealer's table from left to right looking for something that is priced slightly under market value. The likelihood that that exact coin I am interested in just happens to be priced below market value is slim.
If dealers typically make more than 10% to 15%, what is a better estimate of that number? Let's assume we are talking about coins valued between $200 and $2000. I realize a $20 coin may be sold at double the dealer's purchase price while a coin purchased at $18,000 may be sold for only $19,000.
Im guessing it's closer to 20-30% to make a living.
One coin that I tracked on eBay is now on a dealers site. It is an AU Bust quarter that sold for $650 on eBay that is now listed at $850.
Of course this is just one example but....
EAC 6024
Glad you liked it. I am not a PL guy, but I actually bought that coin for a customer of mine, he had looked for a 21 Pl for a long time, and it was the last date he needed for his date set. I bought that from a forum member not too long ago for him. And we paid a lot more for it than you got it for Via ebay. However, about 4 weeks after he finished, he called me out of the blue and wanted to sell the whole set. When I refigured it on the buy back, I figured it a bit less, and even though that specific coin went a little light this time, I did well on the whole deal. (actually quite well) A few forum members bought some of the other dates from that deal. Thks for letting me know which coin, I like to know just for curiosity
jim
You count ....number of deals.
Or VOLUME!
Bullion is VERY thin margin but it's a rapid turnover.
And if you don't worry about % margin and just look at (for example) selling 2 or 3 coins a day that you make $100 (a hundred bucks) on, you have $300 gross profit for that day.
You can NOT go by margin in a coin shop.
The difference (and what makes the bizz go) is that your inventory is INSTANTLY liquid.
Or at least more so than most other businesses.
So you can even put high dollar coins in the case just for "advertising" to create trust and validate your profile. When you get tired of the "advertising" you can sell that and replace it with MORE bait.
Never try to compare a coin shop to ANY other bizz.
When I opened my first shop, the guy next door that owned the stereo store asked me what the "failure rate" was on coin shops.
Never thought about it before, but my answer was quick.
"About ZERO"
Which is right unless the shop is doing STUPID (or shady) stuff.
It DOES however take pretty substantial capital to run one.
This isn't scientific....and its validity depends on
- Trusting Numismedia for a valid wholesale price
- Trusting PCGS as a valid retail price
- Trusting that my 270 slabbed coins are reflective of "the market" (Probably the biggest stretch of logic)
But if I take the total quoted wholesale value divided by retail value for my coins, I get 80%, or 20% margin.
Take that for what it is worth....
I'm sure there are better sources for both values....but I'm not sure the numbers would change radically. More variable might be how close the actual market is to the guides.
Tom
Indian Head $10 Gold Date Set Album
You buy stuff and you sell stuff.
How you make money doing that 'tis a puzzlement.
He was one of the best graders in the business, had a sharp business mind, was a great up-grader, and knew how to work a room at any show he attended. He developed the knack of having dealers hold stuff for him or show it to him first. He'd be one of the first dealers into the room and worked the room of a small show within 1-2 hrs. If you were there an hour after he was....you got the chicken bones. He knew how to maximize the price of whatever he found and how to pay a little less than needed for something he wanted. He knew how to deal. That's how to make money in coins if you don't rip off estates, widows, and orphans at 10-30c on the dollar. Unfortunately, Dave passed away a couple years ago.
I know a number of very successful dealer's dealer....and that's how they work. They rarely let a potential deal walk away from them. They find a way to get it. Most other guys seem to find a way to lose good deals or flip them away for peanuts. Selling retail on bigger margins is a different methodology. Finding buyers for the nice coins you bought right is fairly easy. It just seems that some dealers have the knacks for getting the good deals and collections, even if they wouldn't be the top buyer/payer. I was always amazed at the great coins that walked into my local shops that bought for next to nothing. I could offer to pay 95% of Full Market Value for those coins and never get a sniff at them. The B&M that pays 30c on the dollar for a $100K collection does it over and over again. It's one of the mysterious of the coin business.
Erik,
Its me, what you get, I'm glad for you, I can't know everything.
I bought my 1879 Morgan (PCGS MS63) from you in July 2015.
The worst of the worst buy low from the grieving widow or home robber, sell high to the collector.
Those that buy from the widow generally do not (directly) sell to the collector. These are two distinct businesses, requiring different contacts, skill sets, marketing, and operations.
The worst of the worst buy low from the grieving widow or home robber, sell high to the collector.
Those that buy from the widow generally do not (directly) sell to the collector. These are two distinct businesses, requiring different contacts, skill sets, marketing, and operations.
Those are the places the "roadies" haunt so hard that you're lucky if you can find a buffalo nickel there.
Fall National Battlefield Coin Show is September 5-7, 2024 at the Eisenhower Hotel in Gettysburg, PA. Thanksgiving Battlefield Coin Show is November 29-30, 2024. WWW.AmericasCoinShows.com
Doesn't sound easy with any of them but it sounds so fun.
I get a little coin money, but mostly generate revenue for eBay, PayPal, PCGS and the post office.
8. Hope to get lucky with bullion sales and gold/silver movements in your favor
'Hope' is not a business strategy.
merse
To me marketing is the key. Developing customer and dealer relationships.
Instead I went into financial securities so currently I am a wannabe.
Oh well
But I do have capital and coins so maybe I will give it a shot in my retirement.
That is if my wife let's me travel the coin show circuit! ??
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I'm not a dealer, but I play one on the Internet
I get a little coin money, but mostly generate revenue for eBay, PayPal, PCGS and the post office.
The grass always seems greener on the other side of the fence.
However in seeing your P & L statement, I think I will keep my day job in the financial advisory profession.
I'm not a dealer, but I play one on the Internet
I get a little coin money, but mostly generate revenue for eBay, PayPal, PCGS and the post office.
Very interesting. I can't help but notice that PayPal fees are so high. Have you considered Venmo? PayPal actually bought Venmo. It's essentially a peer-to-peer payment system with no or very low fees. You could triple your profits if you got into that. Just download the app onto your smartphone. all the kids today Venmo money back and forth to eachother.
I am waiting patiently for Apple to get into the peer-to-peer payment market and crush Venmo, Paypal and the others. Apple already has everyone's email, phone, and bank info and the cash to back the operation.
Know how I make a profit? I have a spare bedroom... designated office space. I work my usual 40h week there, run my coin "business" out of there, and also run a Magic card buying "business" out of there. It's a good-sized room, about 15% of the square footage of the house. Because it's a home office used for business exclusively, I can write off 15% of my mortgage/rent, water, power, cable, etc.
I call them "business"es because, while they technically turn a profit (which is immediately reinvested, I don't take a paycheck, per se), the real benefit is the tax writeoffs.
Doesn't that come back to haunt you when you sell the house and open you up to an audit?
My last 2 sales, purchase costs $38, plus grading fees, sold both ebay, gross total $2,275.00, total time spent 2 hrs.
Man o' man
I give away money. I collect money.
I don’t love money . I do love the Lord God.
Have a day job unless you are a millionaire and had the stuff since day 1.
Having a good psychic helps.
My view: Master buy low / sell high, quick turnover, good cash ratio to inventory, and keep overhead low. Know what you can sell it for before you buy. If setting up at shows: sell your coins on Saturday (stay behind table) buy on Sunday (wander the bourse). Don't tire kickers or pickers block your cases, waste your time. Don't let someone leave table with your inventory unless sold. Keep convo w other show participants need to know (NTN) and do not discuss travel schedule, plans. Have a plan for stress relief / entertainment after the show (that is not coin people, numismatic related). Mine is somewhere like Imperial Theatre in Anaheim or Spearmint Rhino in Torrance like if attending Long Beach or some other So Cali Show for instance.
The only way to be a profitable dealer - go all mercenary on you
That is a good and helpful article. It makes me want to read the book.
What do you do for a living and how much do you make?
I'm not a dealer, but I play one on the Internet
I get a little coin money, but mostly generate revenue for eBay, PayPal, PCGS and the post office.
That's a lot of work for $10.33 an hour over the couse of 49.8...
As your could just pump gas, huff the fumes, & make more on tips
I think he's padding his timesheet. Lots of bathroom breaks too.
"If I say something in the woods and my wife isn't there to hear it.....am I still wrong?"
My Washington Quarter Registry set...in progress
I think he's padding his timesheet. Lots of bathroom breaks too.
Between taking pictures, creating the listing and shipping I figure each coin takes about 12 minutes.
But I'm not a very hard worker
But I'm not a very hard worker
Well then forget tips if your not going to wash windshields
I'm not a dealer, but I play one on the Internet
I get a little coin money, but mostly generate revenue for eBay, PayPal, PCGS and the post office.
That's a lot of work for $10.33 an hour over the couse of 49.8...
As your could just pump gas, huff the fumes, & make more on tips
And then you don't have to invest money or take a risk.
I'm not a dealer, but I play one on the Internet
I get a little coin money, but mostly generate revenue for eBay, PayPal, PCGS and the post office.
I totally agree with you. Looks like I am working for ebay, paypal and post office. I really don't how dealers can make a living by selling coins.
or about $2 a coin on an average sale price of $155
ouch
Liberty: Parent of Science & Industry
im going out on a limb
If dealers are making more than 10% to 15% on their coins, there must be a trick to finding quality coins at low prices I am unaware of. Maybe it's just time and effort. Maybe it is because full-time dealers spend all day, every day searching for coins while I, as a collector, spend a few hours once every three or four months at the coin show browsing for coins.
Spotting under-priced inventory at a dealer's booth isn't easy either. Most dealers do not put sticker prices on their coins. They are usually unmarked. I always have to express interest in one particular coin and wait while the dealer quotes me a price on that one coin. It's not like I can scan a dealer's table from left to right looking for something that is priced slightly under market value. The likelihood that that exact coin I am interested in just happens to be priced below market value is slim.
If dealers typically make more than 10% to 15%, what is a better estimate of that number? Let's assume we are talking about coins valued between $200 and $2000. I realize a $20 coin may be sold at double the dealer's purchase price while a coin purchased at $18,000 may be sold for only $19,000.
Im guessing it's closer to 20-30% to make a living.
One coin that I tracked on eBay is now on a dealers site. It is an AU Bust quarter that sold for $650 on eBay that is now listed at $850.
Of course this is just one example but....
Can you go over that math with me?
If that coin sells for $850, and assuming the dealer gets the 20% discount, they net $757.05. Add another $8.65 for Shipping, and another $8 for insurance, it leaves them with a net of $740.40, or just under 17%.
If they DO NOT GET THE DISCOUNT, or otherwise take less than the $850. it is even less than that.
Anyone who thinks it is easy to be a dealer, and that people are lining up to sell you (NICE) coins for 30% back of bid is dreaming.
From a business perspective...a real dealer has many more expenses...so I have no idea how they make it...but if you really want to make more money I'd make the following suggestions:
1. Increase the price point of your inventory slightly...that would cut down on the labor a little bit if nothing else...
2. Try to collect a database of email addresses from your purchasers...then maybe you could sell some inventory by newsletter or web site...and that could cut down on the Ebay selling fees...
I've learned that making money is hard work...anyone who says it is easy...is lucky or lying...LOL...
- Jon