What capital do you need to start a part time coin business?
Copurnicus
Posts: 39 ✭
So I have been going to shows and all that for a while I’m just curious how much capital everybody thinks I would need to have an eBay store and sell at shows as a semi legitimate dealer I mostly deal in semi high-end morgans and trade dollars around $300-$1000 (thank y’all for all your answers I don’t believe I will be starting one)
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Those are a little slower movers, so you need to have enough where you dont have to wholesale out when it gets tight, and things arent selling as fast.
Right now dealing bullion is taking tremendous amounts of capital to run even a small b & m shop.
I mean, non-brick and Morter
Let's see a vendors table at a show is about 8 foot long?...if you had 2 cases on each end and just enough room left in the center to conduct business.
100 coins per case...
400+ coins times X = $100,000 ish bankroll.
Essentially you can start an eBay or website storefront for less money or with the inventory you currently have accumulated.
It’s not necessarily inventory investment size but can you make money on what u have.
I think that is up to you based on number of slabs / display cases needed. The bigger the inventory dollar wise the more likely you have a chance to clear show Opex. Standard 2x3 ft Display cases can hold 480 slabs -
80 stacks of slabs 6 slabs high. Currency can be stacked.
From your descr above it seems you have quite a bit already. The question is can u move it. Can you compete with a wholesaler across the room selling at bid plus 5pct? Will the people coming in the door pay the money? (Example CDN CPG)?
Sales - COS = GM. GM - Opex = Net Income. It’s not necessarily how much inventory you have but can you make money on it. The big gun dealer is going to be able sell on more narrow spread the little guy can compete with. Your angle / material that’s high markup strong profit the big guy does not have. It could be currency, world, etc. Jimmy does a huge biz in junk box coins priced at a dollar he has just 20c cost per coin. Currency at keystone markup. Work your angle.
I think what u already have u can get a good margin above bid on.
It depends on your goals.
Will the business be expected to support you at any time?
If you have $2000 worth, how much will you be able to sell it for, and how long will it take? Your ROI (return on investment) comes into play.
If it is taking a hobby and having fun selling, that's a different story.
I'd advise, if you are doing it part-time and not all the time, you stay away from bullion. Also stay away from slow sellers unless you are ok with stagnant inventory. I knew a local dealer who dealt in EAC that, locally, didn't move much. He might sell 1, maybe 2, pieces at a show. He liked them though and loved to talk about them, so it was ok to him. They were his collection just as much as they were his inventory.
Are you planning to stay only with local shows or do surrounding states or more out of state shows? Travel costs and preparations rise up a lot in that case.
I think, if you are selling things that you want to sell, and don't mind holding at times, you can do it on a few thousand inventory. The faster you flip them, the better off you are. Just have to have the right things at the right prices. If you price too high, and stand firm, that is capital you can't use elsewhere.
There's a (previous) dealer on these boards, that I know (and others do as well), that would price at a very modest 12% roughly, above cost. If he couldn't move it within "x" amount of time (say a few weeks to a month), he would knock the price down and/or do what he had to in order to clear it from inventory. Kept the capital available that way.
Would you do that or would you hold longer?
I played with an idea similar to yours, when I first retired over a decade ago. My wife encouraged me to do it. I didn't. I didn't want to deal with it as a business. Some people do though.
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
My approach has been an interesting one. I do it for fun and more so to fund my collection which in return is an investment for my future. I have bought inventory with a few thousand I had saved. I only started in November doing this. Some coins I bought I have kept for my collection, but overtime I replace em with something better so then that becomes part inventory and goes up for sale. You really need to understand the market and when you are getting a good price on a coin where you have room to make good money on it. It has to be something people will actually buy. Its better to learn when you spend a hundred or less dollars on something than a couple of thousand to then realize you are gonna either make a substantial loss or nobody will wanna buy it. Right now I am working with a 52% profit margin with overall coins I have sold. In return I have been able to reinvest in further inventory + more for my coin collecting hobby.
From what I've seen, most new coin dealers start off using all or most of their coin collection as their inventory. Also, you will need a cash reserve for any buying opportunities that come your way.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
When I started out circa 1994, I had about $10,000 in cash and about $6,000 in coins from my collection. The other non pecuniary part is that I came into it with a lot of numismatic knowledge and had been buying and occasionally selling a few coins since the mid 1970s. I had toyed with being a dealer in the late 1970s. I also had an accounting degree, so I did all of my own bookkeeping.
Yes, you need some capital, but the “human capital “ part is key.
Another aspect is that I had a great reputation with a few dealers and was able to use their capital. After a while I showed to them that I could sell coins into the 5 figures often within a few days to a couple week because I had the customer base. They let me take coins “on the arm” which stretched my capital considerably. I sold items like old Proof gold and High Relief $20 gold pieces.
I agree with all of this.
I would add that it somewhat depends on your goal for the part time business as well as your comfort with your asset allocation. And it also matters how you are going about your business; ebay is cheaper than shows, for example, if you have low turnover.
There are people who only sell a few coins per year because they don't rely on the income and they are largely collectors. To that end, you could be a "part-time coin dealer" with very little inventory.
If, in the other hand, you plan on doing shows and being an active buyer, you will need a much larger inventory.
When I started my part-time activities in 1997, my total inventory was under $5000 and I flipped a lot of wholesale to keep cash on hand. These days, my sales inventory is over $100k and I quick flip less, partly because of what i sell and partly because I'm better capitalized.
TLDR.
Just a comment on asset allocation. Part of the equation is your comfort level with your total financial picture. Inventory has an opportunity cost that people often ignore. Inventory also doesn't necessarily go up in value. So, an important part of the equation is what your entire portfolio looks like.
If you have $1 million dollars in a diversified portfolio and your retirement resources are, therefore, guaranteed, you can then choose to have $100k or $200k as a non performing asset.
If you only have a couple hundred thousand in your retirement portfolio and still need asset performance to get to your retirement figure, holding a couple hundred thousand in a non-performing asset is very risky.
Another way to think of it is that there is a BIG difference between being a hobbyist selling coins (no profit required) and an actual part-time dealer (profit required). The latter buys a lot of coins they dont like for the profit and needs to turn items faster.
Excellent points
I have never been a coin dealer but I have been a small businessman most of my life. Here are a few facts you should know.
No matter how much money you think you need it always seems you are starved for cash.
Money makes money and it is the life blood of your business. It is also what you need to keep you alive. Many people cash starve their business because they spend all their money on things they want or on themselves. You have to learn how to set a personal budget and a business budget. You have to learn to think of your business as a fragile baby you have to keep alive. Truth is, there is a better than 3 out of 4 chance you give up within 6 months. 90 percent of all businesses fail in the first 3 years.
Having said all that i wish you the best of luck. James
you can't just have one narrow niche , certain sectors rotate out of favor and if you are holding a ton of inventory in an area that goes out of favor you will get killed. You can't ride out a decline in buffalo nickles if that is all you own.
Its also very stressful to get no looks on your items and see prices decline as interest dries up.
There were guys sitting on BU rolls of lincoln cents for 50 years that had to die to be out from under them
Thank y’all very much and I don’t think I will be starting one
I'd suggest going to some local shows and setting up as a dealer with your "spare" inventory, and see how that goes.
Around here, it's ~$200 to set up...rent the lights and cases if you don't bring your own.
Try to have someone you trust with you, so you have bathroom breaks and a chance to walk around.
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
Ok
I’ll try that
Try modern stuff first. I use to do it part time, I worked my day job from home (my own business digitizing video) so I had time with a day job, made enough to have a great collection, tons of gold in the bank, and start my company. I started by "making" coins. I would buy bags from the USMint of all sorts of things, Halves and Sac's were a good money maker. I would pay the premium from the mint for say a $1000 bag of Sacagaweas high grade them and return the rest to the bank. You may not end up with a single coin in many bags but some you could score some top pops. I would do this early in the year and sell the top pops off. I made enough to parlay that into Gold and Platinum coins, sell the MS70's some of the 69's and keep the 69's. I ended up with pounds of gold and platinum for free. Same with SAE's, I would sometimes buy a hundred of them. Once I got so super lucky I ended up with 60 2008 rev of 2007's and I have an early lot so a bunch went MS70. Interesting is that I found out about the distinction on this forum and still ordered some and still got a bunch even though they were known to exist.
Another thing I would do is get into a series you love once you get the hang of grading, for me it was Lincoln's and Jeffs and start buying OBW rolls and doing the same thing as the mint stuff. I would also hunt Ebay for old roll collections that would hit the market.
Capital? Don't know but don't go buying a boat ton of inventory to start, start small.
It is possible to specialize in a niche like early American copper. Tom Reynolds, the late Dough Bird and the late Jim McGuigan did it for many years. Once more, you to have an incredible amount of knowledge, and you have be able to relate to those collectors.
I agree with Bill Jones. If you specialize, especially if you specialize in an area you know well, you will get known by the collectors in that area, and you will "make more of a splash" than if you are a generalist. When I was a dealer, I specialized and it worked out well for me.
As far as capital is concerned, you need enough capital to fill two cases to set up at a show. Only one case if you are splitting a table with someone else. What I did when I started out was when I sold five coins, I would buy one better coin. By continuing to do this, I gradually improved the quality of my inventory.
An authorized PCGS dealer, and a contributor to the Red Book.
I specialized in want lists and Civil War tokens on the side. Most dealers don't bother with want lists or put much effort into them. If I could go to a show or to a collector's home or office with a box full of coins that were 99% sold, it made things much easier.
As for the Civil War tokens, I had at least 500 at every show. In those days nice common to fairly common ones were $10 to $25 each. Sales of those easily paid for the table and travel expenses.
Do it as a Hobby. Less government overreach and stress.
and no one ever makes a profit on selling coins 
I hear that you're money is made when you buy not when you sell
You can't be a dealer without a lot of knowledge. I knew a dealer who thought he could buy and sell coins at the shows based on the grades that were on the holders. One day he walking into a show and announced that he was blowing off everything, and would not buy anything. He was going out of business.
It's got to be harder these days with all of the counterfeit coins in numismatic circulation. You have to look a "circulated" Morgan Dollars these days. In my day you could buy circulated ones in bulk at the going price. Today, you have to inspect every one of them closely because of the many Chinese counterfeits.