I figured it out-- the average mid-tier dealer makes about $400k year, before expenses and taxes

Longacre · June 9, 2006 6:13AM

Here is how I came up with my figures. I think that the average sales price of a mid-tier dealer’s coins is probably around $4,000 (this is based on a cost of $3500 and a 15% markup). Therefore, the profit per coin is approximately $500 (rounded).

Let’s say the dealer works 50 weeks per year. Also, let’s assume that the dealer sells three coins per day and works an average of a 5-day week. Therefore, that’s 15 coins per week x 50 weeks = 750 coins sold. At an average profit of $500, that’s a total pre-tax and pre-expense income of $375,000.

Using round figures, let’s say taxes are 40%. That leaves $225,000 before expenses. Does anyone know what a dealer’s expenses would be? I have no idea, but after taking into account business expenses, I don’t think a lot of dealers live high on the hog.

Maybe my assumptions are totally off base. Please feel free to comment where you think I went wrong.

WTCG · June 9, 2006 6:16AM

I'm assuming Longacre's post is tongue 'n cheek. I can only wish it is that easy.

Barry · June 9, 2006 6:22AM

I'd estimate about half the dealers who attend our local shows are lucky if they make 30-40K/year.

jayboxx · June 9, 2006 6:22AM

Does a dealer sell 3 $4k coins per day, by themselves?

1921obsession · June 9, 2006 6:24AM

By comparison to "normal" retail, I suspect the average coin dealer posts P&L numbers which would scare you with their bleakness. I see huge inventory dollars, low turns, and net-net not exceeding 10%.

SUPERCARCOINS · June 9, 2006 8:20AM

@ 400K ............every Tom , Dick , and Harry would be a mid-range coin dealer.

Most dealers I know declare very little profit to the I.R.S , they roll their income

over into their stock for the next year . In fact , if ALL the "coin dealers" were

audited ; many would then sell coins from prison

relayer · June 9, 2006 8:25AM

Exactly what color is the sky in your world?

gamr0n · June 9, 2006 8:29AM

$500 average profit seems a bit high in my opinion, because I am sure a large amount of inventory is sold for low prices. I would say the majority of coins sold by a small local dealer would be below $500 in retail price, making it near impossible to have a $500 average profit.

mgoodm3 · June 9, 2006 8:36AM

Dang, I need to become a wannabe.

Kaelasdad · June 9, 2006 10:34AM

Hmmmm, I know some dealers and they might sell some coins on show weekends or occasionally during the week, but 3-4 coins a day at $4000 plus--thats quite a stretch. Just to find quality coins 3 times a day would be difficult in my book.

But they do get to travel a lot, and eat airplane food, and stay in fancy hotels with room service....

roadrunner · June 9, 2006 12:05PM

Many dealers are happy to turn $25 on a $1000 coin. That's more the norm than making $150-200. I'm sure the retail shops work on that margin but the average dealer you speak of is probably doing more wholesale than retail. For every $500 profit he makes on one coin, there are dozens he'll make $10-100 on. The average coin sold is probably $100-$700. The $3500 coin you speak of may work for Whitlow, Legend, Pinnacle and others, but not the 98% majority of working coin dealers......at least imo. The average guy may be making $15-$50K pay year net. Have to think that those making > $75K per year are in the top 20% of all coin dealers. There are thousands of non-full timers making far less.

roadrunner

oreville · June 9, 2006 12:20PM

Laura:

<< Someone has too much time on their hands.... >>

Another income tax season will cure that very quickly.

mgoodm3 · June 9, 2006 12:23PM

<< Many dealers are happy to turn $25 on a $1000 coin. That's more the norm than making $150-200. I'm sure the retail shops work on that margin but the average dealer you speak of is probably doing more wholesale than retail. For every $500 profit he makes on one coin, there are dozens he'll make $10-100 on. The average coin sold is probably $100-$700. The $3500 coin you speak of may work for Whitlow, Legend, Pinnacle and others, but not the 98% majority of working coin dealers......at least imo. The average guy may be making $15-$50K pay year net. Have to think that those making > $75K per year are in the top 20% of all coin dealers. There are thousands of non-full timers making far less.

roadrunner >>

No thanks. I'll stick to Longacrenomics and make 400k.

oreville · June 9, 2006 12:50PM

<< Here is how I came up with my figures. I think that the average sales price of a mid-tier dealer’s coins is probably around $4,000 (this is based on a cost of $3500 and a 15% markup). Therefore, the profit per coin is approximately $500 (rounded).

Let’s say the dealer works 50 weeks per year. Also, let’s assume that the dealer sells three coins per day and works an average of a 5-day week. Therefore, that’s 15 coins per week x 50 weeks = 750 coins sold. At an average profit of $500, that’s a total pre-tax and pre-expense income of $375,000.

Using round figures, let’s say taxes are 40%. That leaves $225,000 before expenses. Does anyone know what a dealer’s expenses would be? I have no idea, but after taking into account business expenses, I don’t think a lot of dealers live high on the hog.

Maybe my assumptions are totally off base. Please feel free to comment where you think I went wrong. >>

Longacre: You can't use a one size fits all here. First, there are many dealers who specialize in the junk silver, proof sets, etc. etc. kind of coins in which the mark-up may very well be much tighter than what you state. On the other hand, if they have supply sources that are very cheap such as "vulture type" buying trips in which they can "pick off" many great purchases from non astute semi collectors, the numbers can vary drastically.

To help guide you in determining the average profitability of coin dealers which is difficult, almost impossible to analyze, I suggest that you obtain public information of national coin dealerships that are or were publically held. Examples are Bowers & Merena when it was once owned by General Mills, Inc. in the late 1980's early 1990's as well as in the late 1990's to early 2000's when it was owned by Collectors Universe which currently owns this web site. Same for (as stated by yahoo!) Escala Group, Inc. which operates as a global collectibles merchant and auction house network with operations in North America, Europe, and Asia, as well as on the Internet. The company, through its subsidiaries, specializes in auctions, merchant/dealer operations, and trading. In North America, the company engages in Internet, interactive telephone, and Internet and live simulcast-auctioning and merchandising/dealing of collectibles, such as rare stamps, stamp collections and stocks, coins, sports trading cards and memorabilia, and fine art. The company also operates auction divisions under the names Greg Manning Auctions and Spectrum Numismatic Auctions. It also conducts philatelic auctions of rare single stamps and collections targeted to individual collectors, as well as dealers; focuses on smaller, less expensive, and mid-range individual stamp collections; sells individual stamps to collectors; acquires and sells collectible coins, collectible sports cards, and other sports memorabilia; and conducts Internet and telephonic auctions of coins. In addition, the company owns GMAI Auctentia Central de Compras of Madrid, Spain, which engages in the sale, marketing, and production of owned and third-party collectibles, with an emphasis on specialized philatelic material. The company was established in 1981. It was formerly known as Greg Manning Auctions, Inc. and changed its name to Escala Group, Inc. in September 2005. Escala Group is headquartered in New York City. Bowers and Merena was sold by CLCT to ESCL (GMAI at the time) a few years back.

The problem in studying those numbers shown by publically held coin dealerships is that you are going to be looking at a combined auctioneering and retailing dealership in too many cases.

Also, many coin dealers also sell supplies, coin books, books, currency and some even sell stamps, etc. to boot. This will greatly distort your computation.

I do not envy your task in trying to disseminate all the financial data available to analyze.

I have done tax and accounting work for a number of coin dealerships and can advise you that some of the mysterious missing puzzles in dealership profitability include:

(1) Rising profits when price levels rise which increases the market value of inventory held for sale but not yet sold; is not necessarily reportable profits until such inventory sold (remember cost versus market versus lower of cost or market of inventory held for sale).
(2) Decreasing profits or increasing losses when price levels fall which decreases the the value of inventory held for sale but not yet sold;
is not necessarily reportable losses or decreases in profits until such inventory is sold depending on the method of inventory valuation.
(3) How astute the dealer is in buying undergraded coins and then re-selling them for full value, etc.
(4) I would put all of you asleep if I continue?

oreville · June 9, 2006 1:02PM

Longacre: I WILL state this:

(1) Coin dealerships reminds me of being in a business dealing in thoroughbred racehorses. Why?

Years of profits, followed by years of very lean years or even losses. It is actually quite scarce when a dealership can maintain reasonable and steady profits, year after year which the accountant can depend on for a calm income tax filing season.

(2) Dealers do drive their accountants crazy!!!

(3) It takes a while for the accountants to get used to the enormous paperwork and volatility the dealer has to contend with.

roadrunner · June 9, 2006 11:05PM

To steady out those lean years and remove market risk of decreasing inventory value, many top tier dealers branch out into the auction field. Much easier to clean off a solid 10% or more in all seasons than to risk it all, all the time. You don't see these dealers carrying massive inventories even though they are financially equipped to do so. They just churn their auction coins month after month. Anything they can pick off prior to auction or even at the auctions is gravy.

roadrunner

dwssws · June 9, 2006 11:29PM

<< No thanks. I'll stick to Longacrenomics and make 400k. >>

Longacre · June 9, 2006 11:36PM

<< Longacre: I WILL state this:

(1) Coin dealerships reminds me of being in a business dealing in thoroughbred racehorses. Why?

Years of profits, followed by years of very lean years or even losses. It is actually quite scarce when a dealership can maintain reasonable and steady profits, year after year which the accountant can depend on for a calm income tax filing season.

(2) Dealers do drive their accountants crazy!!!

(3) It takes a while for the accountants to get used to the enormous paperwork and volatility the dealer has to contend with. >>

Oreville-- how did I know that you would come up with a more reasoned post than I did?

morgannut2 · June 9, 2006 11:42PM

I'm willing to bet 90% of a dealers gross "profit"--even if it was $400K-- goes to high accounting fees, travel, bourse costs, $2000 ads per month in CW, salery and sales commissions to 2 salespeople, insurance, phones/Watts line, office rent----Frankly I don't see how $400K gross would even break even.

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The average dealer I bet would do better to buy one 1913 Liberty Nickel or 1804 Silver Dollar for their whole inventory!

BAJJERFAN · June 9, 2006 11:53PM

When you see what you get offered here and the asking price when they put it up for sale the markup/profit on a $1000 coin is more than $25 I'm sure. Not to say that they always sell at the listed price but I bet many of them do ok. I would think that if they take in $400K in gross margin they shud end up fairly decent. I expect many make the most out of all of those 2 way cash transactions too.

TwoSides2aCoin · June 10, 2006 12:02AM

Some people will never understand economics.
My advertising bill alone last year in my business was $47,000. This includes phone book, business cards, radio and newspaper ads, etc...
Factor in gas, insurances, labor, MATERIALS, and taxes and I would suspect I am gonna be a coin dealer if any of them agreed with ya , Longacre

Roofing sucks, but to make 400 grand in one year with coins, a dealer would have to have zero overhead and sell about 12 million in coins per year since their return after expense is about 3%, not 20% like most wares sold. Sometimes a flip will not make even 3 percent. Lets be realistic here.

earlygoldnut · June 10, 2006 12:04AM

"Most dealers I know declare very little profit to the I.R.S"

A) Your hanging out with the wrong crowd

I think the I.R.S wants to talk to you

USCGCraig · June 10, 2006 11:55AM

Having worked in a smaller shop in a major city, I can tell you we would average $3-$4,000 in sales each day. Some days a bit more and some less. knowing the owner like I did as well as what we bought coins for, we were lucky, very lucky to clear 10%. Most of the bigger sales were bullion where you don't make much. Quite a bit was wholesale were you might make 2-3% or usually break even. Those big killer deals just don't cross the counter like you think they do. Quality product just isn't out there. You also have to factor in liquidity. That 1907 high-relief St. Gaudens is going to sit in the showcase for awhile. That's a big bunch of cash just sitting there. We actually would do better with the smaller quality stuff as we could move it faster.

Now, one added bonus to this is that you the coin buyer can get some good rips on dealers like this. Try to find the ones who do a lot of wholesaling. Generally, they need the money and don't send to many coins in to get graded (ties up capitol). I picked up a raw 37-D Texas commem for $125. I took the time to get it graded and rewarded myself with a beautiful PCGS MS67. I've picked up quite a few other pieces this way.

I always wondered why most coin shops rarely had nice quality coins until I worked at one.

I figured it out-- the average mid-tier dealer makes about $400k year, before expenses and taxes

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