Do coin dealers make good money?

You see, probably 80% or more of all the coins that a dealer sells, he sells to another dealer. He has to just to stay in business. A dealer has to turn his money over, he has to keep cash flow moving so he can continue to buy more coins.

Oh I understand this, I see it all the time... I just have a hard time understanding they can sell coins low enough for a dealer to "pay electricity, pay rent, pay TAX on earnings, etc. etc. etc." --- AFTER they sell the coin retail....

In other words.... that common Peace dollar I paid $34 for, what did the DEALER pay??? Did he buy it for that much less?!?!?

 

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All very good replies, Thank you!

 

It's possible. He may have purchased a bunch of them at book value when silver was at $7 ounce. Or he just bought it from a seller for $28 and sold it to you an hour later @ $34.

 

I guess another good question is, how to start? You obviously can't go to a coin show or a shop and ask the dealer to sell you some coins at greysheet.

 

Actually, let me put that another way. I know you can go to estate sells, garage sales etc., but how does someone reach the level to where they can purchase at greysheet. get a bunch of certifications?

 

Money talks. The bigger the amount you buy, the better the deal. If you're only buying a few coins at a time, expect to pay close to the asking price. Walk into a shop with a pocket full of cash and spend $25,000 or more, you'll get the dealer's attention and get a better break on prices.

 

You need a pocket full of cash. A credit line of a few hundred thousand is a good start. Then you start buy at estate sales, garage sales, auctions etc.. Or buy a coin shop that's shutting down.

 

I know of one dealer who claims to make $500,000/year. I don't know if this is net or gross (excluding the cost of inventory), but he is successful and very knowledgeable. I've certainly put money in his pockets (but not at the hundred k$ level). He attends all of the major coin shows and auctions, has a home office, an internet site, but not a brick & mortar shop.
He tends to operate on a gross profit margin (markup %) of 25 - 30% (based on his resale prices of coins that I know he was a successful bidder on at auctions we've attended). It is his knowledge of the coins that makes it worth my paying him his desired profit margin (especially when he goes to an auction I wasn't ware of or couldn't attend).

I suspect that there are a number of other specialist dealers at the upper end. The downside to getting to this level is need for either huge cash reserves or a big line of credit with an understanding bank. The ability to buy multi-hundred thousand dollar coins with the anticipation that you will be able to sell it to a third party a few months later requires large financial reserves and/or the understanding bank.

On the other hand, I would be surprised if my local brick & mortar shop netted more than $100,000 after expenses (I hope they do as I want to see them stay in business). With the advent of eBay, many brick & mortar shops have disappeared. For that reason, I try to support my local store even though their inventory does't normally have my particular area of interest (very scarce varieties of half cents).

If you are lucky enough to have a good brick & mortar shop in your area, by all means, support it.

 

All the B&M dealers in my neck of the woods seem to make most of their income buying and selling precious metals.
They still sell numismatic items, of course, but they keep REALLY busy trading in gold and silver.
My favorite B&M guy has opened several branch stores since the PM market got really hot in the last few years.
It seems every type of mom & pop shop, no matter what their business, wants to buy gold - usually for a mere fraction of its value.
That's why my buddy with the branch outlets is doing so well, since he has a good reputation in my area.

 

Yes, he did. If you walked into a shop with that coin he'd offer you $25-$27 for it and that's it. Selling it for $34 would allow him to make $7-$9 on that one coin.


From what I know/understand about retail, that doesn't seem like nearly enough profit to "keep the doors open" esp. since 30% of it is going to taxes right outta the gate!​

 

Thats why everyone says its based on volume. Look at Walmart...they sell on less than 1% markup and I don't think they're doing too badly.
Guy

 

Don't count on it. Being in NYC their overhead is also probably much higher than most.

But how do you replace stock? Until you are well established you probably can't expect people to be contacting you with material to sell, so you will have to work the show circuit as well either with a table or just doing dealer to dealer business, or do auctions. You will find that the hard part of being a dealer is the buying. Finding good material, buying it at a good price and then turning it quickly to free up the capital for more buying. But this means a lot will be coming from other dealers which means no or few killings and small mark ups. So you will need to move a lot of material.

And to make ends meet he must do that a LOT.

Well if you don't have a ton of money to bankroll yourself....go to shows and search out what you think would be good deals that you could possibly resell and start building a little inventory. Once you have enough to stock a couple of cases you can start setting up at small shows and start selling as well. This will give you the possibility of buying from the public as well at wholesale levels and after a few shows the dealers will start accepting you as a dealer and you will be able to start getting some better deals from them as well. One thing, if you are buying from them wholesale, you will also be expected to sell to them wholesale as well.

Now keep this in mind. At first you will be trying to make at least replacement cost and expenses. Anything over that (plus fresh investment) needs to be rolled back into inventory, replacing, expanding, and improving your stock. As you become more established and your stock improves you start attending more small shows and expanding the territory you are known in. As you become known as a dealer you can start working some larger shows doing dealer to dealer transactions even though you don't have a table. This will help improve your stock for the small shows.

Keep building inventory and eventually you will be able to start setting up at the larger club shows or State level shows. This will give you more access to other larger dealers on a wholesale basis and a wider collector base both buying from you and offering you items to purchase (public to dealer wholesale buying) But it will also mean higher expenses. Keep building inventory. Start working regional shows dealer to dealer. Eventually you'll be able to share a table at the regional shows with another small dealer.

Basically as you see what you are doing is starting small and constantly building your business. You will need a retail sales tax license to keep from having to pay sales taxes. As long as you are not pulling money out of the business taxes won't be much of a problem except remitting sales taxes on material you sell to the public. Other profits the business makes is rolled over back into inventory purchases. At some point cash flow will be great enough that you will be able to stop sinking more of your own money into the business and it will be able to keep growing without it. At some point cash flow will hopefully be good enough that you can actually start drawing money OUT of the business. But now you will have to start paying self employment taxes and income taxes on that money. This means the government is going to get a minimum of 15% or more of the funds you draw. Keep building, keep growing, and work your way up. More shows, regional shows, national shows. Eventually you will find yourself working 25 or more shows a year. Now you decide if the coin business is paying well enough to quit your day job because you are working all week long and on most of your weekends too and you are killing yourself. Well we've gotten past "How do you start?" so I'll stop here.

Yep, it is much easier to make money on the metals right now than on coins so that is where efforts are focused.

Well 30% isn't going right out the gate for taxes. Depending on location and whether or not they were able to collect it for 5 to 8% might be immediately going out as sales taxes, but taxes on the rest can be minimized if the money is rolled back over into inventory or expenses. Taxes will only be due on retained earnings. Of course in some areas there will also be property taxes due on the inventory at the end of the year.

 

Yea you're right 30% is probably high for a brick and mortor... but Joe Average selling coins wouldn't have too many LEGIT expenses I wouldn't think...

Well 30% isn't going right out the gate for taxes. Depending on location and whether or not they were able to collect it for 5 to 8% might be immediately going out as sales taxes, but taxes on the rest can be minimized if the money is rolled back over into inventory or expenses. Taxes will only be due on retained earnings. Of course in some areas there will also be property taxes due on the inventory at the end of the year.

Read more: http://www.cointalk.com/t201109-4/#ixzz1n3faaGrJ​

 

Joe Average doesn't usually report his sales or pay taxes. If Joe Average is BUYING AND SELLING as a business you would be surprised at the legitimate expenses that can be deducted against the income, but sales taxes may still need to be collected and remitted and if you don't collect it from the buyer it comes out of YOUR pocket. And you can't offset those taxes with expenses. And if you are drawing money from the business for yourself you can't offset your self-employment taxes either.

 

What's crazy is the coin shows and RC shows I attend where there is never and sales tax collected... and some of the dealers are absolutely brick and mortor type places - one hobby shop is right down the street! I'm not complaining of course, but the gov. sticks its nose everywhere else, wonder why not trade-type shows??

 

After reading the forums lately, I probably am paying more than I should for coinage... but I enjoy it!

 

You enjoy paying more than you should???

 

It's my experience that most B&M coin shops do most of their business in untraceable cash transactions.
It problematic as to how much of their income gets reported to Uncle Sam.