Could you be a dealer without much money?

Maybe it's me, but coin dealers would have to seem to have a ton of money to stay open.

For example...

Say you had $10,000 cash, and someone walked into your shop with a $10,000 coin worth $16,000.

If you buy it, now what? Tell people "I can't buy anything right now", but still sell stuff?

What if someone walked in there anyway, and you only had $5k, tell the guy "I don't have enough money".

Seems to me like you would need a lot of capital to become a fulltime dealer.

 

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I'm not a dealer, but I imagine like any business, you need a cash reserve. Businesses also have credit lines and credit cards with their financial institution. You can pay a customer with a check against that credit line, and make payments as you would with a credit card.

In order to get a credit line to cover something like this, you need cash and assets to back it up, in case you can't make payments. You'll need free cash flow and an inventory worth at least as much as your desired credit line.

Obviously there are coins and currency out there that are worth millions. It will take some time to have the cash flow and inventory to buy and sell at that level.

If you get a customer who walks in with something of high value that you can't pay for immediately, you'll need to make arrangements. Draw up a contract, then pay the customer an initial amount with an agreement to make additional payments. With the coin or note in hand, run to the bank. If your banker knows anything about numismatics they ought to give you a credit line increase to pay for the item since the item is already in your inventory. They will expect you to put it up for sale and sell it in a realistic time frame.

They're not going to give you the credit to put it in your personal collection. The bank needs to know they are going to get their money back.

It's really important that you have a good banker that is familiar with the industry.

 

It doesn't matter what business you start up - you need a fair amount of capita. 10,000 dollars doesn't get you very far these days, especially if you are thinking of a brick and mortar store.

Try making 1000 dollars a month on ebay or somewhere else selling coins alone. Then we'll start to discuss.

 

Agreed. Any business start-up requires a large cash reserve with ready access. And by "business" I don't mean selling a few items per month on eBay. Not sure where you're going with this, but in light of your other threads, if your ideas are that good, pitch them to some venture capitalists and see if you can get financing. $10K won't get you in the door to start a business, let alone buy sufficient inventory.

 

Dealers say no all the time. Few buy everything that walks in the door.

 

I'm pretty sure that if someone walked into the shop with a "$10,000 coin worth $16,000" that the dealer would offer to consign the coin in the store or pay by check. I don't see many coin shops carrying that amount of cash on hand. It just makes no sense.

 

Most businesses are cash constrained. Your example is exactly why they offer low prices when they buy coins. If they have 10k out on a coin they either have to be able to sit on it for a while to get full price, which ties up capital and hurts cash flow, or they have to get it cheap enough to turn it quickly.

To you question about how much cash you need, depends on what type of dealer you are. If you want to be a part time vest pocket dealer I imagine you could start with $100.

If you want to be full time I imagine you need quite a bit more. I would consider 15% profit margin after all expenses would be a reasonable goal, so if you want to make $50,000 in a year you need $300,000 in yearly revenue. Assuming you are turning over your entire inventory every quarter, which is probably unreasonable, you would be looking at $75,000 in capital. I know this is simplistic, if you dealt in bullion your profit margin would be lower but the turnover rate would be higher. You could make the money via consignment/buyer's fee instead of through inventory, etc...

 

Well I don't know how much a coin dealer would have in his inventory but there was a time when I remember a small money exchange dealer was robbed many years ago. Turns out he lost around 50-60,000 dollars in various foreign currencies or so (can't quite remember the figures but it was a lot back then). This was in the papers so yeah, that shocked a lot of people. That's how much money he has to hold onto if he needs to make monthly salary, rent, electricity and so forth.

I would expect a coin dealer to have a fair amount of stocks to make enough to cover rent, living expenses and so forth. 10,000 dollars would just go straight to rent in some places especially in big places.

I'm sure there are a couple of coin dealers here. Lostdutchman is one of them so you might want to PM him.

Best recommendation is, do this as a hobby unless you really understand what you are doing and had some business related experience. Factor in inventory, insurance, taxes, overheads, security, supply and demand etc and on top of that, you want to live comfortably, let's say 2 - 4 k per month towards your salary after deducting all that.

You realize that coins are something that no one is forced to buy like staple food - it's a "luxury" item and that people will only spend if they want to. You only make money after you make a sale - coins that are sitting in trays / inventory will not bring you any interest. At times like this when you hear the word unemployment and coupled with competition from ebay - best of luck.

Now I would like to hear why you think it's doable with limited funds.

 

Depends on what kind of dealer Tim. Could you be a vest pocket dealer at shows, going through inventory and buying underpriced coins to resale? Of course, but you have to have much greater knowledge than the dealers. But, no dealer can know every series. Humbly I would say I have greater knowledge in some areas than almost any dealers have, but since they are so esoteric I rarely find any for sale, and if I do get a good deal they simply stay in my collection. If you REALLY studied an area like UK coins, REALLY learned how to grade expertly, I am betting you could make money in the process if you were willing to sell your acquisitions.

 

Shark Tank wouldn't laugh you out the door, they'd throw you out.

Chris

 

Unless they have a client in mind so they can flip it immediately. I doubt that most B&M's would want to carry a $10K item in their inventory very long.

Chris

 

He'd get in the door?

 

H

This one carries $100,000 coins.
http://www.numismaticamericana.com/category/coins-and-currency/

 

I said most B&M's. Besides, do you know personally that Numismatic Americana has a B&M or do they just deal on a website from home or a private office?

Chris

 

It will vary of course. Ben Marlenee if he shop were still open today would have had an inventory valued well into the hundreds of thousands. However, most stores carry lower end coins, proof sets, supplies, etc etc. They are more small time local hobbiest shops and have no customers for higher end coins. Most of these places wholesale out any higher end product they happen to purchase from local customers.

 

Oddly enough, I am intimately familiar with the company you linked since I not only have my own company, but I also work with Bill at Numismatic Americana and we set up together at shows. We have little in common with the rest of your post, so I have no idea why you would link us as an example when you are generally writing about dealers with $10k liquidity.

 

He was trying to counteract the statement someone made that most B&M's don't carry high end items for very long.

He thought that link would do a good job of refuting it. For some reason.

 

We are not a B&M so the comparison is without merit.

 

Anybody participating in this thread willing to contribute the capital necessary to float Tim as a coin dealer?











































































Now, don't all rush!!!

 

Actually, I wonder how many coin dealers simply use their collection as the startup capital for working stock? Sounds like a plan to me, build up your collection with the intent of selling it when you are a dealer.

I could never do it, of course, since the idea of parting with my coins is anathema to me.