There was a thread along similar lines below, talking about the costs involved with being a coin dealer, etc. I took a quick look at www.sec.gov for the 10-K filings of some of the larger coin firms in the country. In Collectors Universe's filing, it shows that they posted a net loss in each of the last three years (in year ending June 30, 2003, the loss was over $10 million). I also checked Superior Galleries, and they showed a loss of about $3.5 million. In addition, their independent public accountants issued an audit opinion called "a going concern" opinion, which is when a company's finances are in such questionable shape that there is a risk that the company will cease as a "going concern" (i.e., need to shut down). I just found this interesting seeing that I assumed that the coin dealership business was wildly profitable.
Without knowing anything about how these two business operate - any business can go under in a hot market. It's all about management.
Longacre, as with any type of business, the majority of those that fail do so due to a mismanagement. Frequently a lack of profits does not indicate that the profits did not exist, but rather that the principals who ran the company were unable to find them. That being said, the coin business is not wildly profitable. As a matter of fact, I would guess that overall the profit margins in this business are relatively low when compared to your average retail sales business.
cdcda, would you venture a guess on the after expenses and taxes profit that your "average" coin dealer might bring in? Is it under 5%?
A lot of people think that coin companies are such money makers. That is the lure of buying and selling money. It is no different than any other business. First, you must know your product. Then you must know your market. When you look at these large public traded companies, you have to take into consideration the stock price. Then you have to break down each of the areas of their business. Both firms listed are or were involved in far more than just buying and selling coins. You can't compare apples with oranges. As far as profits go, there really is no average. Most dealers start at 20 to 30 percent in sales. Then once you figure out wages, benefits, storage, security, leases, traveling, operating budgets, losses, fluxuations in the market, and 100 other things it all depends on the size of the company and the staff.
There is a business model that involves all the officers draining the company of cash, then filing for protection for the corporation. Can you say Enron? So, a loss (or profit) on paper oftentimes has little basis in cash flow. This is not to say the good folks at any of the companies you mentioned are involved in any of these types of business models. (AKA schemes.)
ND is right, there is no average and the margin is going to vary greatly depending upon the overhead.
