How do coin dealers make a living?

Yet another interesting discussion on dealers. :thumb:

I think being like AJ and just trying to be a good, honest dealer on the side enjoying the hobby, after your day job, could be an enjoyable thing.

I think trying to make a living out of it doing it full time would be not so enjoyable and you would have to low ball anybody you could to make ends meat! I think you'd have to take everything you could get and a lot of people would be ripped off out of necessity! That's probably the difference we're seeing in the supposedly 'good' dealers from the 'bad'.

Everybody can decide who they want to deal with and it's up to you to educate yourself. To that extent, I don't give people much credit.

I understand dealers have a lot of costs involved. You can't fault them for trying to make as much profit as possible. Nobody forces anybody to buy an over-priced coin. How bad do you want it? How nice is it? How long have you wanted it and how long before you find another one that's as good?

 

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as someone who makes a living as a coin dealer, I have to disagree. It is possibile to be ethical and still make a profit.

 

Well, that's good to know. Maybe I underestimate the potential.

 

By all means, you can be a 100% straight shooter and make a great living at this. I'm still learning, it would be a dream job.

 

I quote these so I don't have to retype it.

Now, working in a shop I may be a bit biased but these gentelman have spoken volumes on the subject in their posts.

I have "hung around" shops long enough BEFORE I worked in one to get some idea. Get BEHIND the counter and you really do see how much hard work and knowledge is required to become a successful dealer. We have hundreds of books and two computers combined with years of experience. Between the boss, my coworker and I we've been involved with coins for about 100 years.

It is about buying right and knowing the market. Keys, semi keys and hot items need to be moved and will always get the better money. I can buy coins at work fairly cheap unless it's a key etc. If I want a key I pay darn near as much as anyone else and this is understood in the industry. Nobody is "giving away" keys.

Do we buy under bid? Heck yes in most cases. We also sell well under retail in most cases as well.

What about paper money? Yes, there is a greensheet and we use it but circulated paper does NOT draw retail price a majority of the time. Modern paper? Believe me, that's where the boss uses me a LOT.
It's not ON any greensheet. There's stuff he would have not even considered before I was there but I'm pretty good at spotting it. I tell him what to offer at times. Do I lowball? Absolutely. Why? - because many times we'll be lucky to get half of retail.

I've learned a lot and believe me I would not attempt to open a shop with my own money. With "limitless" backing yes but it takes money to make money in this business.

For those that may think dealers are "crooks" I'll ask you this.

How would you acquire rare coins if dealers were not around? They provide access and knowledge. Get a dealer alone at a slow time and see how much information they are willing to share. I've learned a lot on CT but let me tell you there is nothing like a good local dealer to teach you about coins.

 

I wouldn't call a coin dealer a "crook". Dealers are, as you pointed out, a necessary evil when it comes to collecting. They are the gate keepers. They hold the knowledge and with great knowledge comes the competitive advantage in business.

One must realize that transacting with a coin dealer is a ritual dance. There is a degree of pomp and circumstance involved. A test of wit and a test of wills. The buyer wants to pay the least he can and the seller wants to get as much as he can for what he is selling. Sometimes the buyer walks away thinking he got a deal and sometimes the seller walks away thinking he sold it for more than expected.

Most often the deciding factor is knowledge.

Did a buyer, who knows everything about franklins, walk into a store and cherry pick a poor dealer's stock because the dealer knows cents but not franklins? Or did the dealer selling mercury dimes get some newbie to buy AU dimes for a BU price?

Little buy little, coin by coin the dance is played out all over the country in stores and online. Little battles of wit and will.

To the victor goes the spoils.

 

Those of us who are self-employed understand that it costs money - a LOT of money - to operate a business. Coin dealers are no different. Let me see if I can name a few expenses facing a coin dealer off the top of my head:

• Inventory (coins) and supplies (books, magazines, loupes, scales, tubes, coin folders, other items to sell) And remember, the longer a dealer holds a coin the more it costs him in interest and the less additional coins he can buy for inventory.
• Interest - If you borrow money to buy coins to keep in inventory you are paying interest. If you have enough money to buy your coins using your own money the money is not free because you could be earning interest on the money.
• Advertising - Have you priced a Yellow Page ad lately?! :bigeyes:
• Rent (or mortgage, property tax and property insurance), signage, parking, etc.
• Phone
• Showcases, displays (for B&M dealers), supplies, computers, software, equipment
• Insurance (for inventory, fixtures, equipment, etc.)
• Business license
• Security - alarms, security cameras, safes, security guards, etc.
• Web site
• Education (e.g., grading & counterfeit detection (available at ANA Summer Seminar, major coin shows, etc.))
• Books, reference materials (e.g., books on VAMs and other varieties)
• Tools of the trade - loupes, lights, scales, calipers, subscriptions to Grey Sheet, Coin World, ets.
• Professoinal memberships - ANA, PCGS, NGC, PNG, CCE, etc.
• Employees
• Coin Show expenses - travel (airfare, rental car, motel), table rental, security, security shipment of coins (e.g., Loomis or Brinks)
• Taxes - don't forget that if you are self-employed you pay 15.6% Self-Employment Tax on top of your normal Federal and State Income Tax.

Those are just some of the expenses a coin dealer faces. He (or she) must mark up his merchandise enough to cover those costs and to make a reasonable profit. Otherwise it makes no sense to be in business. Nobody is in business to break even or lose money.

It is so easy for someone to question a business' markup if they have never operated a business. My brother is trying to start a small business. At first he thought it was going to be a breeze to get started. Now that he has gotten into it he realizes how complicated and expensive the business is to get started. His overhead expenses are WAY, WAY more than he ever imagined. I think now he better appreciates what every other business faces.

 

Wow, this is getting a little bit frustrating.

Perhaps you have been burned in the past I don't know, but your animosity for dealers is apparent. There are sharks for sure, but to paint with a broad brush as a necessary evil is off putting. I don't dance with my customers. Take your dance to another website, store or table.

Knowledge comes not from being a dealer per se, but by studying and experience. Collectors have it as well, those who want it.

 

Well said Jack...

 

Absolutely right, Jack.

Education is not limited to dealers. There are plenty of collectors who know much, much more than most dealers.

 

Two things I'll point out about this abreviated quote.

First I NEVER referred to dealers as a necessary evil.


Second, as for the "to the victor goes the spoils" try finding spoils without coin dealers to provide them.

 

This post has given me a really great education. I am new here and have had coins I have collected for more than 20 years (mostly common dates). I have never bought a coin from a dealer but it did give me an educations to do my research before buying a coin. I know that in any given profession there are good and bad (doctors, lawyers, handy men, baseball player etc). Reading this post it seems that if you are going to buy a coin to ask around and see who has a good reputation. Seems that a good reputation trumps prices and all other things. If you have a good reputation other things just fall in line. Ice

 

Thank you both for your very informative posts.

It warms my heart to know that folks of differing opinions can peacefully coexist within the same community. If we all thought the same, what a boring world it would be.

We each have an opinion and I respect yours and I thank you for respecting mine. It just goes to show the quality of the membership that exists at cointalk.

On many topics, folks will have to agree to disagree. It's ok that we both cheer for different teams and that is part of what makes this country great. There is room at the table for everyone.

 

It takes all kinds.

My mind has been changed many a time by reading and thoughtful consideration of the many opinions found here. Some sharp cookies indeed post on this forum.

:high5:

 

It would be an extremely boring existence if we all agreed all the time.

 

I have been known from time to time to tell people if they really want to get the absolute top dollar for their coin collection to buy a table at a show and set up or to put it all in the internet. A few people have taken me up on it and have done well. %95 percent of people don't want to mess with the time and effort that it takes. That makes people like brick and mortar dealers necessary... The guys out in the trenches I call it... digging for fresh coins... creating a supply in this demand rich market.

I have also been called almost every name in the book by people who think their 1921 Morgan silver dollar is worth $200 because the redbook says so.... and I say their circulated 1921 Morgan is worth $12 or $13. They just don't know... I have seriously been chewed out more times then I can remember because of something like that.

Reading back through this thread I can see how someone could easily get discouraged by a lot of the stuff they are reading. I can tell you for sure that I absolutely LOVE my job, It keeps me on my toes because you never know what you are gonna see walk through the door. I have done a lot of things in my short life job wise.... but I'll never do anything different then what I am doing right now. My wife calls it my obsession... but she is a collector... I guess it has worn off a little on her!!

 

This is a great thread. While there has been a lot of disagreement, I am not sure I have seen a better thread about the business of selling coins than this one.

 

Here Harry

http://www.cointalk.com/forum/t43324/

 

Thanks Ruben.

 

A couple things Hobo missed

Utilities: You need heat, light, water. And remember this the rates for these that a business has to pay tend to be higher than what you do at home. The electric rate per Kwh here at our show is three times the residential rate.

He mentioned the phone and maybe more than one phone line. The phone will be painful as well. Where I live the basic rate for a home phone line is $40 a month. For a business phone it's $150.

He mentioned the cost of a web site but missed the internet connection cost. If you have a business address expect to pay three to four times what a residential rate for a broadband connection costs. Once again where I live a cable internet connection at home is $30 a month (That's just for internet no cable) If I have it strung into the shop here it's $120 a month (once again just for internet access.)

Under taxes he didn't mention the fact that a very large number of collectors you sell to will feel they shouldn't have to pay sales tax on their coin purchases even if the state they are in requires it. But the taxman still insists that it get paid so if the collector won't pay it, it has to come out of the dealers gross.

And once you have a business you can expect to be inundated with organizations, civic groups, the local high schools etc asking for donations.