How do coin dealers make a living?

I'm glad someone cleared this up for those who do not know the hours that go into running a business. I worked as a mechanic for 14 years. People always said," Shop rate is so high. Do you know how much your boss is making off of you?"
I always said,"Yes, and it's a lot less than you think."
I like going home at the end of the day and leaving all the troubles at work. A small business owner does not have that option.

 

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Some sharp cookies and some of us crumbs.

I can relate to this also being in auto body. A lot of people can't undestand the high rates. You can add to the previous lists the cost of on going education and computer programs (monthly subscriptions) ect. I also here a lot of people say "well I could do it at home much cheaper", Yea if you had the space, the tools, the special equipment, the knowledge ect. If it was that easy everybody would be doing it.

In any bussiness there are mark ups for a reason, every one has to make a living.

 

I never owned a shop and I have over $30,000 in tools. I bet most shops spend this annually in equipment.

 

I,ll bet you are correct. The shop I work for just spent that much on a spot welder.

 

And as a small business owner writing those checks every month sure does hurt... Also just spent $5,000.00 on a new scan tool for all the latest model cars, $800.00 for schooling and have a customer get mad Because I charged him $35.00 for use of the scan tool...

Everybody should work for the public, just once....

 

As someone who has specialized in business and computers in college, I can tell you that I think a lot of dealers and shops are poorly run. The thought of opening a shop has crossed my mind but I wouldn't do it. I can tell you that it is a rough business to stay in.

A traditional retail business makes money on selling new inventory purchased from a manufacturer at a good markup. They generally can buy as much as they can sell. Coin shops on the other hand have no "endless" sources at good prices.

If you are in business and are not making 20% margin you are having a rough time. On average you need to be making about 10% margin just to keep the lights on, pay credit card fees, rent, etc. The only way to survive in a low margin business is to sell in high volume like Wal-Mart, etc.

So considering all that I have just mentioned the only way you are gonna make it in the coin business long term is by being able to "source" product at a very good cost. One of my older friends who built a 30 store chain from nothing told me his secret. He says he buys something for a dollar and sells it for two!

 

Welcome to CoinTalk, Jeff.

Maybe I'm misreading your statement but I call "profit" what is left after you pay utilities, interest, rent and all other costs of doing business. Am I missing something here?

 

The correct term would be "margin". I used the word "profit" as a lot of people don't seem to know what the word "margin" means. I went ahead and edited my previous post. Sorry for any confusion.

 

You are very reasonable charging only $35.00 for plugging in the scanner. We've been charging $65.00. Some people complained, until we showed them what it costs just to update scantool software biannually. I know we are getting off the "numismatics" subject a bit, but I think people need to know what is involved in operating a business. If you can earn a customer's trust, the cost thing is a little easier to justify.

 

It is aweful hard to sell coins at a 100% mark-up. I think Littleton does it, but they have a tremendous amount of overhead. And as for the Wal-Mart thing, let's hope they stay the heck out of numismatics! It is one of the few sectors of retail they haven't ruined yet.

 

Yup... Your average joe off the street does not understand "Overhead" and "profit Margin"...

I also love how I am the one that works at collecting Sales Tax, work at keeping track of it, calculate it on the States web site and they round it up to the next highest figure taking more money out of my pocket!!!

 

No problem. I see why you worded it that way (for the masses) but it was a tad confusing.

To be honest, a 10% margin is not much unless you do a TON of business (a la Wal-Mart).

 

Or sell only high dollar coins.
Thats why no more Ebay on the biggies for me, they make more than I do on a SVDB or 55DDO in most cases.

 

Exactly, if your company is surviving on 10% margin, that's it, your company is just SURVIVING.

 

Yes, 10% profit margin is pretty low, even for a coin dealer. They do however, operate on a much smaller profit margin than most other businesses. Selling clothes, jewelery, and just about anything made in China can have a profit margin of 200% to 600% even when it's on sale. Most major retailers would never make it on 20-30% mark-up.

 

ahhh, the secret is out. PM me if you want more info. (It will require the ability to travel to Dallas to view in person, there are no photos take of these coins and no returns on your purchases).

 

perk !!!!

 

Clearly!

I strongly recommend you not do this, you will not be pleased with the results.

 

yes, just as humorous as collectors getting together on a coin forum to complain and throw around uninformed inuendo about *evil* dealers.

I'm fairly disappointed in the tone this thread has taken.


edited to add: I retract my disappointment, I hadn't read page 2 yet when I made my comment.

 

When thinking of "margin"... often dealers sell coins they have NO money in. They take coins on consignment from collectors etc.

In addition, sometimes they fill want lists from clients by getting coins from other dealers without putting up cash. They go to a show (FUN, Long Beach, EAC, etc) and the dealers check out each other's stash - during setup time BEFORE the public shows up.

Let's say Dealer A has a great coin but no buyer. Dealer B has someone back home who might be interested. A fronts the coin to B who then goes back home and offers it to his client. If the coin sells, A makes some profit and so does B, who never put money into it in the first place. In a sense, B makes money based on service rendered, not merchandise.

If the coin doesn't sell, B brings it to the next show and returns it to A. Or maybe they work some other deal - trade, etc.

In some ways, dealers are in competition. In other ways they work with each other. There's a lot of money flyin' around based on trust and a handshake.

It's opportunistic, almost like a barter system.