Investing/Opening a B&M...

[TonerGuy]

Ive always had a dream of retiring and opening a B&M coin shop...

 

First, I always thought that purchasing an existing store would be better than trying to start from scratch. Starting from scratch requires a lower outlay of initial funds but it will take vastly more time to develop a client base IF you can still develop a client base.

 

Of course in addition to having a B&M I would also have a very solid online store with an EBay store and also sell supplies as well.

 

Yesterday I had a chance to discuss possibly purchasing a store with the store's current owner. I was not exactly shocked but I now know what it will cost not only to buy an existing store but also what the operating costs for it would be.

 

Before I reveal what I was told does anyone want to venture a guess what a general buy price would be for a coin/stamp store with over 20 yrs of inventory with 10 - 4000lb safes (full of double row boxes of all different denominations of coins and stamps) and shelves full of supplies and Dansco albums ?

 

And what the store's monthly overhead is with 4 employees, insurance and rent ? (the store is about 3000 sq ft) as well as their daily budget for buying over the counter ?

 

I have no reason not to believe the owner. I have been going to this shop for years. And the owner is one of the most honest dealers I have met.

 

I will not reveal anything more about the shop. This wasnt necessarily told to me in confidence since it was discussed openly over the counter in front of other customers but I want to keep this information somewhat confidential in fairness to the owner.

 

 

[DaveG]

I don't know anything about a store's operating costs, so I won't comment.

 

However, I'd be a bit cautious about valuing the store's "20 years" of inventory.

 

Unless I was very comfortable with the owner's report of inventory turnover, I'd probably put a substantial discount on the stamps and supplies and any coins he's owned for years unless he has a really good reason for hanging on to them.

 

The coin business isn't that different from any other retail business - you want to emphasize inventory turnover and cash flow. You don't want to hold onto inventory for decades.

[Coinbuf]

There are lots of different ways to value a company and it varies from industry to industry. Some business's are equipment heavy, some inventory heavy, others have value because of the goodwill/ownership value. But as a general rule in the past when I was looking to purchase a company that was equipment heavy I valued it by taking the street value of the equipment and adding one year's net. In this case I would be looking at the wholesale value of the inventory and slightly less than a year net profits because the ownership/goodwill is a large factor in a retail business like coins. Without any additional information it is impossible to give even a guess as his inventory could be weighted to moderns, or classics, AG-VF or all MS material.

[Curry]

Ive always had a dream of retiring and opening a B&M coin shop...

 

First, I always thought that purchasing an existing store would be better than trying to start from scratch. Starting from scratch requires a lower outlay of initial funds but it will take vastly more time to develop a client base IF you can still develop a client base.

 

Of course in addition to having a B&M I would also have a very solid online store with an EBay store and also sell supplies as well.

 

Yesterday I had a chance to discuss possibly purchasing a store with the store's current owner. I was not exactly shocked but I now know what it will cost not only to buy an existing store but also what the operating costs for it would be.

 

Before I reveal what I was told does anyone want to venture a guess what a general buy price would be for a coin/stamp store with over 20 yrs of inventory with 10 - 4000lb safes (full of double row boxes of all different denominations of coins and stamps) and shelves full of supplies and Dansco albums ?

 

And what the store's monthly overhead is with 4 employees, insurance and rent ? (the store is about 3000 sq ft) as well as their daily budget for buying over the counter ?

 

I have no reason not to believe the owner. I have been going to this shop for years. And the owner is one of the most honest dealers I have met.

 

I will not reveal anything more about the shop. This wasnt necessarily told to me in confidence since it was discussed openly over the counter in front of other customers but I want to keep this information somewhat confidential in fairness to the owner.

 

B&M? What is that? As for the business it be an experience i believe as i would like to own one. But one question. Whats the location status of it? In the good part of the town or the bad part? The Dealer i visit lives in the old part of the town so he has to deal with people constantly wanting to break in, the liquor store next to him, the drunks, the druggies and others. Because of all that he opens only monday thru thursday.

[RWB]

Check for dust.

Old inventory is "old" for a reason --- not good.

[Walkerfan]

Check for dust.

Old inventory is "old" for a reason --- not good.

 

This.

 

And also, I would be mostly concerned about security. I would make sure that it was located in a good area and had all of the best alarms.

 

I would also want to employ some staff, as a sole proprietorship is a target.

 

Conversely, you must ALSO be able to trust your employees, which is equally important.

[coinman_23885]

Check for dust.

Old inventory is "old" for a reason --- not good.

 

This. Caveat emptor.

[coinman_23885]

And to answer your question, to have a successful B&M that sells true numismatic items and not just extremely inexpensive items, I would guess that you would need at least $2 million in capital to start one from scratch. I'll guess the seller (it doesn't sound like he has much in the line of inventory quality wise if it has been sitting there for years) is asking $500,000.

 

Edited: I hope you also realize that most small town brick and mortar shops do not make most of their sales from purchasing numismatic items - most exist to buy precious metals from the public at dirt cheap prices and then sell them off for huge profits. That is how most of them are able to operate.

 

If you want a dealership, my advice would be to start your own starting as a mail order business and then build a store front once you have built a solid reputation.

[Walkerfan]

And you'd also have to start attending shows on a regular basis..........

[DaveG]

I think it's also important to decide what kind of dealer you want to be.

 

B&M dealers need to be able to deal with "little old ladies" who are there to sell their treasures (whether or not they're actually valuable) and "old guys" who just want someone to listen them talk (and talk) about the coins they own (which are nicer than yours) and the tire kickers and lookie-loos and the 10 year-old kids (one of whom might actually turn into a coin collector).

 

I think that if you want to specialize in a particular numismatic niche, you'd be better off doing the show circuit/eBay/mail order.

[orifdoc]

If I was to try the dealer game, I'd find a specialized niche and start on the show circuit with the best website & photos I could afford. I might operate a small retail place on the side, but only as a secondary location where I could do appointment-only business, evaluate estates, churn bullion and that sort of thing.

 

Security is incredibly important. High population centers and good exposure are needed to run a B&M, but those same areas attract social ills.

 

I'd look at buying a coin shop like buying a rental video store or a pet shop. There are a few successful ones, but they usually dabble in other product lines and keep overhead low. You'd need a solid business plan and a careful monitoring to make sure the plan is working. Your bailout or escape plan might need to be considered too.

 

Sounds pessimistic, but that's not something I'd want to dive into. If you're serious about it, I'd ask about working alongside the current owner for a few months before going all-in. You'll have a pretty good feel for its viability by then.

[RWB]

You could always become a specialty provider to the disaffected, doomsday, psychotic, and paranoid element in society.....

 

Look for areas with lots of "survivalists" and underground bunkers, and lots of Mormons....these can easily be sold bags and rolls of silver and gold, plus accessories to keep their stash safe...multiple gun shops nearby would also enhance your business. You'll never have to repurchase the stuff, since that type sticks everything into a hole in the ground, including their heads.

 

just an alternative scenario thought.

[Tyler N.]

You could always become a specialty provider to the disaffected, doomsday, psychotic, and paranoid element in society.....

 

Look for areas with lots of "survivalists" and underground bunkers, and lots of Mormons....these can easily be sold bags and rolls of silver and gold, plus accessories to keep their stash safe...multiple gun shops nearby would also enhance your business. You'll never have to repurchase the stuff, since that type sticks everything into a hole in the ground, including their heads.

 

just an alternative scenario thought.

 

Its insane how many dooms-dayer, silver-stacking nut-jobs I've seen at B&M coin shops. Excellent observation and business advice, RWB.

[bsshog40]

The two B&Ms that I go to are also in the jewelry business. I think it makes sense to have another venue for sales. A 3,000' shop seems to me like a warehouse full of unwanted or losing value items. Heck the shops I go to are about 400 - 800 sq ft. I just don't know if I would buy an existing shop. More than likely, no matter how honest he is, he will not be wanting to lose money on what he's purchased no matter if the market has fallen on a lot of those items. Jmo

[AHFreak]

You could always become a specialty provider to the disaffected, doomsday, psychotic, and paranoid element in society.....

 

Look for areas with lots of "survivalists" and underground bunkers, and lots of Mormons....these can easily be sold bags and rolls of silver and gold, plus accessories to keep their stash safe...multiple gun shops nearby would also enhance your business. You'll never have to repurchase the stuff, since that type sticks everything into a hole in the ground, including their heads.

 

just an alternative scenario thought.

 

LMAO.... seriously....

 

Yay for me.... It only took 3 months but I can honestly say that I follow and understand your humor in this reply.. finally!... (At this point, I am completely prepared to admit that the reason for this is due to your extremely high level of intelligence versus my... a... less-high of a level

 

 

Oh, by the way, I live in Salt Lake.... Honestly, If I were to start a B&M here, I think it would be a food storage/emergency preparedness shop.

 

 

[mtnstyne]

I hope you also realize that most small town brick and mortar shops do not make most of their sales from purchasing numismatic items - most exist to buy precious metals from the public at dirt cheap prices and then sell them off for huge profits. That is how most of them are able to operate.

 

What he said. I live in a small town and we had 2 coin shops. One is now closed and the other was robbed last year, the owner pistol whipped and all his inventory is still being held as evidence.

 

The entire business is based on someone walking in with their recently deceased family members collection and not knowing what they have. Then he pays less than spot and turns around and over-grades the coins, puts them in 2x2s and asks more than retail. I honestly don't know how he is still open, but he is retired with a pension so that may be enough to cover the overhead cost.

 

That being said, I visited a shop in SC a couple years ago and his business was based entirely on the turn over of silver. His volume was around $1million per month and he just worked the margins. If you wanted to buy something numismatic it just wasn't there. Maybe it's just me but I have never had much luck in coin shops.

[e1cnr]

would guess buy price near couple million

and monthly budget near 300K

 

 

but would really depend on 'value' of inventory and store location

 

 

if you are really considering something like this, I would recommend working there a couple years

[orifdoc]

You could always become a specialty provider to the disaffected, doomsday, psychotic, and paranoid element in society.....

 

Look for areas with lots of "survivalists" and underground bunkers, and lots of Mormons....these can easily be sold bags and rolls of silver and gold, plus accessories to keep their stash safe...multiple gun shops nearby would also enhance your business. You'll never have to repurchase the stuff, since that type sticks everything into a hole in the ground, including their heads.

 

just an alternative scenario thought.

 

Wow. It's been a while since such I've seen an educated individual publicly display such poor judgement. Simply unbelievable. We can look to history to see where intolerance and bigotry have gotten us. Can't we just all grow up and get past this sort of stuff? Honestly, virtually every American is part of some minority group in some way or another. Have any words of wisdom about setting up shop around Jews, Hispanics, African-Americans, homosexuals, or the mentally ill? Maybe you could tell us which of those groups buys the greatest quantity of numismatic books. Perhaps we would all be better off if we limited our association to the most refined, elite, well-healed of all individuals - coin collectors.

[TonerGuy]

To add some info, the shop is in a major city in a very nice area of mostly retail stores. There is a major shopping mall with 1/4 mile and more than 20 restaurants within 1/2 mile. Its not a bad area of town but the security for the shop would definitely have to be increased.

 

Its in a high traffic strip mall.

 

Every time I am at the shop there are on average 2-4 other customers as well and within the hour Im there they receive 4-7 telephone calls from clients or prospective buyers/sellers. Its one of the busiest shops I have ever been in.

 

They are also in an area with a lot of retirees and have been there for 20+ yrs. All of their inventory as come from across the counter. The owner doesnt do shows, doesnt wholesale coins and only does a small EBay business.

 

One of the more interesting conversations was about how 15-20 years ago they bought some beautiful collections over the counter but recently as the baby-boomers have retired and sold their collections the quality has dropped off tremendously.

 

The baby-boomers, according to the owner, bought a lot of telemarketing scam coins and overpriced modern Commems/Mint products and overpriced home shopping coins. The generation before them actually spent time and effort in assembly very nice collections. Not so much anymore.

 

Ive seen alot of their inventory over the years. And as you would guess it ranges from dwreck to some very nice coins but none are all that rare. Its typical of a dealer with a lot of inventory.

 

Once in while they get something good though. I just looked at a collection of original Mint Sets all very nicely toned in an old National Coin Album from 1951-1959.

 

And their prices are very fair. I bought a nicely toned 1958 toned P & D Mint set for $90. It wasnt in the original cardboard folder though. But its a beautiful set at a great price. From coins I have bought from them and submitted, they usually grade 1-2 pts under PCGS/NGC.

 

I dont think they do much "doomsdayer" bullion business but its in a Red state and I can certainly see that could be an area untapped by the current owner.

 

And yes, I agree the in-store stamp business would have to go. But believe it or not they do a good online/EBay stamp business.

 

Overall I think the 4 employees probably make up 50% of the overhead.

 

Some of you guys have come extraordinarily close to the purchase price and operating expenses. I can see why the number of B&M ( Curry - Brick & Mortar - refers to an actual store front not just an online store ) coin stores are slowly diminishing over time. I have watched numerous stores close over the past 20 years. Very rarely do I see new ones open though.

[coinman_23885]

Overall I think the 4 employees probably make up 50% of the overhead.

 

I truly hate to say this, mainly because I wouldn't want to see anyone lose their job, but is it really necessary to have four employees running the shop? Maybe you could help find one of them another job (and give them some time to secure something else before letting them go) and perhaps some severance pay to make the transition easy for the employee.

[RWB]

"Oh, by the way, I live in Salt Lake.... Honestly, If I were to start a B&M here, I think it would be a food storage/emergency preparedness shop."

 

If you do, be sure to put a golden statue of Louis Armstrong playing the trumpet on the roof....

[RWB]

There are all kinds of effective business plans based on the market one plans to serve. Before opening or buying a business one should investigate all of those market segments....even the ones that might seem off-line with one's individual perceptions.

 

Possibly, you might want to reassess your readiness to enter a retail business at this time?

 

(PS: Humor can be understood many ways. Is an image of Russian President Vladimir Putin as a bare chested puppeteer wearing a crown funny, sardonic, disloyal, or perceptive --- ?)

[TonerGuy]

Overall I think the 4 employees probably make up 50% of the overhead.

 

I truly hate to say this, mainly because I wouldn't want to see anyone lose their job, but is it really necessary to have four employees running the shop? Maybe you could help find one of them another job (and give them some time to secure something else before letting them go) and perhaps some severance pay to make the transition easy for the employee.

 

I think that 4 is probably needed because of the stamp business. Two of the employees are dedicated to basically working the stamp side and two for coins. I would jettison the stamps and therefore lose two of the employees.

[jpcienkus]

Overall I think the 4 employees probably make up 50% of the overhead.

 

I truly hate to say this, mainly because I wouldn't want to see anyone lose their job, but is it really necessary to have four employees running the shop? Maybe you could help find one of them another job (and give them some time to secure something else before letting them go) and perhaps some severance pay to make the transition easy for the employee.

 

I think that 4 is probably needed because of the stamp business. Two of the employees are dedicated to basically working the stamp side and two for coins. I would jettison the stamps and therefore lose two of the employees.

 

If you decided to purchase the store, before you decide to 86 the stamp side, I'd look at the books to decide how healthy it actually is. I don't know jack about that hobby, but I do know that a strong business has great cash flow and the stamps might be helping in that area.

[coinman_23885]

Overall I think the 4 employees probably make up 50% of the overhead.

 

I truly hate to say this, mainly because I wouldn't want to see anyone lose their job, but is it really necessary to have four employees running the shop? Maybe you could help find one of them another job (and give them some time to secure something else before letting them go) and perhaps some severance pay to make the transition easy for the employee.

 

I think that 4 is probably needed because of the stamp business. Two of the employees are dedicated to basically working the stamp side and two for coins. I would jettison the stamps and therefore lose two of the employees.

 

If you decided to purchase the store, before you decide to 86 the stamp side, I'd look at the books to decide how healthy it actually is. I don't know jack about that hobby, but I do know that a strong business has great cash flow and the stamps might be helping in that area.

 

With some exceptions, the stamp market is dead. There are so called collectible stamps on eBay that are selling for a bit above face and sometimes even lower than face, especially in the 1930 forward range.

[johntookit-migration]

Just wanted to show the difference of Modern Coin shop and the traditional one.

 

 

 

http://www.crownhillcoins.com/about/pictures-3/

 

http://www.wscbrc.com/

[Nutmeg Coin]

I sort of doubt the transferability of many businesses, many buy outs I have seen fail within a few years. I would recommend gradually building your savvy in numismatics which gets sharper and sharper with practice. Since most of the business is going online, you could be way ahead of the analog dealers if you are fully versed in the digital world. Anyone can open a shop or do online business, the statistics are not particularly favorable for start-ups, but with all the gradual options your chances are much better. I built a landscape and tree business from the ground up starting with landscaping and tree work being small, efficient and fast enough to out compete the dinosaur sized businesses. You have to have some type of edge today to survive economically in any business. State regulations are critical, there are plenty of states with hold times and sales taxes on numismatics that make it next to impossible to run this type of business competitively. Working under a real pro cannot be underestimated in value.

[TonerGuy]

If you decided to purchase the store, before you decide to 86 the stamp side, I'd look at the books to decide how healthy it actually is. I don't know jack about that hobby, but I do know that a strong business has great cash flow and the stamps might be helping in that area.

 

The owner actually suggested getting rid of the stamps. I would replace the stamps with other collectibles... antiques, toys, Hollywood/Sports memorabilia ect.

 

I sort of doubt the transferability of many businesses, many buy outs I have seen fail within a few years. I would recommend gradually building your savvy in numismatics which gets sharper and sharper with practice. Since most of the business is going online, you could be way ahead of the analog dealers if you are fully versed in the digital world. Anyone can open a shop or do online business, the statistics are not particularly favorable for start-ups, but with all the gradual options your chances are much better. I built a landscape and tree business from the ground up starting with landscaping and tree work being small, efficient and fast enough to out compete the dinosaur sized businesses. You have to have some type of edge today to survive economically in any business. State regulations are critical, there are plenty of states with hold times and sales taxes on numismatics that make it next to impossible to run this type of business competitively. Working under a real pro cannot be underestimated in value.

 

I somewhat agree with your proposition but in this instance I think trying to start from scratch will be much harder and time consuming. The potential client list is limited for a B&M and trying to reach them independently might be somewhat impossible at worst and extremely time consuming at best. Buying an existing store is more about the client list than the inventory. You can buy coins anywhere - you cant just grab hundreds of clients out of thin air.

 

Ive had my own business now for 12 years. And prior to that I owned another business from 21-28 yrs old. My family owned their own business for decades. My brother has his own business. I come from a house of small business owners. Ive watch and/or been apart of the growth of several business. Being as this is a retirement business I dont want to spend 10+ years building the client base. I might not have that kinda time...

 

As for the online side, some of my current clients and friends own/run or do SEO for some of the most highly trafficked websites in the world so Im good there. And my wife has run her own websites since 2000.

 

This is a state with no regs and no sales tax on coins.

 

And yes I agree working with the current owner would be necessary. I would make the current owner agree to a slow retirement. I would want them in the store until the current customer base is comfortable with the change over.

 

Just wanted to show the difference of Modern Coin shop and the traditional one.

 

http://www.crownhillcoins.com/about/pictures-3/

 

http://www.wscbrc.com/

 

Funny - 'cause I prefer the traditional one... .

[bochiman]

Just wanted to show the difference of Modern Coin shop and the traditional one.

 

 

 

http://www.crownhillcoins.com/about/pictures-3/

 

http://www.wscbrc.com/

 

I don't like either website.

I've been in both stores, in person, and have purchased something from both. I have sold to the Bellevue Rare Coins branch (they have a West Seattle and Bellevue branches).

 

I would hope someone, on these forums, would be able to do better than either.

I won't go into both of them, or either one of them, right now, but I will say I am sure Bellevue Rare Coins does well financially as they are big on bullion.

[MarkFeld]

Without knowing, among other things, the approximate value of the inventory, average net and gross profits and expenses over a period of years, it's just plain silly for people to be asked to guess the asking price.