Cash for gold type businesses query

[d777]

Yeah, right now the coin stores are buying gold at 90-95% without stone deductions because they get 96% of hallmark after testing or 98-99.5% after melt. The days of buying gold at 10% margins in quantity are gone. From many sources, gold coming through the melt shop is about 20% of the volume it was in 2010. The people that have the gold don't need to sell it to pay the bills, the people that need the gold money to pay the bills don't have the gold anymore....they sold it in 2010.

Are there markets where you can still do well, of course....but between the costs of commercial real estate and the slim margins, it's not as easy as it used to be. I'm pretty happy being a little guy these days.

What about no brick and mortar and purely online? But the marketing expenses are huge and as someone who’s been in e-commerce it’s not easy/cheap to attract customers anymore.

Not sure I agree at all with the 2010 comment, there’s always people who end up with heirlooms/bed side tables full of old gold, and there’s always people who need money. That’s why I keep coming back to this, it’s a never ending cycle of people in financial distress/inherited gold etc.

 

[nickvc]

The quantities that came in back in 2010 onwards were helped by news reports about record gold prices all over the place so people who had stuff in drawers and cupboards or inherited items were inclined to sell not just leave it lying around but those days and items have gone.
Yes people will still sell to cover bills if needed but many sold years ago and those inheriting aren’t been told about record gold prices all day on media so tend to just put it away.
Yes you can make decent money buying scrap if you can get the volume but forget anything near a 20-10 % margin that isn’t going to happen , if those are the margins you need look for another business and don’t waste anymore time or effort looking at this one.

 

[d777]

The quantities that came in back in 2010 onwards were helped by news reports about record gold prices all over the place so people who had stuff in drawers and cupboards or inherited items were inclined to sell not just leave it lying around but those days and items have gone.
Yes people will still sell to cover bills if needed but many sold years ago and those inheriting aren’t been told about record gold prices all day on media so tend to just put it away.
Yes you can make decent money buying scrap if you can get the volume but forget anything near a 20-10 % margin that isn’t going to happen , if those are the margins you need look for another business and don’t waste anymore time or effort looking at this one.

But economically wise we are in the same place as 2010, perhaps worse soon. I’m finding it rather hard to understand or believe that all the gold is gone from the people who need the money - people are always buying jewelry and need money, I’ve not heard the take that the game is over from that POV. In any event yes I need to make a decent margin, and the ones in the UK are all making this 10-20%, if they aren’t they are very volume heavy and making a minimum of 6-7% at the very worst - of course if the volume is there and average packet is high value (all work on a min of 10g), then margin doesn’t matter as much I guess. I’ve masqueraded as a customer with most of them and it appears they offer you a 20% off fixed price then negotiate with the customers who flat out say no at that price, often times if they can’t negotiate it to something they need margin wise - usually 15% - they just decline and wait for the next person who might be more desperate. I’m specifically talking about the ‘post gold for cash’ model - not the walk in off the street, if someone has posted it to you, likely they can’t be bothered to have it sent back, so you meet in the middle margin wise, I guess.

I’d really love to hear from someone doing this exact model, my background is e-commerce, I sold a business recently and think I can apply my expertise here with the help of the technical stuff/refinery stuff being handled by someone who knows what they’re doing. But I do need a margin, perhaps I’m conflating 2 different niches and have it stuck in my head I need a large margin, when in this niche perhaps you don’t as it’s volume/average packet value is high.

 

[Justincase]

I started my business on Harold old model.
80% for small on the day liquidations and 90% liquidations for people who have enough material to warrant a "Toll" refinement.
And I have to say over the past fifteen year that has worked quite well.
I am paid 99% of spot without assay because of the volume I liquidate each year.
It is stupidity for someone who has four or five grams a year to expect the same liquidation as someone who has four or five kilos a year to liquidate.
The more you have, the better percentage of spot you can expect.
If you put in the hard work, are unscrupulously honest and help as many people as you can locally to you liquidate their metal in a far and transparent manner you might just be welcomed as I have been.
But to expect to be treated that way from your first day is unrealistic to say the least.

 

[nickvc]

I am going to give you a list of essential things you are going to need and some points you need to be aware of if you intend to go forward.
First is a safe well protected office and I do mean well protected with cameras, safes , alarms and very thick glass in any windows and steel lined doors, to this you need to add on insurance and whoever you pick will insist on certain protective measures to allow cover which I reckon won’t be cheap.
I would suggest a safe that has a timer so it can only be opened at the correct time.
Next you need to find a bank that allows you withdraw large amounts of cash which is far from easy these days.
A good xrf gun is now essential to allow proper identification of the % of precious metals.
A separate melting room with good extraction and something to melt you scrap in , this can be built cheaply or you can buy a unit ready to go.
Be aware in todays environment you and or any staff plus your location will be under risk day and night , you are handling a high value easily sold material plus you will have possibly large amounts of cash on the premises the address of which I assume will be in your advertising.

 

[Justincase]

I am going to give you a list of essential things you are going to need and some points you need to be aware of if you intend to go forward.
First is a safe well protected office and I do mean well protected with cameras, safes , alarms and very thick glass in any windows and steel lined doors, to this you need to add on insurance and whoever you pick will insist on certain protective measures to allow cover which I reckon won’t be cheap.
I would suggest a safe that has a timer so it can only be opened at the correct time.
Next you need to find a bank that allows you withdraw large amounts of cash which is far from easy these days.
A good xrf gun is now essential to allow proper identification of the % of precious metals.
A separate melting room with good extraction and something to melt you scrap in , this can be built cheaply or you can buy a unit ready to go.
Be aware in todays environment you and or any staff plus your location will be under risk day and night , you are handling a high value easily sold material plus you will have possibly large amounts of cash on the premises the address of which I assume will be in your advertising.

This is actually a significant step-down for me as to security and threat.
Compared to what I used to do, I am now on a permanent holiday.
Thank you so much, Ms Hoke, you saved me from an excruciating life.

 

[nickvc]

One more point you may be missing is that the sale of gold jewellery to the public has dropped drastically over the last decade as the price has risen just as drastically, this means that there is less and less out there to buy.

 

[Justincase]

One more point you may be missing is that the sale of gold jewellery to the public has dropped drastically over the last decade as the price has risen just as drastically, this means that there is less and less out there to buy.

The high-end market has crumbled.
My gemologist has had to take up other employment.
Luckily the market for junk,"Ratners" has taken over.
And that is quite disposable with a few years life span.
Also, being in the centre of the retirement community does not hurt too much.
Most people have acquired a small amount of gold over their lives.
It is sad to see their offspring liquidating it instead of them.
I see our service as a solemn duty to provide for others.
We have to charge enough to survive and even thrive.
But we should do this with honesty and transparency.

 

[Justincase]

Next you need to find a bank that allows you withdraw large amounts of cash which is far from easy these days.

The revised legislation creates a new criminal offence which prohibits scrap metal dealers from paying for scrap metal in cash, only permitting electronic payment or payment by cheque.

 

[snoman701]

What about no brick and mortar and purely online? But the marketing expenses are huge and as someone who’s been in e-commerce it’s not easy/cheap to attract customers anymore.

Not sure I agree at all with the 2010 comment, there’s always people who end up with heirlooms/bed side tables full of old gold, and there’s always people who need money. That’s why I keep coming back to this, it’s a never ending cycle of people in financial distress/inherited gold etc.

You can choose to not agree all you want. I'm telling you what a lot of people in the business all over are telling and showing in their business. They used to have more throughput, and could do it at higher margins.

Get out and do it. Maybe your area is better....but one thing is for sure, hoping to find that someone else has the same business model, and having them share that their online commerce business model is working, online, in a group of refiners is about as likely as a Frosty surviving hell.

 

[Justincase]

You can choose to not agree all you want. I'm telling you what a lot of people in the business all over are telling and showing in their business. They used to have more throughput, and could do it at higher margins.

Get out and do it. Maybe your area is better....but one thing is for sure, hoping to find that someone else has the same business model, and having them share that their online commerce business model is working, online, in a group of refiners is about as likely as a Frosty surviving hell.

Our trade has been ongoing and very productive since before the pyramids were rased, and I expect it to continue until our species manage to start mining our asteroid belt.
It seems like an easy trade to involve yourself in.
But it is more about your humanity than your chemistry.
Many are attracted by the potential wealth.
But we might as well be trading potatoes as gold.
It makes no real difference, except £1000 of gold is much lighter than £1000 of potatoes.

 

[snoman701]

Our trade has been ongoing and very productive since before the pyramids were rased, and I expect it to continue until our species manage to start mining our asteroid belt.
It seems like an easy trade to involve yourself in.
But it is more about your humanity than your chemistry.
Many are attracted by the potential wealth.
But we might as well be trading potatoes as gold.
It makes no real difference, except £1000 of gold is much lighter than £1000 of potatoes.
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That's sort of exactly it. It's a lot more than putting up a sign that says I buy gold. People say that cash for gold guys don't have repeat sellers. I have found that to be the opposite. You pay a little better, and you do get a lot of repeat sellers. They pick it up at yard sales, they hoard when times are good and sell when lean, they find it in the garbage...whatever...if you treat people right, and don't try to make your whole paycheck off each transaction, you will establish a reasonably good business pretty quick. If you go at it to get rich off other people, you'll struggle.

If you treat your customers right, it doesn't really matter how much the melt shop is doing, you can still build a client base. You are just taking it from someone else who was trying to make 30%.

 

[Justincase]

That's sort of exactly it. It's a lot more than putting up a sign that says I buy gold. People say that cash for gold guys don't have repeat sellers. I have found that to be the opposite. You pay a little better, and you do get a lot of repeat sellers. They pick it up at yard sales, they hoard when times are good and sell when lean, they find it in the garbage...whatever...if you treat people right, and don't try to make your whole paycheck off each transaction, you will establish a reasonably good business pretty quick. If you go at it to get rich off other people, you'll struggle.

If you treat your customers right, it doesn't really matter how much the melt shop is doing, you can still build a client base. You are just taking it from someone else who was trying to make 30%.

I much prefer to have 1% of one thousand deals, then 100% of one.
If all deals were equal under this imaginary example.

 

[grainsofgold]

With the fluctuations of spot price you have to be prepared to deal with the dips. Most places have hold periods on items you buy as a gold buyer. Some 30 days some as little as 10. You will more than likely need to be licensed and bonded.

There’s a lot that goes into this and if your friend is doing the buying - writing the checks or paying out money you need to have a system in place to review the transactions.

If you use an XRF they can be easily fooled by heavy plating. best not to be greedy and if a deal seems to good to be true just say no.

Good luck.

GOG

 

[slsmp40]

You are right about the big guys being bankers as well as refiners. A good full service refiner is usually able to give you a credit account so that they have minimal transactions and the buyers on the street always have cash on hand. Interest on that money is at a high rate so use it correctly to grow your business.
Its the going rate lately for estimates on settling to credit 95% and settle at 98%

 

[slsmp40]

I wrote much more in that post and it truncated it on posting. Right in the middle of a sentence. Anyone else have that happen?

 

[d777]

Very good points made by all here. I’ll have to weigh it all up (pardon the pun). I certainly don’t want to be ripping people off, my concern is advertising costs meaning each deal is unprofitable unless it’s at a certain margin, I won’t truly know that until I get started but that’s what’s putting me off. It’s a slightly different scenario to some people who have used real life/walk in shop examples, firstly I am not in the US and secondly this is primarily done online. It feels incredibly saturated this market - from the high street stores to the area of online buyers, which proves the model works but I’d be up against it vs people who know their trade inside out and are able to undercut me. I might put this idea on the back burner.

 

[Justincase]

my concern is advertising costs meaning each deal is unprofitable unless it’s at a certain margin, I won’t truly know that until I get started but that’s what’s putting me off.

And well it should.
Let us not forget the historical train crash, the was"Cash For Gold". Which is actually doing very well as a worldwide concern, still somehow?
Under the leadership of Jeff Aronson, the company claimed to pay between 20-80% of the melt value of the items to the seller, though independent reports suggest less than 20% of the value was normal.
They spent so much of advertising(Even during the supper bowl) that hey could not afford to pay their clients properly.
In all honesty, a person who has gold to sell does not fall under the normal advertising strategy.
They are quite rare, so the chances of proactive advertising strategy hitting enough of them to produce a detectable return is minute.
You have to be easy to find but not waste money chasing clients.
Develop a good reputation and good clients will find you.
Unfortunately, this is really on a generational scale, so once I die all my efforts will be lost.
But if you have a family to hand it onto, I can not imagine a better legacy.

 

[4metals]

I might put this idea on the back burner.

If your friend the jeweler who suggested this venture is willing, why not start small and get a feel for the business and the pitfalls. If the jeweler friend has a brick and mortar shop, a moderate investment can have them buying and melting for a modest setup cost. Don't overspend, get a hand held XRF and a gas furnace and you're done.

Once you are comfortable buying and dealing with a refiner, you can start to advertise more and begin to use the internet. If you build as you learn, you will likely not take a financial beating but you may work into a niche where you can prosper.

I worked an entire career teaching refining and setting up refineries for small start ups with the same simple plan as I just outlined. So it is definitely do able.

 

[Anil]

This is actually a significant step-down for me as to security and threat.
Compared to what I used to do, I am now on a permanent holiday.
Thank you so much, Ms Hoke, you saved me from an excruciating life.

We call the place "the gold collection and verification center" with all such precautions as mentioned above + an insurance to cover overnight holding in the SDV on the premises. The cash payment limit is always as per the law and beyond that is a direct transfer to the bank account of the client. The KYC of the seller is a must whichever way you can, otherwise, you end up buying stolen goods, and you end up in more trouble than the seller him/herself.