And do you mind enlighten the rest of us?It is well known mate just not in your native language
Cash for gold type businesses query
- Thread starter d777
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Sure although the OP has already done that- it's Joint Venture.And do you mind enlighten the rest of us?
It could also be junior varsity, I guess it depends on your perspective. Since we have an international representation here on the forum it's best spelled out.
Most people who sell scrap jewelry by the piece aren't repeat customers, so likely, they do not know who to call to get a fair shake. That's where a good advertising blitz may be effective, or a catchy name to point out that your transaction can be fast and honest and risk free.
I know that when the original cash for gold guy was on a blitz he was rumored to spend $2,000,000 a month advertising. He even had an add in the Superbowl in 2009. Obviously his advertising costs needed to be covered by his business earnings which eventually had him indicted. He did pay the worst of anyone for sure. Although the Superbowl ad was pretty funny.
If e-commerce was your specialty this can be your time to shine. Remember people want a fast and fair deal.
Here is a video exposing cash for gold's scam. inside edition video
They had a time limit on how long the customer had to accept or reject the offer. If you missed the deadline, all done with snail mail, they paid you what they offered. They got snagged by posting the mailings but not putting them in the mail for delivery until it was too late.
They had a time limit on how long the customer had to accept or reject the offer. If you missed the deadline, all done with snail mail, they paid you what they offered. They got snagged by posting the mailings but not putting them in the mail for delivery until it was too late.
Interesting stuff and exactly what I am trying to do differently. I came across this funny mini doc about the Toronto cash for gold tycoon which is funny, he obviusly made a fortune out of it
Thought I'd bump this thread given things ar eprogressing nicely with my refiner partner and I should be in the position to launch after summer. Does anyone have any other tips or resources, I;ve found very valuable advice in this thread which we are going to implement to make our business fair and competitive.
Banking is an important skill a gold buying operation needs to master. Modern gold refineries (the major's) are as much bankers as they are refiners. One mistake the startup cash for gold type gold buyers make is to price their services too high to make up for their lack of capital. Once these startups build up their capital they have the ability to hedge metals but often startups wing it. A quick $100 downturn in gold prices, which can happen pretty quickly, can bankrupt a buyer who isn't protected and is sitting on a week or two's purchases.
A lot of refiners work off of a pool account. Since precious metals are fungible, an ounce of gold is worth the same everywhere at the same time and this allows a pool account to work. To build up a pool account a refiner will leave a percentage of their gold on settlement in a pool account at the refiner. The metal in the pool account is their metal which is held at the refiner to be used at your request. That means if you have a particularly busy day and bring in a Kilo of gold, you can sell off a kilo of gold from your pool account to protect the price you purchased the goods at. When you settle that job, you simply leave the replacement kilo in pool. Depending on what types of metal you are buying, most refiners have both gold and silver pool accounts.
To simplify the accounting, I always liked to convert all of the payable metals on settlement into gold for the pool account. Then I just worked off of a gold balance.
One small caveat, big refiners can go bankrupt. Just think Republic Metals and Handy & Harmon in the early 90's. Pool accounts are useful but don't get caught in an "all of your eggs in one basket" scenario.
I am, by far, more chemist than banker. However these are skills you will need, and potentially questions you will have to ask about, before jumping in.
A lot of refiners work off of a pool account. Since precious metals are fungible, an ounce of gold is worth the same everywhere at the same time and this allows a pool account to work. To build up a pool account a refiner will leave a percentage of their gold on settlement in a pool account at the refiner. The metal in the pool account is their metal which is held at the refiner to be used at your request. That means if you have a particularly busy day and bring in a Kilo of gold, you can sell off a kilo of gold from your pool account to protect the price you purchased the goods at. When you settle that job, you simply leave the replacement kilo in pool. Depending on what types of metal you are buying, most refiners have both gold and silver pool accounts.
To simplify the accounting, I always liked to convert all of the payable metals on settlement into gold for the pool account. Then I just worked off of a gold balance.
One small caveat, big refiners can go bankrupt. Just think Republic Metals and Handy & Harmon in the early 90's. Pool accounts are useful but don't get caught in an "all of your eggs in one basket" scenario.
I am, by far, more chemist than banker. However these are skills you will need, and potentially questions you will have to ask about, before jumping in.
Hi all
I’m still working on this and am deeper into it. I notice that some of the big gold buyers in the UK (pawnshop types) are all doing rather well - see attached from HT Pawnbrokers who gross profit is £160m a year - their scrap gold part of the business accounts for nearly £9m of that, and they note a 20% profit margin in their accounts. So does that mean they are essentially making 20% margin on their scrap gold spread to customers? That would mean selling at 98.5-99% to a refiner and then giving roughly 80% off fixed to the customer which seems extremely predatory. The issue is working off 5-10% isn’t really viable as a business model unless very big volume and to start I don’t see how the volume could be so big.
Is there anyone in this forum who has a C4G business that could spare me some time to chat?
I’m still working on this and am deeper into it. I notice that some of the big gold buyers in the UK (pawnshop types) are all doing rather well - see attached from HT Pawnbrokers who gross profit is £160m a year - their scrap gold part of the business accounts for nearly £9m of that, and they note a 20% profit margin in their accounts. So does that mean they are essentially making 20% margin on their scrap gold spread to customers? That would mean selling at 98.5-99% to a refiner and then giving roughly 80% off fixed to the customer which seems extremely predatory. The issue is working off 5-10% isn’t really viable as a business model unless very big volume and to start I don’t see how the volume could be so big.
Is there anyone in this forum who has a C4G business that could spare me some time to chat?
Attachments
Much of the profit for the pawnbrokers may well be against unredeemed pieces which I’m sure they will leave a decent margin to cover any downwards movements in the gold price plus perhaps some pieces are sold as items rather than scrap which will boost their margins.
Well their company audited accounts which they file in the UK for the HMRC (our IRS) outline exactly where the profit for each sector of their business, the above exert is from the scrap gold buying department - so £9m GP which has a 20% margin built in. Pretty good business lol.
I’m just wondering if 20% margin off fixed is viable in reality unless you’re being very predatory which pawnbrokers obviously are. But for someone like myself who isn’t a pawn broker and wants to get into this game, I’m wondering if 20% is absurd. If it isn’t, then it’s a great business.
A good number of refiners (not pawnbrokers) also sell on the internet the pieces which they have purchased and they feel have more value as a piece of jewelry then they paid for the contained precious metal value. The markup can easily be 20%. They are acting like a manufacturing jeweler without the cost of manufacturing. If you were to go into a jeweler to buy a gold ring for example. The markup above gold cost is as high as 200%.
I notice in the sheet you posted above they have a lot of stores. They all re-sell the pieces at retail value vs scrap value and what they do not deem worthy of resale they ship to their refiner.
If they are doing what I said in retail stores then 20% is absolutely do able but it does require a lot of locations and advertising.
I notice in the sheet you posted above they have a lot of stores. They all re-sell the pieces at retail value vs scrap value and what they do not deem worthy of resale they ship to their refiner.
If they are doing what I said in retail stores then 20% is absolutely do able but it does require a lot of locations and advertising.
Having re-read this thread, you are interested in setting up a cash for gold type business with a jeweler as a partner. Your cash flow will come from buying scrap and melting it and sending it out to a refiner. This is easily accomplished with an XRF instrument and a melt furnace. But if you want to partake in the re-selling of jewelry it will require the expertise of your jeweler partner. He or she will have the skills to determine what is re-sellable and a proper price point to sell it. From there it's just a digital camera and a website to advertise and sell your goods.
All scrap buyers segregate their gold purchases as straight meltable scrap and as scrap containing precious or semi precious stones. The scrap with the stones needs a separate process to fully recover the values. Most pawnbrokers that get big enough eventually evolve into in house refining of the material containing gemstones, both diamonds and semi precious stones. The payouts from refiners doing chemical stone removal leave a bit too much wiggle room for the refiner to make extra money. So they eventually evolve to do this fraction of their business in house.
If you do make the jump into this, I hope you realize we can help you attain your goals here on the forum.
Good luck. (Oh, one more thing, if you are doing this, get going before Christmas as it seems to be the busy season.)
All scrap buyers segregate their gold purchases as straight meltable scrap and as scrap containing precious or semi precious stones. The scrap with the stones needs a separate process to fully recover the values. Most pawnbrokers that get big enough eventually evolve into in house refining of the material containing gemstones, both diamonds and semi precious stones. The payouts from refiners doing chemical stone removal leave a bit too much wiggle room for the refiner to make extra money. So they eventually evolve to do this fraction of their business in house.
If you do make the jump into this, I hope you realize we can help you attain your goals here on the forum.
Good luck. (Oh, one more thing, if you are doing this, get going before Christmas as it seems to be the busy season.)
If you want to buy in volume you need to offer really top prices for the scrap at least 95% of spot for gold in my opinion especially if you are going to advertise to buy on your website as many buyers are already in that space.
I’m dubious that they get a straight 20% margin on buying in gold scrap but as the market price has risen over the last few years it’s possible some of that margin comes from that, I also suspect that if items aren’t redeemed and have no value but scrap then those pieces may end up in the scrap department.
I’m dubious that they get a straight 20% margin on buying in gold scrap but as the market price has risen over the last few years it’s possible some of that margin comes from that, I also suspect that if items aren’t redeemed and have no value but scrap then those pieces may end up in the scrap department.
I mean the top top payers in the country I’m in pay 90-93% (and I don’t really know how they are doing this) - there is no way they are getting more than 98.5% from the refiner (they aren’t refiners themselves) or they may have other use cases for the gold, I.e jewelry manufacturer etc. Buying at 95% and making (or selling for 97-98% to refiner) and making 2-3% before marketing costs/operating costs is an impossible business model and I wouldn’t entertain even thinking about it. But I’m sure it’s ultra competitive unless you pick and choose who you buy from if they don’t want your prices then you don’t buy it. If there’s 10-20% margin it’s worth exploring.
Who are you getting rates of 97-98% from? What are the quantities you were quoted on and what were the terms? Interest on advances, minimum payable quantities, lot charges, etc. A lot of the major refiners in the US are offering in excess of 99.5% and a good number of them are owned by European companies. After all of the add on charges we can compare apples to apples to see what you can really do.
A couple of the major refiners here in the UK, yes this 97% is based on beginner volume, larger volume would be 98.5-99%, so that would be worked towards. Nobody is giving more than 97-98 from the get go. But tbh, I’m not sure i want to get involved in a business that relies on a 1-2% spread to make or break you. Hence my constant back and forth with this :/ one minute I love it and the next I wouldn’t touch it (depending on what I’m reading/research). I’m usually very quick at setting things up and have sold an online business recently so this is me on the fence and im glad I’ve found this forum to learn more before I dive in.
Sir, If you thought you could walk into a business with 5 - 10% margins from the get go, then you are sorely mistaken. If that were the case there would be more refiners than jewelers. This is something you have to build and learn as you go. With $2500 gold and shipping 200 oz a week you can earn $5000 a week for a business that only requires melting and shipping for the basic service. As a baseline for a startup, that isn't so bad. You won't get a lot of sympathy from me because I had a start up refinery with $300 gold.
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.
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.
