RINKER ON COLLECTIBLES — Column #1232 Copyright © Rinker Enterprises, Inc.
Starting an Antiques and Collectibles Business in 2010 - Part II
Part I of “Starting an Antiques and Collectibles Business in 2010” stressed the need for a 21st century antiques and collectibles dealer to specialize. Further, he/she must subdivide that specialty into five to ten profit centers (sub-specialties within the general category). Part I also focused on understanding the customer base for each of the sub-categories and deciding whether each is strong enough to provide the income needed to maintain a business.
Selling antiques and collectibles is a business. A successful dealer treats it as such. It makes no difference whether the dealer devotes 10 hours or 80 hours per week to the business. Profit is the goal. When the dealer writes a check to himself on a regular basis, the business is a success. If only expenses are paid, the business is a failure.
[Author’s Note: There are individuals who sell antiques and collectibles as a hobby. Often retired, their principal concern is accumulating expenses for income tax deductions. A second group sells to support their buying habits. They measure success by how many new items are added to their personal collections each month. Both groups are vital components of the antiques and collectibles marketplace. This column does not apply to them.]
In approaching the selling of antiques and collectibles as a business, the first step is to develop a business plan. “I want to sell antiques and collectibles and make a profit” is not a business plan. A business plan contains the goals you want to achieve after six months, one year, and two years. It is reviewed and revised every six months. It is your map to success.
While I encourage new dealers to be set ambitious goals, especially during the first two years, I also encourage them to be realistic. If an antiques and collectibles business turns a profit in its first month, it is a major miracle. If it becomes profitable in six months, it is a minor miracle. If it happens in a year, it is a miracle. On average, it takes 18 to 24 months for an antiques and collectibles business, full or part-time, to achieve profitability.
A beginning dealer not only needs enough capital to buy inventory and pay operating expenses, he/she also needs enough income to fund his/her personal expenses for two years. Ideally, the amount needed will decrease each month. Cash flow is never steady in the antiques and collectibles business. There are more bad months than good. The dealer must have enough capital reserves for the inevitable “rainy” day.
The next step is to acquire merchandise. Think twice if you decide to sell what you collect and use excess items from your collection as your initial inventory. Collect what you love, sell what you hate is the applicable rule, although most often ignored. Collecting passion clouds buying and selling judgments. It also prevents the dealer from putting the customer first.
The dealer buys for resale. The primary consideration must always be: how fast can he/she resell it? The dealer does not have time to fall in love with the items he/she is selling. Here today, gone tomorrow is the ideal. The faster the dealer sells the quicker he/she obtains the funds to re-enter the market and repeat the process.
“If I do not sell it today or at this show, I will sell it tomorrow or at the next show” is an attitude that leads to disaster. A dealer should never buy an object that he/she does not believe he/she can sell in 30 to 60 days. He/she should have two to four buyers in mind when making a purchase. Stale (unsold) merchandise is a major problem. After an object remains in inventory longer than three months, the dealer loses money. Funds tied up in inventory are not assets. They are a financial drain.
When buying inventory, the dealer needs to think from the selling price down. Begin with the price at which the object can sell quickly. The dealer’s goal is to average triple the inventory cost over a year’s time. The theory is: double your money, pay your expenses; triple your money, pay yourself. If the dealer can turn the object in 10 to 14 days or the profit amount is large, he/she can risk buying on a shorter margin. The overall buying strategy is to acquire merchandise at one-third or less of the final selling price. When goods are bought within this parameter, the dealer can heavily discount a slow moving piece and still make a small profit even when the discount is 50 percent.
Apply an altered version of “you are known by the company you keep” to the merchandise offered for sale. A dealer’s inventory is judged by the poorest quality item on display. Avoid buying and offering any object that is not in very good or better condition. Given the growing sophistication and fussiness of today’s buyer, a dealer is well advised to raise his condition standards to fine or above.
Buyers have no interest in buying a fix-it-upper. They want objects that are room/display ready. This is especially true when the object is bought for decorating or conversation purposes. Dealers must avoid a reputation for selling items with hidden problems.
Selling antiques and collectibles is a people to people business. The trade sells the sizzle as well as the steak. Dealers must be educators as well as merchandisers. They must tell individuals about the importance of the pieces, show how to incorporate them into their home, and/or use them without harming them.
The Great Recession leveled the playing field relative to the question of who, the buyer or the seller, is more important, in the sales equation. The time has passed when a show dealer could arrogantly display a sign in his booth that read: “I found it. I cleaned it up. I researched it. I hauled it. I displayed it. And, you want to pay how much?” Dealers need buyers to survive, and buyers are in short supply.
If not familiar with how to sell, a dealer should consider auditing a merchandising course at a local community college or attending workshops sponsored by the Chamber of Commerce or other business organizations. Selling skills are learned and honed through practice. They are not a gift from a higher power.
A good customer is one who buys several times. Too many dealers rely on the one-time sale. Successful antiques and collectibles dealers maintain a customer base of between 75 and 100 individuals to whom they sell one or more objects each year. They are familiar with their customers’ wants and work to fulfill them. Good dealers also know the items in their customers’ collections. When an opportunity to upgrade or add a prize piece arises, these dealers are in a position to suggest a sale that includes swapping our some lesser quality, but resalable pieces in lieu of cash. This provides the dealer with less expensive merchandise to use as a lure to attract new customers.
Today’s dealer needs to stay in touch with his customers. E-mail is one approach, but not the only one. Nothing replaces the sound of the human voice in a person to person business model. Dealers need to find/take the time to talk to all their customers, not just their best ones, on a regular basis.
During a review of my business by SCORE (Service Corps of Retired Executives), I was advised to develop a business model that resulted in receiving a check or cash every day. The amount was not important. The point was to develop a steady cash flow through aggressive selling. Instead of making the buyer come to the dealers, the favored sales approach, the dealer has go after the buyer. The dealer is responsible for taking the initiative if he/she wants to make a sale happen.
Patience is a necessity for an antiques and collectibles dealer. Phrases such as “I am just looking” and “I’ll think about it” are common. More individuals walk away than buy. The successful dealer invests in long-term customer relations. The customer that does not buy today may buy tomorrow.The business plan is complete, inventory acquired, and customer service practiced. Starting to sell is the next step. The final “Rinker on Collectibles” column in this series will examine sale venues.
Rinker Enterprises and Harry L. Rinker are on the Internet. Check out www.harryrinker.com.
You can listen and participate in WHATCHA GOT?, Harry’s antiques and collectibles radio call-in show, on Sunday mornings between 8:00 AM and 10:00 AM Eastern Time. If you cannot find it on a station in your area, WHATCHA GOT? streams live on the Internet at www.gcnlive.com.
SELL, KEEP OR TOSS? HOW TO DOWNSIZE A HOME, SETTLE AN ESTATE, AND APPRAISE PERSONAL PROPERTY (House of Collectibles, an imprint of the Random House Information Group, $16.95), Harry’s latest book, is available at your favorite bookstore and via www.harryrinker.com.