written by David Geller
Remember in 2011 when gold soared to $1800 and everyone thought it was going to $3000?
Well it didn’t happen, but this ONE EVENT saved most jewelers who otherwise would have gone bankrupt. How and what was different?
- Most jewelers have poor cash flow because they have too much inventory and most of it is over a year old. (once a year is a turn of “1”. If it takes 2 years to sell that’s a turn of .50)
- But when they bought and sold gold back then they were shelling out big bucks every week and to keep the flow and profits coming most sent gold scrap into the refiner very month or quarter (that’s a turn of 12 times a year or 4 times).
- You made a lower profit margin, but you did that 4 to 12 times a year, so you had great cash influx with virtually no inventory on hand; other than cash required. You were a cash generator.
This allowed jewelers to pay off debt and pay themselves and staff well. Remember the gold “ole” days?
But as profits were flowing and as the gold buying slowed many jewelers just kept on buying, this time putting what they bought in the case. Stockpiling more stuff over a year old-even more than before.
Now jewelers are in debt again, but you’ve probably been saved once AGAIN!
- First by the SBA; many just got a long-term loan and paid off debt (and it has also been a good summer for most)
- Gold has gone back up again, nearing $2000. But we bought most scrap 10 years ago, now there’s more finished jewelry to stock isn’t there?
- Don’t become a jewelry museum.
You’re not a jewelry museum. You’re a cash generator and the only way to generate dollars is stuff has to leave the store. Either in a box to a dealer 3 to 6 times a year at a lower margin or at least one a year on a customer’s finger! If it takes over a year-send it out in a box to a dealer or refiner.
Don’t get caught again being a hoarder, you may not get a third chance. TURN-either to a dealer or customer at least once yearly is the secret. The pandemic is closing many businesses in America. As I write this September 24th gold has already broken below $1900, now at $1865.00. Could go either way, I’m betting with dollar going UP, gold will continue to drop. Cash is always king.
I remember years ago speaking to a medium size store and they listened to me about not keeping items over a year old they had poor cash flow, robbing Peter to pay Paul. It was early fall. That next January they sent me an email:
“David, we did as you suggested. We put on sale or scrapped so much stuff. We had a GREAT Christmas, first week in January we paid off ALL debt, paid ourselves a nice bonus and we for the first time ever have over $100,000.00 in our check book, thanks.”
Take heed and become a cash generator or at least sell tickets to your jewelry museum.