Coin Dealers—Have You Planned Your Retirement?
From goodwill valuation to succession strategy, coin dealers who plan early can maximize the value of their business and avoid leaving money on the table at retirement.
Coin dealers, like any business owners, need to consider when and how they will retire from their operations. The ideal time to begin such planning is right at the beginning, when making the decision to become a dealer. The earlier before hoped for retirement that such planning takes place, the better the prospects to maximize financial yield, realize estate planning objectives, and smooth the transition for the dealer and the business post-retirement.
I know several dealers who are sole proprietors whose effective retirement plan is that they will simply liquidate their numismatic inventory when they cease operations. They don’t think of the potential goodwill value for which they might be able to be paid for their existing location or customer list. By ignoring such additional tangible and intangible assets, these dealers could be shortchanging themselves.
One story I recently heard of a business where the owner simply decided to close, selling off the equipment and inventory. When he explained that decision to his banker, the advisor told him that he had built up significant goodwill through decades of operation. In the end, the owner was able to sell his company for about four times what he originally thought he would realize. As a bonus, since the company continued in operation, the existing employees did not lose their jobs.
There are a variety of ways a coin dealer could retire. Beyond simply ceasing operations and liquidating inventory, the business could be sold or transferred to partners or co-owners, family members, existing non-family managers and staff, competitor dealers, buyers from outside the industry, or an employee stock ownership plan, to name just a few options.
One factor to consider is how transferable the business might be. An operation highly dependent on the owner-dealer would have less value to buyers than a business where the owner’s involvement is less critical. Another significant factor is that investing in a precious metals/numismatic business carries a high enough risk of failure that potential buyers may not be able to find outside financial resources. In such situations, a seller may be forced to assume the risk and finance the buyer.
If thinking of simply liquidating inventory, who do you think is in the best position to sell it for maximum value? Usually, that would be the dealer, not their spouse or heirs. This would be especially critical if the numismatic inventory consists of material from a narrow niche.
There are costs associated with using advisors and consultants. The owner’s objective should be to realize a net increase in eventual value once such fees have been incurred.
By planning ahead, it would be easier to incorporate changes that add value to the business, making it possible to sell it for a higher price.
By the way, some of these considerations also apply to collectors in planning how their holdings will eventually be liquidated or distributed.
Last column’s numismatic trivia question.
Last time I asked— Which U.S. Commemorative Half Dollar was struck at the San Francisco Mint but does not have the S mintmark? The 1925 Fort Vancouver Centennial Half Dollar was struck at the San Francisco Mint but does not bear any mintmark.
This week’s trivia question
Here is this week’s question. What is the definition of a coin? Come back next week for the answer.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, the 2017 Exemplary Service Award, the 2012 Harry Forman National Dealer of the Year Award, and the 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild, Professional Numismatists Guild, National Coin & Bullion Association, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Michigan, and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. He now volunteers with the National Coin & Bullion Association as its Industry Issues Advisor. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries, "Things You ‘Know’ That Just Aren’t So,” and “Important News You Need To Know,” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).
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