Sunday, 7 April 2019
Could You Make a Living from Stamp Dealing?
Could you make a living from stamp dealing?
I will start by supposing that you are modest and that a “living” is as little as £25000 per year, before tax. That’s 30 000 euro or 32 500 USD. To achieve that you will probably need to achieve sales (turnover) of the order of £100 000 (120000 euro, 130000 USD). I arrive at that figure by assuming that you achieve a 100% gross mark-up on sales, so that you get back £100000 on stock which cost you £50000. But there are costs to running a business. There are the costs of acquiring stock - travelling to auctions, visiting the homes of dead collectors, etc. There are the costs of selling it - taking tables at fairs, running a shop (forget it!), advertising, paying commissions on sales on ebay or at auction, travel and hotel costs, postage and stationery - I include postage and packing costs within the gross turnover. There are the more or less fixed overhead costs of websites, telephones, office space, an accountant to sort out VAT and digital tax returns, insurance if you are so inclined. In my experience, it will be impossible to get all those costs below about a quarter of turnover, so £25000 - which then leaves the £25000 pre-tax profit I set as the lower threshold.
So if your working year extends to 50 weeks, you have to sell, on average, £2000 worth of material each week, every week. If you work a 40 hour work, then you need to be selling £400 every day, £50 every hour of your working week. How is that possible? Leave aside for the moment working 60 hours each week…. working 40 hours, you are earning for your time and effort the grand sum of £12.50 per hour, before tax. It's easy to reduce that hourly rate, harder to increase it.
In the UK there are dealers who travel around the country attending small stamp fairs. Table costs are often low (£25 - £100) but so is turnover - £500 might be acceptable to someone with a small stock and the cheapest table; a bigger table and £1000 would be rather better but still implies two fairs each week, every week - and an awful lot of travelling and bad food.
An online shop would need to show a very big range online to turn over £2000 each week, which is why most online shops offer more expensive material to cut down the number of transactions needed to achieve the sales target.
Buying in bulk and breaking down for resale at auction is another possibility but requires enough capital to contemplate large purchases and confidence that they can be profitably broken down, one way or another.
And so on. I think you will get the picture; it’s not going to be easy to make a living from stamp dealing even if your “living” is as little as £25000.
I am lucky that I started up as a full-time stamp dealer when I already had a pension from past employment. When I got to 65 and added to that a state pension, I took the opportunity to reduce the scale of my business. In the UK, there is a very high registration threshold for VAT - currently with turnover under £85000, your business is exempt from VAT; you neither claim it back or pay it. So I scaled back to under the threshold (which, remarkably, has gone up every year since I scaled back).
It does mean that I cannot make a “living” from what I now do, but I don’t have to. But I still work long hours to achieve the turnover I aim at.
The stimulus to writing this Blog post was the fact that the UK tax year has just ended - it runs from April to March, not January to December - and I have just assembled my draft calculations to pass to the accountant who does the fine tuning which tells me in due course how much net profit I have made and how much tax I will have to pay on it. I already know that it wouldn't be enough to live on.