How To Avoid Becoming a ‘Jewelry Museum’

REMEMBER IN 2011 when gold soared to $1,800 per ounce? This one event saved most jewelers who otherwise would have gone bankrupt. Why was that the case?

Most jewelers have poor cash flow because they have too much inventory and most of it is over a year old. (Selling an item once a year is a turn of 1. If it takes two years to sell, that’s a turn of 0.50.)

But when they bought and sold gold back then, they were shelling out big bucks every week. To keep the flow and profits coming, most sent gold scrap to the refiner every month or quarter.

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 good ol’ 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 $2,000. But we bought mostly scrap 10 years ago — now there’s more finished jewelry to stock, isn’t there?

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 once 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, gold has already broken below $1,900. Could go either way, but I’m betting with the dollar going up, gold will continue to drop. Cash is always king.

I remember years ago speaking to a medium-sized 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 in our check book, thanks.”

Take heed and become a cash generator, or at least sell tickets to your jewelry museum.