Not surprisingly, new faceters ask me this quite frequently. Of course, as in any business, you have to work hard, invest, and make some sacrifices to succeed. But specifically, for the gem faceting business, there are two main principles to live by: learn to handle the variety of materials you’ll find in gem parcels and buy quality rough.
Gem Parcels are the Best Way to Buy Rough
If you’re serious about the business of cutting and selling gemstones, gem parcels are the best way to buy rough. However, you must understand that parcels cost large sums of money. To get the best prices, you’ll usually have to buy larger parcels.
Invest in Quality Rough
Your other option is to invest in quality rough and wait to make a profit. Buy quality rough when you can, so you can cut and sell it later. Quality rough is always more expensive but will always be worth more. It will go up in value. Cheap material will always be cheap.
I dunno — just 5 years ago or so I didn’t have much trouble finding what I thought was pretty decent amethyst and ametrine at the Tucson Show from South American sources for fifty cents per carat or so in small quantities, picked — not poured. Here and there a large, eye-clean, native-cut amethyst or citrine for a buck a carat, stuff like that. No mas, and I don’t think it’s because I’m just not getting up early enough.
If the poster had bought all of the amethyst he could at fifty cents a carat years ago, guess what he would be making on it now? He would also have good stuff to cut now just for fun, if that’s what he wanted. Unfortunately, he didn’t buy more than a few pieces, probably due to financial reasons. Maybe he just wanted a couple of stones at the time. We’ve all been in similar situations.
Rough prices, especially for top rough, rise every year. Despite a few dips, on average, they always go up. So, use the fact that rough is getting more expensive to your advantage. If you want to make money faceting, take a longer view when you buy rough. The rough you buy today will be worth a lot more later.
Why Does Rough Get More Expensive Every Year?
One reason the cost of rough increases every year is simply that the cost of everything goes up. Remember what a candy bar used to cost x years ago? Inflation is a steady, constant force.
The availability of rough (or the lack of it altogether) also contributes to the cost increase. Mines that produce inexpensive rough of a particular gem for years become exhausted. This puts pressure on the price of rough of all qualities for that gem. The supply shrinks, so the cost increases.
As new gem markets open, the demand for rough increases, especially for colors and materials that sell well. Of course, as the faceted market gets larger and stronger, it puts a lot of price pressure on the rough market. Suppliers will no longer have the surpluses they once did. It just becomes easier to sell gemstones.
Last, but not least, people in gem-producing countries are trying to cut their rough and retain more of the value of the gems. This has only been partially successful, but the trend will probably continue and will place even more pressure on the rough market. Personally, I think this trend will reach a balance. For various reasons, not all the rough will be native cut.
Gem Parcels: the Dealer’s Perspective
Picking individual, quality rough pieces and waiting to cut and sell them when they go up in value is the best way to make money in the long run. However, if you want to make money faceting in the short run, you’ll need to spend a fair amount of money buying gem parcels.
Remember, a parcel contains a mix of stones. It won’t all be top material. Of course, this assumes you can find somebody willing to sell you a parcel worth your time and money. You might be surprised to learn this usually isn’t easy.
Personally, as a rough dealer, I’m never in a hurry to sell top-quality rough in parcels. I know I can make a lot more money on the rough in the long run if I sell the top stones separately, especially if I cut them myself. So, why would I, or anyone, ever sell quality rough in parcels? The answer is simple: sometimes I need cash flow. Nevertheless, I’ll only sell a parcel of top material when absolutely necessary. Even then, I’ll only sell a large enough parcel to make it worth my while.
I can assure you, I’m not the only dealer who operates this way. It’s just good business. Top-quality rough is never easy to find, and I try to hold on to all I can. (Just like you, the faceter). Assuming a dealer can get a nice parcel and wants to sell it fast, they’ll have to settle for a smaller profit margin. Most clean, quality gem parcels aren’t priced a lot under the going wholesale rate for the cut gemstones. Thus, most of the time, they can make some profit, but usually not a lot.
Selling Stones at Retail
What other options do novice faceters have if they want to start making money? You might try to sell your stones at retail, which usually brings the best profit, but that may also entail holding the material for a longer period of time. You won’t make money in the short term.
Moving Past Cherry-Picking
To make money from gem parcels, novices will have to get past their cherry-picking habits. You’ll have to learn to deal with cutting problem rough so you can make money from those gem parcels. You can still cut these pieces clean, but you’ll have to work around flaws, bad shapes, and other problems. Mistakes can cost you dearly. You must realize that working with problem rough will be difficult.
If you’re buying quality rough as a novice, don’t expect to make a lot of money buying one stone at a time, especially in the short run. You can make money buying and faceting hand-selected rough, but it’s going to be tough. Obviously, it can be done. Look at just about any faceted gemstone sold in any retail jewelry store. With time, you’ll be able to take top-quality, hand-selected rough, cut it for the best possible color and clarity, and sell it for a nice profit at retail. Of course, you need to find the customers first. You may even be able to sell your gemstones to a jeweler for a nice profit.
Is Gem Faceting a Hobby or a Business to You?
If you’re a hobbyist, you can make money selling to both jewelers and retail customers but will find the going tough in the wholesale market. If you want to make a living cutting gems, then expect to pay your dues.
For novices, competing against people who’ve invested in their businesses over long periods of time will be difficult. Trust me, they have a huge advantage: the inventory and, thus, availability of stones. Until you build up your business, it will be tough. You’ll start to make a few bucks here and there, but you’re not going to get rich.
If you want to stay in the gem business, you’ll need to spend serious money, make investments for long term profit, and be patient. It’s not a fast process. It will take years. If you have what it takes, you can make a good living in the gem business. (But you’re still not likely to get rich).