Gemstone Business: Invest and Cut
How can I be successful in the Gemstone Business? This is another question that I get asked frequently, as you might guess. The gemstone business is like any other, you will have to work hard and invest. But the key phase here is invest, and invest, and invest and I might add keep cutting, you cannot sell what you do not have cut.
I hear the complaint that people cannot buy the top material rough, and cut it for a nice profit. They seem to think that it is instant gratification type of deal. That they should just be able to go out and do it because they feel like they should… and that they are left out. The real world does not work that way, and to be successful you are going to have to work at it.
There is a lot of tough competition (you can bet, including me) nobody is going to hand it to you. It is not instant (not even close) and you are just like everybody else, if you want to make money you are going to have to work for it. Oh, by the way, join the club, I often cannot get top rough at prices where I can cut it and make money either at least not right away.
How can it be done? What do you need to know?
Well there are some things that most people are not taking into consideration and should know. Here are just a few.
- It takes money to make money. It takes large sums of money to be able to buy quality parcels of rough or even single stones depending on what they are. You can start small and build, but the bottom line is (you guessed) “it takes money…”
- It also takes connections that take years to acquire and not everyone will make the connections. The stone business is more of a tightly closed community than most people might think. It depends on how you do business. How good a business person you are… and so on. The connections are just not on the rough side of the equation either, you need connections to sell the rough or cut stones too, which is just as important.
- Most importantly of all, it takes investment of capital. This is the one that most people do not seem to get, or understand (or do not want to get, I suspect). Ask yourself… “How do you expect to go out and compete against someone that has been in the business for years and has been working hard, investing and building their business?” The answer is you cannot do it, you will have to pay your dues.
Do you think that you can go into any other business and be successful without any of these things? No you cannot, business is not instant. Even when you manage to buy some nice parcels of rough at a decent price. The initial profit, most people would be surprised to learn, is often not all that high, especially at the wholesale level.
One of the big mistakes new people in the hobby/business make is that they want to go right out and compete with the big boys on commercial rough. In most cases they will not be able to do it. The big boys are big for a reason. They are almost impossible to compete with on a strictly commercial basis, even if you are able to get quality commercial rough (which is not too likely).
For example one of the most common things people try to do (I hear the complaints all the time when they cannot) is try to buy hard to get, top commercial rough like blue Sapphires and Tanzanite. Well this is not rough that most people can get at a price they can make money on and be competitive with the established market. Also even if you can make money on them, the profit is usually low there is tremendous competition on those goods.
Almost all of these top commercial rough stones are tied up by the big boys and even if you manage to get some rough (by some miracle), you will probably not be able to make any money on it. You are fighting a stacked deck and frankly there is not enough profit in these stones (usually) that they are worth the effort most of the time. Even for me. and I have a lot more access to rough than the average person.
The point is, do not even bother to try. Why fight over 10% to 20% profit? That is the margin a lot of the larger people work on in the top commercial goods. They have to buy and sell a lot of stones to make a good living.
Buy rough you can really make money on and try not to go overboard. There are a lot of types of rough you can do very well with, concentrate on them. Trying to go head to head with the large commercial cutters on commercial goods like Sapphire and Tanzanite will just give you a sore head. Why play their game? Cut things like Tourmaline, Amethyst, Citrine, some Garnets, and some Beryls that are available and can be cut competitively. Cut top top quality material, anything else and you are wasting your time. Cut custom shapes, and designs.
You can make money on top quality stones and one of a kinds, plus you will minimize your competition. There are not many of these types of stones around and any jeweler that is worth anything knows this. When they see your stones they are much less likely to “bargain” or anything else. They cannot get that type of stone just anywhere and they know it. By the way, top quality stones are easier for jewelers to sell for the same reasons, assuming the jeweler deals in that type of stones in the first place and has the market.
Do not fall into the trap of trying to cut for the “fill a hole in gold” type of jeweler. They are cheap skates and absolutely not worth your time and trouble. Move on. The next type of jeweler that is usually not worth the trouble is. If a jeweler tries to show you a “guide” that says he should be able to buy for “X” amount. Point out that your stones are not commercial and much higher quality (not the same thing), if they still want to quote the “guide”. Move on.
You are wasting time on him, the jeweler(s) all know the difference he/they are just trying to bargain you down and it is unlikely that you are going to do much business. If the jeweler really does not know the difference (they are blind maybe) then you still need to move on, they are not educated enough for your stones. You can try to educate them but it is not always possible to do so, and it is time consuming. In short, buy parcels, buy quality, cut unusual shapes and designs. Deal with jewelers that are worth your time.
Learn to recognize when you are wasting your time with a customer/jeweler and move on. Try to do something different than the commercial cutters do. These things work for me and they will for you.
- Gemstone Business: Buying Quality Rough