Basic Rules of Business and developing a good relationship – Part# 1
There are some simple rules in this business…
I have a lot of people ask me about getting into the gem stone business and wanting to know how to make money.
As you may know I have written a lot of articles about the gem stone business in general over the years. In this article I want to expand on some basics and things people should think about… before getting into business.
These are my opinions and my basic set of rules, other people may disagree (some probably will), but these are all from my personal experience and in my opinion you will find them to be common sense and accurate.
Here are some basic rules to live by. Disregard them at your own risk…
I am going to stress this because it is probably one of the most important things I can tell you.
Do not be a rude obnoxious ass and expect to be able to prosper in the gem business.
Sounds simple right? You would be surprised at how often people are obnoxious ass’s is all I can say. Especially in the “want to be” or just starting a business category.
Think it does not happen? Wrong. In the last two February gem shows I met several people that fit the ass’s category. One person in particular was rude, obnoxious, and make some very serious enemies.
This person had never meet me, my friend the dealer (at the booth), or even had a clue who he might be burning bridges with. I have been told by people that know this person that it’s just a natural talent of his. I would say from personal observation he is very talented, he made an enemy of me in the first 30 seconds.
This person was looking to buy rough, needless to say while he may have found some, much of his gem show and future opportunities were ruined by bad behavior. With in a matter of a few minutes this person had managed to piss me, my dealer friend, and several other people off, and was black balled around the entire show minutes after he left. We made some calls.
Think that is not significant? Well just for starters the parcel of rough the guy was being a jerk about belonged to me, but was in my friends booth. So he obviously was not going to get any good rough from us. After the calls, he was not getting any rough from my people and associates. Frankly most of my people passed the word around to their friends too.
Here is a hint… Dealers all talk to each other. Many times dealers are good friends and have done business for decades. Dealers often network together. During a show I typically have many parcels out with friends, no I will not say who, but it is a good guess you maybe looking at my rough occasionally. You might be very shocked at how much networking goes on. Beside being friends, dealers are often related to each other, brothers, sisters, uncles, marriage and so on. It is a small tight community.
So for example if you manage to be a total ass and piss off uncle Frank, he will tell his 5 (or more) relatives in the business as well as all his friends, they in turn will tell theirs, and so on… It does not take a genius to realize that it will not be long before an obnoxious person cannot do business any where.
What happens is rough becomes unavailable, unseen, much more expensive if shown, and so on. Sooner or later, usually very soon, a person like this is out in the cold and wondering what happened. Yes, there are people he has not pissed off yet, but with an attitude like that it will not be long. So people like this tend to be self limiting. Just a matter of time before anybody that knows, will not do business with them.
Here is an article that people should read.
You do not want to be an ass like this person I am describing was/is… People like this are severely handicapped because of their personality and treatment of others in this business. They will never recover from the damage done to themselves. It is not the way to do business.
OK here are some more words of wisdom… about starting a business.
If you are not willing to make the financial and time commitments to be in business, do not waste your time, keep faceting an enjoyable hobby.
What do I mean about time?
Well a lot of people seem to think people that run their own business’s only work half days…
This is true… As a person in business you can pick which 12 hours a day you want to work. But believe me you will have to work those kind of hours and it is a very rare weekend when there is not some thing that has to be done. In other words plan on being a workaholic, at least during the start up years. If you are not willing to make these time commitments, then save yourself the trouble, do not even consider going into business.
If you have no business experience (even if you do) and are unwilling to pay experts, you will not survive.
Go to experts. Ask experts.
Pay experts for their help and advice.
No whining. No excuses. Find experts in places where you need help. What do I mean? Well do you know the tax code? No? Then go to an expert tax and business person. No, I do not mean your aunt Bess or uncle Fred unless they are legitimate experts. I mean the real thing. Pay a CPA, pay a certified financial advisor, and or what ever other experts you may need.
There are so many things you have no idea about that will cost you time and money that is it not even worth considering going into business unless you have real certified experts to get answers from.
A good tax person and financial advisor can make or break your business, not even counting that they can make life in general much easier and more pleasant. Yes, experts cost money, that is why they are experts. They have the knowledge and experience. Knowledge and experience cost money and time to acquire, it is not free. Pay the experts and say thank you, believe me you will come out way ahead.
Experts will save you a lot more than they will ever cost you… That is if you are smart enough to find them, use them, and follow their advice. I cannot begin to even count how much time and money asking experts has saved me over the years.
What experts would I advice to start?
A qualified CPA is a must. A financial advisor is an excellent idea if you need one (here is a hint, you need one). A general business expert is a good idea, often the accountant (CPA) can help with setting up the initial business stuff and give good advice, especially about your area/state.
There are many other experts that you may find you need, it will just depend on your business. A good example of an expert you may not know you will need in the gemstone business is a customs broker, import/export. You cannot do business with out one if you are doing much business out of the country or bringing goods into the country.
I have to say that very few people in my experience will listen to this advice, but then I guess there has to be a few winners and a lot of losers, you decide if you want to be a winner or a loser.
Winners get expert advice and listen to it.
Buy the best quality and cut it the best quality you can – Junk is junk, you are wasting your time if you buy anything less than the best or at least the best you can afford. You cut low quality materials and you are just going to be competing with the Bangkok or India cutters for a bowl of rice. Any thing but quality is a waste of time in my opinion.
Corollary to the best quality rule. You are better off with a few quality stones than a lot of low quality – Why? Simple, most people, especially starting have limited funds. Buy quality, because it is always in demand and it is always the gemstones that will fair the best over time. Generally quality will always increase in price over time, often dramatically. Also you want customers to know you are a quality gem dealer and cutter, so showing your customers quality will cement that in their minds.
Note: Quality does not especially mean expensive, you can buy really nice quality Quartz for not a lot of money. The point here is quality, no junk. Buy top rough that will cut top stones.
Unique sells – Go to any large gem shows and I guarantee you by the 2nd or 3rd case your eyes will be glazed over because of all the junk and repetition you will see. You will see an occasional gem stone of exceptional color or quality, but in virtually ever case you see one, you will think…
“GOD what a butcher job they did when they cut it… I could have done a lot better if I could just get the rough.” Some times on a very rare occasion you will see a glimmer of some thing unique, but not very often.
My point here is… By cutting your stones in a unique style, and meet point quality they will very easily stand out from the pack of commercial schlock. Of course you will have to find the correct buyers, people that want and are willing to pay for quality.
Note: I can tell you from personal experience that quality buyers are out there, you just have to find them. Where? Well that is another article.
Corollary to Unique sells. Quality meet point and design stands out – Go to any gem show as a quality faceter and you will see from the very first show case you look into that the general quality of commercial faceting is very poor. Actually the faceting quality in the trade and commercially is terrible. It is low quality schlock and in general commercial quality cutting stinks.
I am including in this many (not all) supposedly professional and even award winning commercial cutters (AGTA and others). Look closely at their work, you will find poor designs, bellies for weight retention which kills light return, no facets on the girdles, no polished girdles, wrong designs for the rough (often to maximize weight), completely blown meet points and often poor polishes. Just very poorly faceted gemstones about every where you care to look.
Note: The really sad part to me is they almost always butcher up some very high quality rough. It is a dirty shame, but that is how it is.
Just because a faceter has managed to win some contest(s) does not mean they are a good faceter, hobby or commercial. In point of fact many of the winning stones in the commercial contests… I would make a student of mine re-cut them, that is how poor some of the winner’s cutting is… and in a meet point and polish contest like the Guilds, these stones would not even qualify to be judged. They are literally faceted that badly.
There is a lot of politics in many of the shows and trade assocoiations that interferes with the judging (in my opinion most of these contests are not even close to honest or fair) and frankly most of the “cutting contests” like the AGTA are not judged by people that know quality cutting from bad cutting. These types of contests are about business promotion, not quality cutting. Promotions for their members (hence the politics) advertisement for the associations, that is about all.
Most of the stones, not all of them, there are a few exceptions, look OK from a distance or maybe even good as compared to their Bangkok rivals, but look closely, your will see all of the above comments and a lot more, usually with just your naked eyes. The judges are seldom even cutters, they know nothing about cutting generally and are clueless, mix in the politics and you begin to get the picture of just how poor the quality is in general.
Note: I am talking about cutting quality, not the actual quality of the gem material that is often butchered up in my opinion. The quality of the rough is often out standing, before cutting. Yes there are occasionally very well cut stones in the contests, but very rarely.
Yes, there are a very few cutters like me that cut professionally that do it right, but the vast majority of cutters do not. The point here is that as a quality cutter you will have very little real competition and if you cut quality, your work will very easily stand out from the crowd.
Do not expect to win contests because in my opinion and experience there is a lot of politics involved and frankly there is not a level playing field (or has not been in the past) in most of the commercial trade association types of venues. They do not name their judges and often do not even have judges independent from the people promoting their own work in the contest itself. In other words some times the judges because they are part of the association have serious conflicts of interest.
Expect to have to invest and spend a lot of time and money building inventory – The gem business is not an easy business to make a living in and you will find that it will cost significant time and money to buy and build your inventory. Inventory is not some thing that happens over night, a good quality inventory will take years to build. I am not only talking about cut stones, but rough as well. It not only takes years because of funds, but because as you will find out the supply of rough stones varies dramatically. Basically you cannot inventory and cut what you cannot buy and you will often find rough of some types unavailable.
Corollary to the Invest in inventory law – Basically as you buy rough you will find that obviously you will be able to buy only rough that is available. The corollary to this is that if the rough is available, there will be a lot of competition for selling the rough and cut stones currently available.
What this means in general is if you try to buy and sell for a profit, the faster and closer to the supply you try to make money the less you will make.
What do I mean? Basically if you buy Tourmaline for example when there is a good find of a particular color, everybody will be cutting and selling the same material (if that is what is available). So the peak of the find is profit wise, the worst time to be selling. This is where the “investment” part comes in. Cut and sell what you can or need to to pay for your buys, but plan on making the best profit later (often years later) when the find in question is gone and there is less to no competition for that rough and/or cut stones.
Look at quality, cut, size, colors – Quality as I have said is the only place for an American cutter to be in my opinion. But size and color do also play a part. You will notice as I have said before that pretty much anything under 2 carats (with a few rare exceptions) is not the place to be. The under 2 carat range is where the commercial cutting houses have American cutters almost always beat. So in general stay above 2 carats finished.
Cut quality is wide open for an American cutter we can very easily beat almost any foreign cutting in quality of cutting and of course design. So these are two areas that any custom cutter should concentrate on.