Can I build a business around local auction sales this way?

[Joshcam8395]

I'm considering an interesting business idea, and I'd like your opinion on it, if you have a few minutes to spare for me.

I recently started to build a business, but I had to put it on the back burner until I can raise enough spare cash to buy business liability insurance for it (I posted the story about it here in this thread (http://www.small-business-forum.net/starting-your-business/10595-please-help-my-local-ad-board-business-idea-flop.html)).

I came across this other idea by reading through some unique business ideas. (It really appeals to me because my startup capital is extremely limited.) Also...I want to go where the money is; I currently live in a very rural area, but I see auction listings here in this part of northwest Illinois all the time, so I'm thinking there must be a lot of money changing hands at those venues!

So anyway, the idea is for...


--Making Money with Local Auction Sales--

Here's the skeleton for a possible business plan:

(1. Since I'm unfamiliar/inexperienced with local auctions, I'll attend at least 6 auctions, and take copious notes on what items are commonly bought there (market research).

(2. Also, I'll check with the auctioneers to learn what the rules/procedures are, and what commissions and/or fees he charges.

(3. I'll acquire those items from any number of sources: around the house, "curbside alerts," in local & online classifieds, friends/others who are moving, yard sales, flea markets, garage sales, closeout sales, etc.

(4. I'll clean them up, and make minor (NOT major) repairs.

(5. Then, I'll take them to local auctions and have them sold, and collect the money minus commissions.

Of course, this is not limited to just local auctions. I can be selling things in different venues, including (but not limited to) Craigslist, Ebay...and maybe even on my ad board (http://www.small-business-forum.net/starting-your-business/10595-please-help-my-local-ad-board-business-idea-flop.html), too!

Plus, I could scale this up by hiring somebody part-time to help me acquire & prep. more items each week.

Also, I mentioned closeouts; I could eventually acquire entire closeout and liquidation lots, reselling them to area retailers.

So...

What do you think?

Are there any holes in this idea?

I'd appreciate any questions, or advice you might want to share with me!

[vangogh]

A friend of mine used to by things from garage sales all the time and a few years later sell them on Craig's List for more than she paid at the garage sale. We used to joke about it being something she should start a business around.

I think everything your saying is doable, however I'm not sure how well the idea scales. I guess it hinges on how much money you can make on average, but my guess is it won't be enough to justify the time involved. I'm not entirely sure how an auction works. I would think you could set a minimum price or starting bid, but you can't guarantee how much higher than that any item will go for. It's hard to know how much people would pay over what you'd absolutely need to sell for, but if unless there's something special I'm guessing it wouldn't be much higher.

Before you let me talk you out of the idea there's an easy way to test this business. Find a few products and take them to auction and see what happens. I could be completely wrong. It wouldn't be the first time. Attend a few auctions and try to sell some items at a few auctions after that. See how much you make. See how much time you had to put in. See what other costs you incur.

My gut tells me it's hard to scale this kind of business. Usually when you see a business that deals in used goods, the business has a physical location and the goods come to the store. It cuts down on the time involved acquiring items for sale.

[Steve B]

I think the cost of the commision for the auction company plus whatever value you place on your time to procure all these items, plus the cost you place on the storage space to store all these items will make it very difficult to make money. You'll probably lose money in my opinion unless you have unlimited and free storage space.

[Joshcam8395]

Thanks for your thoughts, Vangogh!

Yes, like I said, before I take any serious action, I will be going to some auctions first, to study average offerings, demand and prices bid/won. That will give me the best chance at making money right off the bat--assuming I can acquire similar items in demand, for less money (or even free or barter). With many items, much of the profitability depends on appearance/condition of cleanliness; so I theoretically can influence & leverage market disparity fairly well, I think.

As far as I know, I can set minimum/opening bid prices; and, one reason I'll be attending each auction where I'm selling things is (according to what I've read), I will have the chance to influence how much a given item sells for.

Here's a quote from a source I've been reading about auctions:


Before advising you on where and how to get more items to sell at Auctions,
let’s get into the Auction process itself. This way, you will know how to help
the Auctioneer get top-dollar for your items and make more money for you.

To do this, go to the Auction where your items will be sold. When one of
your items comes up, pay close attention to the bidding. If no one makes an opening
bid for your item, bid on it yourself.

Should it be necessary to make this first bid yourself, keep it very, very
low - say $1 or less. This will prompt the other bidders to bid it up, because
they don’t want you to get the item so cheap.

Further along, if the bidding stops, and you really don’t want to sell that
item for the last bid offered, make another bid just a little-bit above the last
bid. This will usually start the bidding again and increase the price.
If the bidding does not start up again, and you end up buying one of your
own items, you only pay about one-half the regular commission to the Auctioneer.
And, you still have the item to sell at another Auction. (Be sure to check these
percentages with the Auctioneer before you take the items to the Auction.)

NOTE: Buyers at Auctions are a curious breed. They buy, like anyone else, to
get the best buy for their money, but they are also intrigued by the action; the
battle of bidding-wits. Winning the bid means a victory, so, if they really think
they want the item, they will make every effort to “win the bid” (purest
competition).

This quirk gives you, the seller, the maximum edge; no matter who
“wins the bid,” you come out the real victor with cash in your pockets.
Even if you buy your own item, all is not lost. I have seen a number of
instances when, after the Auction, the party you “beat-out” for the bid will come
to you and offer you a “profit” on your purchase, if you will only sell them the
item for a few bucks more than you supposedly paid for it.

The most important piece of advice I can give you about attending the
Auctions is to get to know the Auctioneers. Let them know what items are yours.
Then, during the Auction, they will sneak a look in your direction when your items
are on the block. This will allow you to signal them whether or not to sell for
the last bid; giving you the chance to determine your own profit.

NOTE: Although I have given you a general outline of the procedures to follow
at the Auctions, once again I will advise you to go to your local Auctions to
learn, first-hand, the procedures and attitudes that prevail. BECAUSE - each
Auction has its own personality.

(This was written many years ago.) So, if this is all still true, much of making money at auctions depends on participation, timing and technique.

One more thing: thanks for the great point about having people bring me the items, in order to save time and money acquiring them!

[Joshcam8395]

Steve, that's a very important point you made about storage space costs.

I forgot to mention, I currently do have some free storage space I can use :)

UPDATE: I may have found someone who may be willing to mentor me as I pursue this business model. His name is Aaron LaPedis; Donald Trump endorses him, and at least one Amazon.com reviewer said he is friendly and approachable!

But, I will really appreciate any more comments you or other fellow entrepreneurs would like to offer here :)

Because, I value your perspectives so much...I believe they are actually worth money, and I would gladly pay everybody who shares their thoughts, perspectives and advice here...if I had the money to do so right now ;)

[mmovies01]

For years I used to buy stuff from yard sales or acquire things for free through Craigslist or clean outs and turn it into supplement income in as little as one weekend. I can't imagine doing it for primary income though, there's expenses involved that can add up quickly:
- Fuel (driving to yard sales, or to pick up items)
- Wear and Tear on your vehicle
- Auction fees
- Parts/tools to repair items you've picked up (even for minor repairs. you can't just slap some duct tape on a lamp or table and call it refurbished)

[MichaelWallaroo]

My 2 cents: the idea is a 'small' one. Meaning, like mmovies01 said, it can be supplemental income... at first.

It seems like most of the businesses in the positive cash flow have: a retail store, an online store, go to auctions, and buy/find items in like methods.

Ebay has always been a great resource for buyers to find what they're looking for. You can't beat the impact Ebay brings to the table. Having your OWN online store... or at least a site guiding customers to your Ebay site and/or physical location... can be an easy way to sell those items.

Being from Illinois myself, there is a definite auction market out there. I would weigh the cost of putting up your items at auction vs. online. Whichever is less expensive, go that route first. Then, if it doesn't sell, go to the other route. Someone in the burbs may not want your refurbished lamp with that cool vintage shade, but a designer searching on Ebay from Chicago may be the right buyer.

Hope this helps!

-michael

[Joshcam8395]

Thanks for those points, mmovies :)

And, thank you Michael! I really appreciate your points about cash flow, and demand.

I've never sold anything on Ebay yet; there is such an ocean of stuff on there, I was wondering if it's possible for anybody to get started there anymore.

By the way, what part of Illinois are you from?

[vangogh]

I can't imagine doing it for primary income though, there's expenses involved that can add up quickly

That's how I was thinking about it as well. I think if you look at only a handful of items and you sell those for a decent profit it seems like it could become a good business. I'm not sure it scales though. The costs increase more than you might realize to do it enough to turn it into a full time business. That doesn't mean it isn't possible, but it seems like a hard thing to do.

I think having a store where people bring stuff makes more sense. Maybe one or two days a week part of the day could be sent visiting garage sales, etc. to acquire more items for the store. The auction model adds so much more time to each sale. You can sell more than one piece at a single auction, but not enough. Maybe with a store certain items could be taken to auction, but I think there has to be more to the plan.

[huggytree]

in my hometown they have a flea market every month....I know one guy who goes to the dump and picks up stuff for free....then after the flea market he throws out in the fairgrounds dumpster whatever doesn't sell...

this idea sounds like a lot of hard work......for possibly a small return....I doubt its original..im sure thousands of people have thought of it....if it worked id think youd hear others doing it...

I used to attend antique auctions...I have a whole house full of 1890-1915 furniture from years of collecting.....10-15 years ago prices were high and people fought over the stuff.....now no one wants it and prices are 1/2 or 1/4 of what they were.....If the antique market is what your looking into I think youll be disappointed....ive sold some of my overstock and got 1/2 or less than what I paid and I had refinished and reupholstered the stuff..it was such a horrible loss that my left over over stock is sitting in my work garage attic....just waiting for the market to come back someday...I cant see selling $400 items for $150 when its hard to get stuff

[operationconsultinggroup]

You can make money but it is risky and you need to be an expert on what you are buying otherwise you don't know if your getting a good deal. You also need an outlet to attack customers. ebay and craigslist work but ebay takes 10% and Craigslist is only local. Consider starting a website our a store if you want to make enough money/ attract enough customers

[vangogh]

this idea sounds like a lot of hard work......for possibly a small return

Yep. I think that's the case and I think it gets even worse when you try to build the idea out to the scale needed to run a business. More products probably drive the cost up instead of down, while prices remain the same.

Still there's no reason not to explore the idea. Nothing wrong with Josh checking out a few auctions and seeing first hand what would be involved. Perhaps there's something in this we're all missing. It won't cost more than a little time to visit a few auctions.