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Start -up Costs of raw materials in a business


#1

Hi Bruce, I try to keep a supply of the different forms of silver
that I use because its less expensive and I save on the shipping
costs. I usually order gold as I need it - It comes the next day from
Stuller and in a couple of days from Rio. It took me a while to get
smart enough to not try to keep a supply of gold on hand - just too
pricey to have that much money tied up in inventory.

However, gemstones are a different story for me. I live in a fairly
small city a long way from anywhere so when I have a chance to go to
a gem show I stock up big time - actually, I have a hard time
resisting beautiful stones. I’m talking about the semi-precious
free form cabs - when I need a precious faceted gem I order it as
needed. This week I’m getting ready to go to Tucson and I know I will
over spend and come home with enough to last for 3 years or so, but
I can hardly wait - I have rock fever big time! Jan
http://www.designjewel.com


#2
My strategy for studio equipment has been "don't buy a tool until
and unless you really need it."  Should I maintain the same
strategy regarding raw materials? 

Bruce, after closing my store a couple years back, I would highly
recommend don’t buy it unless you need it. When gold prices were
stable for a few years, there was no reason to buy ahead other than
for volume discounts. When the price starts to vary quite a bit,
like now, then you may need to make a bet on which way it is going
to go, along with what your needs are for the next month, year, or
so. This is a gamble to invest in inventory for this range of time.
It may pay off, It may not.

If you look at how a scrap gold dealer works, they buy at current
prices, as sell the same day if they can. They are guaranteed a
margin by trading like this. If they hang on to it too long, it
might go away.

If you are buying stones, the volatility is some what less, but as
those of us who marketed Tanzanite know, the market can turn on a
single news story. For stones, I recommend that you purchase a
stone for a piece you have in mind, or when you find that
exceptional stone that you would like to design a piece around grab
it while you can. For the bread and butter stones, the ones you can
find with a phone call or two, buy them as you need them. Not
before.

Don


#3
So as I create pieces, my proportions aRe: 1 gold (knock-em-dead)
piece and 5 or more of the same in silver (where I can play with
different colored stones for variety). this seems to keep my gold
costs down to almost sane and I build inventory as well. 

June, consider this. True it will keep your cost down. BUT, it will
also keep your profits down, all for the same amount of work.
Actually more work if you consider the extra time needed to keeping
silver in good show room condition. Your time and skill is what you
are selling. Work with gold and platinum as you will get the best
return for your time.

One other point. The fact that you have both a gold, and a silver
piece, identical other than the metal, would scream “MASS PRODUCED”.
You would be degrading the value of the (Knock-em-dead) piece.

Just my view on it.
Don