Go for the gold

Cash for Gold is a business idea that has made me sit up and take notice. People send their used gold in an envelope, the company values it, and the customer gets money back. I have heard a story about enormous revenue figures from that model, and I think the idea is worth taking inspiration from.

It is February 2010, and today you get a view of a bloody boring main road instead of my face. I have not brought the dog either, so you are spared the shock some of you got yesterday.

First, a recommendation for my interview with Kaspar Basse

I spoke to Kaspar Basse yesterday, and I bloody well hope you have heard the interview. I think it is one of the best things I have done. But of course you must judge that for yourself.

It is about an hour and a half of conversation. If you have not heard it yet, settle into your favourite chair at the weekend and listen.

The story came through a friend of a friend

Yesterday, I went to a computer hardware gathering with my good friend Craig. He is a bit of a nut and a real American entrepreneur, whom I must also interview one day.

He has practically 700 new ideas every day. As he says: One of them has to bloody well hit the mark. I do not think it is a particularly good strategy, and he is not making money from it right now, but he is having fun.

What interests me today, though, is another story. Craig has a friend, Herb, and Herb’s friend started the company I am talking about. I cannot remember the man’s name. So it is a story I have heard from other people, and the figures I mention are the figures I have heard.

This is how I describe Cash for Gold

You call the company or go to its website and receive a padded envelope. You put the gold you have at home into it and send it back. As the model has been explained to me, the shipment is insured.

The company’s staff go through the gold, diamonds and other items that arrive, and offer you a price. Rather bluntly, I call it a ridiculous price because the company buys the material cheaply.

You receive an email or a letter listing the items and the amount they will pay. I explain that they send a cheque if you accept or do not reply. I am describing the precise process based on the story I have heard.

The advertising message is simple: Turn your gold into cash straight away. If you are short of money for the rent, you can send in a few rings and quickly get a cheque back. That speed is what the concept sells.

The big numbers made me listen

According to the story, the man started in 2006 in small premises of around 20–30 square metres and borrowed 500,000 dollars. In the video, I convert that to about 2.5 million kroner.

I do not know what he spent all the money on. My guess is advertising, but it is just that: a guess. I also think you could start on a smaller scale, in a small room.

What is striking is the revenue figures I mention: 100 million dollars in the first year, which I describe at the time as half a billion kroner. At the time of the video, I have heard of 500 employees and annual revenue of 500 million dollars.

I also say that the owner has just sold the company, kept nine per cent and received 100 million dollars in cash after three and a half to four years of work. That is the story I am reacting to, not figures I have checked in a set of accounts myself.

The customer also avoids the hassle and embarrassment

Think of all the gold people have lying around at home without knowing what to do with it or what it is worth.

I also imagine it can feel embarrassing to go to the local jeweller in a small town and say you are broke and want to sell your things. An envelope sent to a company you do not know personally can feel more anonymous. And a few days later, the payment arrives.

As I have heard it, the company initially paid around half the gold’s value. Later, the payments supposedly improved. Of course there are also costs for melting it down and marketing, but I still see an opportunity for a good profit in the model.

I think the idea could work in Denmark too. Perhaps you can use it directly, or perhaps you can simply take inspiration from how it makes things easy for the customer. I also mention the adverts, which I think are about as cheesy as you can imagine. But the concept certainly got my attention. I describe my own experiences of developing businesses in Iværksætter til jeg dør.

He generated $100 million in revenue in the first year from people’s used gold… Best wishes, Martin

Location:N Federal Hwy,Boca Raton,USA