Realm of the Coin
Ken Smaltz is a master collector--of customers.
(FORTUNE Small Business) – In his quest to find well-heeled clients for his rare-coin business, Ken Smaltz Jr., 42, shows up in the most unlikely places, from baseball's spring training camps to New York City's Friar's Club, the legendary haunt of has-been entertainers. Last year the Zelig-like owner of K. Smaltz, his one-person firm in Garden City, N.Y., spent $15,000 traveling, including trips to trade shows, to buy and sell coins. He spent $10,000 to entertain clients and prospective customers.
Smaltz sees rare coins as more than just a schoolboy's fleeting obsession. With gold rising to a 16-year high, rare coins have appreciated 20% over the past two years. He claims that one of his clients bought an 1871 $20 Carson City gold piece in 1998 for $4,750; it is now worth $12,000, according to Coin Values magazine. "I'm trying to change the perception of coin collecting from just a hobby," says Smaltz.
Opening his business in 1997, Smaltz built sales to $1.5 million in 2004, up about 5% from the year before, and he says his firm is profitable. He gets a big chunk of business by going to trade shows, with the rest coming from client referrals, advertising, and networking. In 20 years, he says, he has never met another African-American coin dealer, which helps people remember him. "My uniqueness in this industry has been quite positive," he says.
Smaltz discovered his knack for selling rare coins through happenstance. At 21, having dropped out of New York University, he took a job in the shipping department of MTB Banking, a company that sells rare coins. Within two years he had worked his way up to a sales position. That led to more senior sales positions at other rare-coin companies around the country.
As his client list grew, Smaltz saw an opportunity to go out on his own. He got his big break when a former boss put him in touch with New World Rarities, a Long Island rare-coin and precious-metals company, where he worked as a salesperson and began to set himself up as a sole proprietor. He now operates his own business out of the headquarters of Eastern Numismatics, a rare-coin company that covers his rent, telephone, and shipping expenses in exchange for a percentage of each sale he makes. He pays for his own travel, entertainment, and supplies, such as the computer he bought last year. Smaltz tries to keep his fixed costs down. Last year he spent two months calling dealers around the country and combing the web to find a prized 1895 Morgan silver dollar in excellent condition. A client had gathered an almost complete set of the coins, which were minted from 1878 through 1921, and needed only that one to round out his collection. Because it was made differently from the others in the series, it was in hot demand. "They call it the king of the Morgans," says Smaltz. After weeks, he found the coin at a dealer's shop in Dana Point, Calif. He ordered it and sold it to his client for $139,750. His markup varies according to the time he spends looking for a coin, he says, noting that the industry average is between 10% and 25%.
To create buzz for his business, Smaltz has donated valuable coins to charity auctions and has designed his own commemorative coins. But what really makes his business tick is a reputation for delivering the exclusive goods in a timely manner, something Smaltz believes leads to repeat business and consistent profits. Gene Fox, a retired engineer from Joshua, Texas, started doing business with Smaltz around eight years ago when he ordered some historic silver dollars for his grandchildren. Since then he has purchased about 25 coins. "He's very reliable," says Fox, 73.
Smaltz hopes that recent world events will help him attract customers. "People are worried about the war in Iraq," he says. "Gold has always been considered a safe haven. And rare coins happen to be made out of gold." He repeats that line everywhere he goes, offering to let his prospects in on what he considers a secret: the investment potential of coins. "Nobody," Smaltz says, "really knows about this."