QuestionI am looking for some advice. I have knowledge and experience in the fire assay of gold, platinum, palladium, and silver used in jewelry and dental manufacture. I am interested in starting a business offering assay services. Although I can handle the technical end of the business, I need to find partners who are 1.willing to invest with me to start such a concern and 2. connected to the precious metals trade in order to bring in business. I live in New Jersey, so the assay lab would need to be located there. Any suggestions on how to go about finding interested partners?
AnswerHello Sandor,
I do quite a bit of consulting in start-up businesses in the jewelry trade, so my information is current. First, if you are experienced as an assayist and can handle large volume (tonnage) there is a good bit of mining related assay and analysis that is out there, however this would involve international contracting, and the entire bid process involved in garnering contracts.From the sound of your letter you seem more interested in small scale jobbing. Unfortunately United Refiners is in your area and have a majority of the work due to their long term business in place that caters to the jewelry industry and now, the "cash4gold" trade as well.That is stiff competition to begin with.Then there are many smaller vendors that sell jewelry supplies and equipment and sell raw materials and have in house refining services dealing largely in refining scrap from independent jewelers as well as corporate accounts - convincing a jeweler to switch to using your services would involve some incentives and a major marketing effort perhaps with the help of a an organization like JBT for resources , renting mailing lists, etc. if you are interested in a direct mail campaign to reach jewelers and manufacturers.You need to decide how it is you are going to reach your target market after identifying it, then doing some homework related to the distribution of jewelers, manufacturers in other than jewelery related industry ( if that's who you want to deal with) and small scale businesses like pawn shops, etc. in your target market and whom they are already using for their refining, as most large manufacturers have in-house assay set-ups receiving their raw materials.
Then to be competitive you would have to be able to handle all forms of scrap and offer perhaps something unique that no other refiner or assay service is offering at this time ( I can't give you that because that's where I make my living!) . In setting up those services you would need to install major equipment for air treatment to handle voluminous lots containing, for instance, carpet and flooring, polishing sweeps and other combustibles that are being handled by the competition. United for instance offers locals the opportunity to watch their lots being processed as it is happening through a hall like corridor that takes the scrap materials from assay to pour- you too would have to offer something that would attract new business or make clear that your services are superior somehow to those established businesses on the east coast. Funding this is not something that can be done on a shoestring.
From insurance, to equipment, employee screening,training and benefits ( in addition to what is required by law),OSHA compliance,clean air act compliance, FTC regulations regarding precious metals and all the other considerations including marketing and right down to consolidating printing and file systems, inventory handling, supply chain management and an escrow account to provide financial services to international corporations ( some companies that you may think are US owned are not, and therefore the payments would have to be sent to the businesses headquarters wherever that may be) and for payouts to those jewelers or companies that want cash back instead of raw materials ( provided you are going to offer refining services too), and the technical equipment you would need to at least lease to provide spectrographic analysis of say ore samples we are talking in the millions just to get it off the ground.
If it's your first business venture check with your state for any entrepreneurial programs that they have available for new industry, or small scale business start-ups - you would fall into both categories depending on your business plan and the target market. I would not recommend putting your home or other assets up as equity for a loan to start the business at this time due to the volatility of the precious metals market and the large volume of exploration that is going on in both North America and South America ( I would avoid targeting Russia and the middle east at this time though explorations are proving many placer claims and much mining is going on in the Urals, Siberia,etc.) due to the sheer weight of the in place competition's years in business and established trade with larger corporate producers in both jewelry and other industries that require assay in all of its forms. there is no "keeping it simple" in starting up an assaying service given all the considerations you must weigh before jumping in and seeking funding. Even convincing an "Angel Network" to invest in your business would take an innovative and creative presentation that promises something new and different in return for their investment.Similarly venture capitalists are looking for proven businesses to invest in doing business at the 10 million and above levels. So while I don't mean to sound discouraging in the least, I do want you to consider- carefully- what you could offer, to whom, and what would set your services apart from the pack in technologies, in services or in pricing structures. Once you have answered those questions and can write a viable business plan based on those points that set you and your operation apart from the run of the mill but established refiners and assayists, you will have a tangible plan to present to potential funding sources.
Funding from grants is almost a myth.What you may see on the web about "free government grants " to individuals is grossly misleading if not an outright untruth.The National Science Foundation, National Endowments, or other federal programs for scientific research would not apply here, and do not provide support to individuals as a rule.Your funding would come from a bank, the Small Business Administration, a Micro-Enterprise Fund that may be operational in your state, or other small business start up programs that would maybe lend or grant you 100,000.00 (as the maximum I have experienced in most of these programs limitations) after completing some training or other set path that after completion would result in monies for a start-up, which would barely buy or lease the equipment you would need, much less cover the overhead, operating capital and other costs ,like insurance, security, escrow, legal counsel, personal insurance ( so that no litigation involving your business could touch your personal resources), incorporation as an LLC or other business structure that fits your scale and keeps you personally safe from financial reproach and then whether you want to offer your company as a publicly traded investment ( selling stock in your business) opportunity, and the costs associated with brokerages for the business venture. I realize this sounds like a lot of individual points to consider but in the precious metals business and given the current market, and the pool of potential clients and investors you have a lot to think of before walking into your first presentation and making your brand distinct among the target market you want to reach, be it local, or further and as a direct service provider or as a subcontractor to established firms.
I could go on for hours about the small details in each point I have mentioned but that constitutes consulting and as such I must limit myself . I hope this information has provided some points that you had not thought of and some that clarified ideas you had and how to proceed with them. Your state's trade center may be able to give you some information as to the statistical implications of opening such a business as far as the competition, their annual reports, their clientele ( as a generalization for your own information and weighing the pro's and con's of going forth with developing a cutting edge business plan that is competitive:I'm certain that no one discloses their clients in full regarding general business stats) and the potential markets that remain untapped that could utilize a service like you would propose. I do want to say that I encourage you in developing a well thought out new business, but urge you to find that edge that would set you apart or reach a larger structure than you perhaps thought of initially. As for beginning a "cash4gold" type business, it is a fad that will wain as soon as the supply of "old jewelery" is depleted, or heirs stop their parents from shipping gold and platinum off to unknown and soon to be gone businesses - and it will end fairly soon, as everyone with access to an electromelt furnace is hanging out a sign that says they buy gold..Attaching your services to independent jewelers that are currently sending their scrap out may be your niche, but these questions are for you to think out and the huge amount of capitol necessary to open your doors will not be easy to come by without some specific research. So I wish you luck in developing your idea more fully and then in attracting business as long as you protect your self and your assets from potential problems by thinking it all through as thoroughly as is possible.I'm sorry that's all I can tell you at this point but it should give you some things to consider in designing a brand and the services that support a viable business in assay services and urge you to add a refining component to that plan whether it is done in house or outsourced at first to save you some money initially and allow time to establish a client base.
Best Regards,Ari
