Winners Adapt to Economic Times: It's Time to Start Thinking Outside of the Box.
By Rick Shab and Michael Shyne

In financially prosperous times businesses and collectors knew the value of their money and purchased inventory or added to their collection based on each item's value. We all understood that common currency. Today, we are more conservative with our money. We have had to reduce our spending to only those basic inventory items or "must have" collectables. Current economic conditions present an opportunity to change our way of thinking in order to maintain or improve our businesses and personal collections.

Our economy has changed the way we do business. Some of us dealers no longer speculate on inventory, even when we know the opportunity may not be there for us in the future. Many collectors no longer have the available cash to expand their collections. Dealers are seeing the consequences of this economy at the bottom line of their monthly Profit and Loss Statements.

When we dealers have stale inventory or we collectors have duplicate items in our collections and cannot succeed in selling them, we may be able to improve our successes by changing our thinking from selling to exchanging our merchandise for more useable commodities.

Today, when collectors want to acquire new treasures for their collections, but find themselves lacking cash, they may chose to reevaluate their position, which is not as bleak as it seems. The lack of cash does not mean collectors are without available assets with which to use to expand their collections, as long as we dealers are willing to expand our thinking as well.

Exchanges - "trading" as we called it as kids, only work when information is successfully assembled and conveyed. The seller of that treasure, that you want to add to your collection, is trying to sell it because he has no other way of placing a value on his merchandise without using the common denominator of dollars. But a monetary price does not mean he will only accept dollars for his merchandise. And when you ask "will you trade", he is most likely going to decline, because he can not imagine his excitement over something you own. This is because he lacks clear knowledge of what you have to exchange. In fact, when asked, most collectors interested in using an exchange in lieu of cash can not readily say what items they have available to trade.

If you are interested in this new age - and old world - means of expanding your collection, start by considering everything you own. EVERYTHING. Now that information can be transmitted so easily on the internet, assemble your List of Trading Material. Ask yourself these questions:

* What duplicates do you have in your collection? Would you rather have two of one thing or add something to your collection that you don't yet have?

* Has the focus of your collection changed? What items have you collected that no longer excite you? What's now available for trade that may not have been in the past?

* What accessories and small parts have you accumulated over the years? Rare parts and accessories have a collectors market of their own and everyone needs spare parts.

Your new list of Trading Material seemed important when you first acquired the items. Now they are boxed away in storage, out of sight and not even thought of as a valuable asset. Yet they are of value to someone and if you do not list them, the sellers you work with will unknowingly miss the opportunity to offer you more than you expected for what you valued the least.

Finally, what treasures in your collection would you consider exchanging for something better? This is a hard question to answer. But the person on the other end of this transaction may decide to extract a similarly rare item from his - or her - personal collection to entice you into a trade.

Remember, merely listing the items on your List of Trading Material does not mean you are surrendering them. You are only telling the world you will consider letting go of them if the world comes up with something even more exciting to you.

That being said, your list may be an even more valuable tool for others if you include a description of what you collect. You may just remind a seller of something he forgot he had - to trade.

This list should not become such a massive project that it never gets done! Your written descriptions should be brief. But if your treasure has unique history, tell that too. If the other party is interested, he will ask you for more information. A group of parts does not have to be methodically inventoried at this point. "Thirty miscellaneous 1919A4 Browning parts" is a sufficient initial description. If the seller is interested, he will tell you. Photographs are effective tools to incite interest and desire. If you can include a photo of each item or group of items with each description, you will have an effective tool to convey what you have for trade. If you do not know how to attach pictures to your list, mention that you have photos available to email to interested parties.

Since we are addressing exchanges, realize that the person you are trying to strike a transaction with may have other interests, as you do. You may be able to turn that dusty Harley Davidson in the back of your garage into a very rare firearm for your collection. So be brave and include everything of value you are willing to part with. List the other items under separate headings so your customer can quickly scan your Trading List.

The authors of this article intend for it to become a catalyst for you to find ways to transact business with other interested people even though available cash may be in short supply in today's economy. For some exchangers, an exchange becomes a taxable transaction. For others, there is no federal tax consequence due the IRS. The authors are not tax counselors. But generally, individual collectors can make "like kind" exchanges without creating a tax liability on the "gain" received. Gain is the difference between what you paid for the items you are trading away and the value of what you receive. The IRS evaluates dealers differently. Dealers can not enjoy the benefit of 'like kind" exchanges of their business inventory. Dealers must declare the gain on exchanges. That may discourage some dealers. However, in this economy, most dealers have reduced income and increased expenses, so the addition of exchange revenue may not create much of a tax burden. And, when the dealer resells the items received in a tax paid exchange, the cost basis in the exchanged items is greater, reducing the future taxable gain when the eventual cash sale takes place. Consult your tax accountant for the answers to your questions.

Cash sales and purchases were simple, and they still are when cash is available. For exchanges between two collectors or between a collector and a dealer, the inconvenience of this more complicated transaction will be quickly offset by the joy of completing a transaction without cash. This avenue of trading inventory and collectables could be taken even further. If we all could post our Lists of Trading Material in "Trades Only" sections of our favorite websites, perusing those lists may be great fun! And remember the wise insight we all have heard: "One Man's Junk Is Another Man's Treasure."

Mankind has been making exchanges since the beginning of time. Collecting must go on - lets all work together to make it happen.

This article first appeared in Small Arms Review V14N4 (January 2011)
and was posted online on November 1, 2011


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