Setting Up a Grading Company in Australia

Setting up a proper coin grading service in Australia is a far from trivial exercise. Here are some of the difficulties that an entrepreneur will encounter.

1) Market. The Australian population is about 1/15 th that of the United States; so the target market will be roughly 1/15 th size of the US market.

2) Staff and Training. Coins sent to PCGS are independently graded by two graders. If they arrive at different grades, a third person grades the coin. This usually suffices. But you need to employ a lot of graders as there is a limit to how many coins a given person can grade in a day (eye tiredness, back strain and eventually boredom). These staff have to be properly trained (they also have to be naturally good in the first place) to not only grade but also detect coins that have been "played with" to enhance grade. For obvious reasons the staff also have to be exceptionally trustworthy. Coins have to be authenticated. You require staff who are experts in identifying subtleties in each type of coin such as die varieties, who have had experience in detecting forgeries [ if you get this wrong; see (4)], in identifying error coins, in dealing with ancients and with hammmered coinage. You also need photographers, computer programmers and other I.T. specialists, people who unpack packages coming in and staff who package parcels going out. You also require people to put the coins in their mounts and seal them properly. Additionally, the people who do the grading must have many years experience, have a good reputation and must have passed an accredited course such as one of those offered by the American Numismatic Association.

3) Security. You have millions of dollars of other peoples' coins on your premises. You need exceptional security. Which also goes back to staff and training.

4) Insurance. The reputable US third party grading services guarantee their grading and coin identification (see the warranty claims here). So if they make a mistake, they pay out. I remember a story about PCGS buying back a proof coin for $30,000+ because they had graded the coin as PR70 (i.e. perfect) and some time later the coin had developed a tone spot.

5) Coin holders. You need to develop proper ones that are inert as far as coins are concerned. The generic ones from China (PCCB I think they are called) are of no use to you unless you enjoy paying out claims under (4) above.

6) Reputation. The people starting out the company would have to be well known and respected in the industry. If say Joe Bloggs from Na Na Goon declared himself a top grader and expert in every type of coin, no one in their right mind (i.e. only a few who may think his costs are 'cheap' or just because he is Australian) will send him their coins for grading.

7) Pricing. Your pricing structure will have to be competitive with companies such as PCGS. While you do have a slight advantage in postage charges, the overall cost to the consumer will have to be lower than that of PCGS.

8) Conflict of Interest. To avoid suspicions of bias, the owners and workers at the company (in particular the graders) should not be operating commercially in the numismatic industry in any other capacity. In particular they should not be operating a business where they are selling coins that they have had 'the company' grade for them nor should they be purchasing or attempting to purchase coins or numismatic material others have sent to 'the company' for grading purposes.

Finally, of course, after setting up all this infrastructure, how long will it take to recoup your startup costs? In the longer term are you actually going to make any money?