Turning Your Collection
Into a Business Venture
By SARAH E. NEEDLEMAN

After fingering through hundreds of records, some shiny and clean, some scratched and smelly, John Tefteller knew he'd found gold. At a record convention in Texas, Mr. Tefteller had spotted a 45 record featuring the 1958 song "Box Top," recorded by a singer named "Little Anne" and produced by the now defunct label ToonTown. Mr. Tefteller recognized that he was holding a rarity worth more than $1,000. But did the seller?

Mr. Tefteller got his answer just before breaking a sweat, and made the purchase. For $600, he walked away with a copy of Tina Turner's first record. Mr. Tefteller later sold the record for twice what he paid.

Finding rare records is Mr. Tefteller's career. He sells his collectibles via auction through his Grant's Pass, Ore.-based business, World's Rarest Records, which he started after graduating from college in 1979. Originally, Mr. Tefteller's passion for records was just a hobby. He was introduced to vinyl at the age of 12 and began spinning dance and comedy records on his grandmother's Victrola. After his grandmother's passing, Mr. Tefteller drove with his father to a flea market to donate items from her home. There he discovered an inexpensive market for buying records, and a collection was born.

At age 21, Mr. Tefteller began selling his stockpile of records through advertisements in the record-industry publication Discoveries, while continuously purchasing more. The effort quickly mushroomed into a full-time career that today earns Mr. Tefteller a six-figure income and allows him to work from his home. But Mr. Tefteller says the reward isn't the money or the relaxed environment. "I'm thankful to God every day that I can sit here and talk to people about records," he says.

In 1960, Mike Cramer bought a Babe Ruth trading card for a nickel and he hasn't stopped collecting since. He later launched his career by selling collectible trading cards, but he had a bigger goal in mind. Mr. Cramer wanted to manufacture his own cards.

Mr. Cramer began by signing a deal with the Phoenix Giants and the Coca-Cola Co. to make cards for the minor-league baseball team's players. The process involved several steps, including shooting photographs of the players, scanning the images, printing the cards, and packaging the sets.

The deal was so successful, Mr. Cramer was able to clinch a partnership with the Pacific Coast League of Professional Baseball Club Inc. and began making cards for the league's six teams in 1977. The next step was to "go pro," so he applied for licenses to manufacture cards for the National Football League, National Hockey League and Major League Baseball. They were approved, and today Mr. Cramer, now based in Lynnwood, Wash., sells his cards under the name Pacific Trading Cards to major retailers such as Wal-Mart Stores Inc. and Target Corp.

There are some records that Mr. Tefteller says he'd never sell because they're a part of his personal stash. Take his copy of Jackie Brentson and the Delta Cats' "Rocket 88" single recorded in 1949, one of what he believes are only six copies in existence. He can't stomach letting go of that item, although he did let Life magazine take a photo of it for an upcoming commemorative issue dedicated to the first 50 years of rock and roll.

Parting with most other items is a joyful aspect of the business he's in, Mr. Tefteller says. "I like making collectors happy."

Not every collector shares that attitude. Jeff Ogiba, a collector of Star Wars paraphernalia and Nintendo games in Hillsborough, N.J., says selling his collectibles would be too painful, although he has enough to start a small business. Mr. Ogiba, who is a welder and a part-time student, says he'll likely one day sell parts of his collection, which he values at about $25,000. "It may not become a full-time career, but it will always be a hobby that pays for itself and more," he says.

Although you don't have to be a seasoned expert in your collectibles area, it certainly helps. After all, your best customers are likely die-hard fans of your product, and they're apt to grill you on its obscure details. Other clients may be new buyers with questions about an item's history or value.

In other words, it pays to know your product well, says Jeff Silver, a counselor for the Service Corps of Retired Executives (SCORE), a Washington, D.C., nonprofit that counsels entrepreneurs and small businesses. "It's not unusual for people to come to us who are interested in getting into [a collectibles business], but have no background in it." It's a good idea, he says, to get some experience by working for a business that sells the kind of objects you to plan on dealing.

Mr. Tefteller says your expertise also will help draw business. "The more of an expert you are in a specific area, the more your clients will trust you, and you'll attract serious collectors. They know that you really know this stuff and all the little nuances about it," he says. Mr. Tefteller restricts his business mainly to records from the 1920s through the 1950s, stopping just before the British invasion, because he says he's most familiar with music produced during that time.

If you're thinking of going into business as a collectibles dealer, consider the following advice before opening your doors:

1. Target your customer.

   Barbara Brabec, author of several books on home-based businesses, including "The Crafts Business Answer Book and Resource Guide" (M. Evans and Co. Inc, 1998), suggests creating a profile of your ideal customer. "Be very specific. Think in terms of age and geographic location, and consider the economics of certain areas," she says.

   Then identify publications your customers read and advertise in them, recommends Mr. Tefteller. "If you do it right, you'll gain a lot of customers and recognition," he says. And don't skimp on size, he suggests. "I never took out small ads -- I took out full-pagers. Nobody missed my ads, because you couldn't -- they were big and bold," he says.

2. Trust your instincts.

   It's important to take risks, Mr. Cramer says. In 1973, he purchased a pile of leftover trading cards from Topps Gum Co., a trading-card maker in New York City, for about $5,000, sensing they would one day become valuable. He rented a warehouse and let them sit until 1978, when the cards suddenly drew interest among collectors. Over the next several years, Mr. Cramer earned a profit of about $500,000 from the leftover cards.

   Another gamble that paid off was making the first Kurt Warner cards -- before the football player became a star as the Rams' quarterback in 1999. "He came out of nowhere," Mr. Cramer says. "I saw him at a game, and he didn't play very much, but I knew if this guy were to just get a chance, something big would happen."

   Mr. Tefteller says he now regrets not risking certain purchases when he first started instead of borrowing money to pay for them. "I was too conservative," he says. As a consequence, he missed the opportunity to make what would have been lucrative acquisitions. " I should have borrowed money when I needed it. I would have offset interest charges and be ahead now," he says.

   But never invest more than you can afford to lose. This advice applies not just to money but to your ego as well, says Ms. Brabec. "Losing and failing is sometimes harder on the ego than the pocketbook," she says.

   Measuring just how much to invest, however, is critical because collectibles tend to become increasingly difficult to reserve. Mr. Tefteller says he projects his business at least five years into the future by stockpiling records that he knows will sell. "I've had the foresight to buy as many copies as possible of certain types of records that I maybe didn't need to sell that month, but planned to sell over time," he says. "If I don't buy a new record in the next 10 years, I'll be fine."

3. Take advantage of technology.

Mr. Tefteller says he's sorry he ignored friends who talked about "this thing called the Internet." When he finally got around to building a Web site, the domain name he wanted for his business, rarerecords.com, was already taken. He had to settle for worlds.rarest.records.tefteller.com. It's not really a problem, he says. "Really serious buyers aren't messing with the Internet, but [are working] with people they know and have dealt with for years."

For sales online and off, Mr. Tefteller recommends accepting credit cards. "The immediacy of [credit-card transactions] is really good, especially for overseas customers," he says. Credit-card companies will take care of currency conversions for you, he explains.

Ms. Brabec recommends using eBay Inc., the San Jose, Calif.-based online auction network, to lure customers to your business. Include your site's address in the section where products for sale are described.

While Mr. Tefteller doesn't sell his records on eBay, he uses it to buy from amateur sellers who undersell items that he later sells for a profit. "I can buy something on eBay for $1,000 and get $2,000 for it," he says. "I'm on there all the time."

Since collectibles businesses vary, getting started will depend on your needs. Can you sell your product by advertising auctions in magazine ads, as Mr. Tefteller does? Or do you need to open a store and hire employees? Perhaps you'd like to manufacture your own collectibles, like Mr. Cramer. Do you have start-up capital to purchase the necessary machinery or rent a warehouse?

Regardless of how you begin, success requires following through on your dreams, Mr. Cramer says. "I see people who have grandiose ideas that turn into nothing, because they didn't do anything about them. People who follow through on things take more risks, but they also have greater rewards."

-- Ms. Needleman is associate editor of StartupJournal.com.

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