Up until about four years ago, I was like most of you… largely a hobby/industry outsider. I spent the majority of my time as a collector and researcher. The more I became involved in the business of this business, I saw that what I thought and what I was seeing were in fact two different things. In recent months I have written a number of pieces that hopefully have offered insights and perspectives on things that may not have been apparent to you as the collector. I have openly discussed MEARS business relationships and our role in this industry.
Although I have touched briefly on MEARS’ pricing structure as it relates to the recent sales initiative, I think it is worthwhile to cover this in detail for a couple of reasons:
1. To show why MEARS can not and will not go back to the old days of the “day laborer rate.”
2. To hopefully put to rest that “all these authenticators are in it for the big bucks” at least where MEARS is concerned.
I don’t have an MBA but I did take a business course a long time ago. While I don’t recall all the details, I do remember the general idea that a profit is a result of taking in more than you spend. As we close in on April 15th, the day of National reckoning for taxes, I had an opportunity to review our financial statement for 2006. I would like the collecting public and the industry to see a couple of things. First what MEARS spent as an organization on things that fall into the category of product/service improvement, and secondly the impact this has had on the money that Dave and Troy made in 2006. These relate directly back points 1 & 2 above.
For 2006, MEARS spent the following in these areas:
1. Video transfer initiative expenses: This was the cost of screening,capturing, and transferring NFL DVD footage to JPEGs to support our football research database.
$2,015.00
2. Catalog project initiative: This was the cost associated with the review of auction catalogs, gathering and archiving data. Used to support all game used equipment evaluations with special emphasis on manufacturing/sizing of caps, shoes, etc as they relate to being able to perform trend analysis.
$2272.60
3. Reference materials purchase initiative: This was the cost associated with the purchase of books, magazines, yearbooks, photos, catalogs and film references.
$5,055.39
4. Research Assistant: This was the cost associated with paying a person to serve in the capacity of a research assistant. Focus has been but not limited to, on gathering images for internal database reference, now at 44,000 images.
$11,995.74
5. Web Site Maintenance: This was the cost associated updating the databases, search features, archives, and other information categories associated with the web site.
$10,512.50
6. The cost of producing our own letters. This was the cost associated with checking and transferring work sheet information and photographs to a final letter for auction house work, photography and letter support for retail submission, entering those documents in the data base, and updating the same via the bat and jersey census. I think it is important to note, that unlike others doing this work, MEARS does not simply print out an auction house description on auction house letterhead.
$34,181.00
7. MEARS Buyer Protection Program. This was the cost associated with either purchasing items outright or refunding a portion of the purchase price as agreed to by the collector.
$6,500.00
Total for these categories alone: $72,531.66
Now go back and consider point 1: Why MEARS can not and will not go back to the old days of the “day laborer rate.” It is not possible to do all of this based on a day rate of $1500.00 for an auction house.
While these are not all of the expenses associated with running and operating MEARS for 2006, they do offer you both insight and a point of reference when doing your own comparative evaluations of other individuals and organizations in the same line of work. This also has a direct bearing on why MEARS price structure is what it is. To improve profitability, could MEARS cut corners in these areas in order to make it a more attractive option for auction houses? The answer is yes, but our core business principle is focusing on producing the best product we can as it relates to a collectors ability to make an informed purchase decision.
The second aspect to address is the impact that all of this has had on Dave and Troy’s bottom line. Within the structure of MEARS, principal owners like Dave and Troy are paid on profits only after expenses are paid. Unlike like some structures, where principal owners also draw a salary that can be expensed, there is no such provision within the corporate governance and Articles of Incorporation for MEARS.
For 2006, Dave and Troy made a profit of:
Dave $25,873.00
Troy $27,873.00
To put this in perspective, consider that if seen against the metric of a 40 hour work week for 49 weeks (yes I know there are 52 weeks in a year, but I have deducted Federal Holidays and a couple weeks vacation)you come up with
1960 hours in a work year. Divide this by the total profit for Dave and Troy and you will see that:
Dave Bushing worked for $13.20 an hour.
Troy Kinunen worked for $14.22 an hour.
Now consider the advertised starting salary at an hourly rate for:
Letter Carrier U.S. Postal Service $15.85
UPS Driver $16.21
U.S. Auto Worker $18.00-26.00
There is of course one big difference between these three jobs and that of a working for MEARS, that being that MEARS offers no health or retirement benefits.
I would like to highlight a couple of things. These are before tax figures and that a 40 hour week has not been the norm for Dave and Troy. I am not laying this out in order to gain any sort of “sympathy vote” for Dave and Troy as they can control their own profitability based on what they are willing to spend and what they decide to keep for themselves.
Now go back consider point 2: ““all these authenticators are in it for the big bucks”. Ask yourself if you would be willing to do all of this and all that it entails for what it actually pays in order to produce a service to a certain standard? That is an individual decision and one that Dave and Troy have clearly made for themselves, but to suggest that this is some sort of cash cow or turn key operation for Dave and Troy is not an objectively defendable position in my opinion.
The purpose of this article was not to create some emotional stir within the hobby as to what Dave and Troy make, don’t make or could make. I wanted to share some information with folks who may not see the hobby/industry with the same perspective that I have been afforded. What these numbers bear out is that if Dave and Troy were only in it for the quick buck, they could have decided to cut out the above mentioned efforts and obviously more than doubled their own personal profitability.
Just something to consider….
MEARS Auth, LLC