Start a Business Buying & Selling from Auctions

A buying and selling from auction business buys products at auctions and then resells it either from home, garage, storage unit, shop or warehouse.

Introduction
This is a relatively simple business, go to auction, bid on items that you believe that you will be able to sell for a profit. And if you win the bid great, if you don’t its fine you can’t overpay, don’t get emotionally attached to buying something as auctions can sometimes be addictive and you have to remember that at most auctions in SA you have to still add VAT (now at 15%) to the winning bid.

What kind of auctions & market need
The most popular types of auctions to buy and sell stuff from are household goods, the majority of South Africans are feeling the squeeze as things have gotten more and more expensive, so people are turning to places like Gumtree to furnish their homes or offices. This opens up an opportunity if you can supply these goods at affordable prices. Also keep an eye out for shop soiled auctions you can sometimes get great stuff there (other appliance auctions are usually returns or repaired goods).

There are also other types of auctions to look into and that is commercial goods, whether office, IT or catering equipment and these types of items are usually found at liquidation auctions.

Strategy
There are two ways to start this business: the best way and a cheaper way.

The best way is buying a secondhand flatbed bakkie, Hyundai H100 or Kia K2500/K2700 or even the Tata equivalent (max R50k), rent a small storage or warehouse unit, or even garage and then buy and sell stuff at auctions whether liquidation, shop soiled, general etc. Office furniture, catering equipment, household goods/appliances etc. and just start advertising and selling on Gumtree, it does not have to be high-end stuff just affordable. And make more money charging an extra fee for delivery for large stuff if people don’t have transport. Hire a boy/labourer or two (it’s unskilled labour so its minimum wage) to help carry and clean stuff. Get on the mailing list of auction houses, keep my eye on liquidations, business rescue listings etc. This will require around R100 000 to get started: vehicle, premises and stock.

Then there’s the cheaper way: get a car with a towbar or small bakkie and either rent or buy a trailer and use this for collecting stock. Sell from your home or garage. And use whatever money you have to buy stock. This is an OK sideline business but hard to grow, you are limited in space with a trailer (meaning multiple trips, in time and petrol expense), you are limited in space in a room or garage and you are limited in what you can buy with less capital, forget commercial equipment, you are going to have to look at buying the job lots (let’s say a clothing company goes under, the “big boys” mentioned above will buy the machinery and you can hustle them for the scraps: the unsold garments in this case, that is job lots). It’s another aspect of this business that I will cover on its own as it can be an excellent small business if done right.

Sales and marketing
As mentioned above you will be selling stuff to people who either cannot afford or don’t want to buy new stuff either for their homes or offices, and where do these people usually look? Gumtree. This is an excellent business to start on there. Some people who buy at auctions open shops in a main street, but that is a 9-5 job and requires a shop assistant when you away and can be a lot of work, when you sell on Gumtree you sell by appointment.

Where to find auctions
If you doing this full time then you need to stay up to date as when and where auctions are happening in your area. Sign up for mailing lists, SMS updates and keep an eye out. Try to only go to “no reserve” auctions where goods are sold to the highest bidder and avoid STC auctions (subject to confirmation), where they have to phone the owner with the highest bid to find out if it is acceptable, there are a lot of Mickey Mouse auction houses in Cape Town doing this, it is quite laughable as sometimes 90% of the stock is not sold as sellers don’t accept the price, which if you ask me defeats the whole purpose of an auction and I’m not talking about cars or properties they do this with pots and tools in the Cape.

This is an excellent business if you have the right vehicle, space and some money for stock. It is far less work than a courier or bulk delivery and more profitable. It is important to have a big vehicle and lots of space, that is because a lot of people who buy at auctions (your competition) don’t like to take bulky and heavy stuff meaning you can make some good money if you are willing to buy larger items and resell it. Auction houses also don’t mind letting large items off the floor as it takes up a lot of space.