The Solid-gold Roller Coaster

In the volatile collectibles market, Jim Halperin and Alan Hershon stayed ahead by learning how to react to rapid change.

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Just before Christmas of 1979, 27-year-old Jim Halperin, chairman and founder of New England Rare Coin Galleries Inc., was in high spirits. His young company was about to wrap up a record-breaking year -- $22 million in revenues, $1.6 million in net profits. The market for coins and other collectibles was booming, and Halperin had seen his company's sales rise by 1,275% in only four years. How fast, he wondered, could the business grow in 1980?

Looking for answers, Halperin convened a meeting of his five department heads in an office in New England Rare Coin's Boston headquarters. One by one, his managers tossed out revenue projections for retail coin sales, financial services, investment portfolios, auctions, and other parts of the business. When they finished, Halperin tallied up the numbers. With a broad smile, he announced that New England Rare Coin's revenues should hit $48 million in 1980.

For Alan Hershon, the company's newly hired vice-president of operations, the meeting was as much a revelation as the numbers. "In 15 minutes we had our budget for 1980," he remembers. "That threw me. I came from public accounting, where putting together a budget takes weeks."

Hershon soon discovered that he'd stumbled into a company growing so fast that it bred a special kind of rapid-fire decision-making. "Jim's a trader at heart; he trades coins and that's how he became rich in the first place. So his philosophy is you make a decision assuming it may be right or wrong, but you make it in two seconds," Hershon says. "Then you're immediately open to whether it's right or wrong, and you adjust accordingly."

Hershon had never seen anything quite like the frenzy that engulfed New England Rare Coin in 1980. The company's traders -- especially Halperin -- seemed to have a Midas touch that year. The company unrolled innovative new programs, hosted coin auctions, and sent buyers rushing overseas to build up inventories. New offices were opened in Beverly Hills and Palm Beach as part of a "coast-to-coast expansion." And a slew of eager young staffers were added to the payroll. Much of Hershon's time was spent simply helping Halperin think of new ways to spend the money that kept pouring in at a rate of almost a million dollars a week.

The growth brought with it a certain amount of turmoil. "We didn't return phone calls," Hershon recalls. "We were so busy, salesmen on commission lost the incentive to go out and do extra business." Reports, policy making, and office systems fell by the wayside in the attempt to keep up with the staggering volume of sales.

By the end of the year, though, Hershon realized that Halperin's casual projections had been almost exactly on target: New England Rare Coin's revenues for the year were $48,997,000.

Flush with success, Halperin decided to call another pre-Christmas planning session to talk about the company's growth prospects for 1981. "We'd just had an enormous year," Hershon says. "We'd made an unbelievable amount of money. We didn't even know what to do with it. We sat around in a circle, maybe for an hour and a half this time, asking everyone, 'How much can you do?' The number came out to $75 million."

With the promise of a $75-million year, Halperin and Hershon began 1981 by expanding New England Rare Coin's advertising budget, staff, and operating expenses. But within a few months, it became evident that the rare coin market had come off one of i ts roller-coaster peaks, and was now plunging -- along with the company -- into a crash.

In fact, there had been warning signs late in 1980, but no one in the company had paid attention. "If you had been looking at it from the outside, you would have known it was time to stop spending money," Hershon concedes, "but I don't think we knew. You could see the numbers were smaller, but we'd been on a roll. How could we know that things weren't going to turn?"

The company's managers were mostly in their twenties and early thirties; they had never seen a serious collapse. "We felt that spending money was going to turn things," Hershon adds. "It was a combination of thinking we could do it, and just hoping that it was going to change. Because we didn't want to admit that it wasn't."

Bit by bit, Halperin and Hershon reluctantly trimmed back their revenue projections -- first to $45 million, then to $40 million, then to $35 million. Finally, they faced the truth: They'd be lucky if revenues for 1981 broke $25 million, only half of what the company brought in during 1980.

The miscalculations, they realized, wouldn't necessarily be fatal: Hershon had squirreled away a hefty reserve fund for taxes. "But we were spending like a $75-million business, and bringing in $25 million. Well, at some point those lines cross."

Clearly, the time had come to map an orderly retreat before the company's business turned into a rout. In the 13 years since he had launched New England Rare Coin, Halperin had weathered a few of the industry 's notorious boom-and-bust cy cles, but never a crisis as severe as this one. Moreover, the personal stakes were high: Halperin was New England Rare Coin's sole owner, and both his wealth and his reputation were closely tied to the company's fate.

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