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In this episode of Sound Design Live I’m joined by the Chief Gearguru at Gearsupply, Mendel Rosenberg. We discuss how to get the best deals on used production hardware without getting scammed or violating tax laws.

Transcript

This transcript was automatically generated. Please let me know if you discover any errors.

[00:00:01.360]
Welcome to SoundDesign Live. I’m Nathan Lively, and today I’m joined by the founder of Gear Supply, Mendel Rosenberg. Mendel, welcome to SoundDesign Live.

[00:00:15.090]
Thank you very much. Excited to be here.

[00:00:17.800]
So Mendel, I’d love to ask people just about music that they like a little bit before we get started, just so we can all get to know you a little bit. So we’re definitely going to talk today about buying and selling using used gear and pro audio equipment. But before we do that, after you get something set up, maybe that you’re trying to test since you handle a lot of used gear, maybe what’s one of the first pieces of music you might play through it to get familiar with?

[00:00:45.010]
Good question. I grew up in South Florida, so definitely an EDM guy. A lot of Bouca Shade, some of that older European house music. That’s definitely my go-to These days in the office, we have Rufus, The Soul on 24/7.

[00:01:11.820]
Okay, so normally this is when I would talk to you about how you got started, but let’s do that second, because I know a lot of people listening are like, What is Gear Supply? Who is this person? Why aren’t we talking about mixing shows? So could you give us the overview of what Gear Supply is and what it is not? Because I know you have some maybe horror stories that you heard from some of your customers about working with Other old guard. The old guard. Yeah.

[00:01:49.130]
Gear Supply is a marketplace for concert production equipment. What we found is our industry is pretty technical. They’re pretty good at what they do. They’re very good at testing gear. They know how to spot gear that’s in good condition or in bad condition from a mile away. They’re not needing you to tell them what gear they’re supposed to buy. They already know what they want. Oftentimes, they already own what they want, and they’re just adding to that system. They’re definitely not here for you to tell them what’s considered good condition or bad condition. They want you to describe and show what they’re buying, but they’ll make their own decisions, their experts, in the actual gear. You have a lot of other industries where people rely heavily on brokers or middlemen to connect you with… You’re buying a tractor for your farm, and so and so in Wisconsin has a tractor, so you got to get that from Wisconsin down to South Florida. This is your first tractor you’re buying, so you need to learn all the ropes. That’s not our industry. Our industry knows exactly what they’re buying, and they don’t need you to school them on the gear.

[00:02:51.790]
They know the gear probably better than you do. They probably use that gear two, three nights a week for the last four or five years. What our industry really does does need is our industry needs help marketing the equipment and a place to safely transact. Market place, that’s where we are. We are the town square where everyone can come, where there’s good observance People aren’t going to be pulling off thievery or whatever. Imagine your old 1600s marketplace. It’s a safe place to transact, and everyone’s there. That’s what we are. We’re a marketplace for concert production equipment. We are not a integrator. We’re not going to be giving technical advice. We’re going to connect you with the best gear at the best price with the highest level of trust and satisfaction in that transaction. We spent all of our time and money focused exclusively on two things: marketing and the transaction. Making sure that that transaction from start to finish occurs safely, that you’re not all of a sudden finding out that you owed a tax bill to some jurisdiction, that you had no idea you were supposed to pay taxes when you did this deal.

[00:03:57.250]
Of course, the broker doesn’t know because the broker has never done a deal there or they they have and they didn’t think to ask or mention it. You’re not shipping the gear with a bad carrier and the gear gets damaged and you find out that really used gear is only covered on a per-weight cost and not an actual per-item cost. Now you’re getting 25 cents on the pound per speaker, which for some of that older power speakers, you actually might do pretty well on because those are pretty heavy. But there’s a lot of horror stories of people all of a sudden stumbling into a deal where they met a guy in a physical marketplace or they used a broker and the broker did a deal in such and such a place, and all of a sudden it gets damaged. And whose fault is it? Is it the broker’s fault? Will I use the broker’s carrier? Or the broker is not the shipping agent. So now it comes on me and I don’t have insurance on that. It’s out of the jurisdiction of my general liability. And general liability doesn’t cover shipping. All these issues we solve on this marketplace.

[00:04:50.680]
We handle soup to nuts, sale to shipping, to payment, to feedback. That whole component is all handled by us.

[00:04:59.270]
I think in the last few years, as an adult, I still either get fully scammed once a year or get really close to being scammed once a year. And so recently, I guess last year, I was trying to sell an old air conditioner on Facebook marketplace. And I think it’s because it’s these moments of weakness where I am in a hurry, I need something from someone, or I’m trying to sell this thing and just get it out of my life. And so then when someone messages me and says, Hey, I can come pick it up now, can just send me your email address or Venma- Right, just get excited.

[00:05:40.570]
You’re like, That’s it, we’re done. Great, great, great.

[00:05:41.730]
Let’s get it taken care of. So these are things that I think that aren’t visible immediately until you get scanned, then you’re like, Oh, my God, why did I use Facebook marketplace?

[00:05:53.000]
Yes. I, unfortunately, can share a couple of those stories as well. We started, and we’ll talk about this later, we started just as a trade-in service. We bought gear in bulk, either from manufacturers that were accepting their clients’ old gear or from integrators and installers that were accepting their clients’ old gear. Our whole focus was supply, gear supply. We just made sure we had the right supply. We relied on all those formats that you just mentioned, brokers, Facebook marketplace, email, all those unregulated and I don’t know the regulation is the right word, more unsupervised methods of transacting. There are a couple of horror stories. One that sticks out, we had a middleman, I call it that, reach out and I said, Hey, we need some… I think it was a mire lion rig. They reached out and said, Hey, can we get some of these lions? I said, Actually, you’re in luck. We’re buying a big package of them soon. If you want, I can just ship them straight from the person that we’re buying them straight to your client. There’s a bunch of other stuff that we’re buying as well, but I’m happy to siphon off this piece of it.

[00:07:04.110]
It’s a big deal. It’s a truckload, so save them four or five grand in shipping. I’m going to pay to ship it to me anyways. I’ll ship it to your client for free. But disclaimer, I haven’t tested anything, so make sure that the second they get it, power that up right away because if there’s any issues, I need to be able to take care of that right away and get them refunded and go back to the vendor and figure out what happened. Second thing is, there’s zero accessories that come with it. Sometimes vendors will throw in accessories, and if we get that, I’m happy to throw that in. But you’re at the behest of the vendor. I have no idea if there’s going to be cables or anything. This PO, this SO has zero cables on it. You’re signing that sales order. This is exactly what you’re getting. Fly bars, pins, cards. That’s your order. Sure enough, I get a call the day that everything’s supposed to go through, and we actually get the full pick list, and there’s no cables. They say, Hey, we need these cables. I said, Guys, I tell you there’s no cables.

[00:08:01.310]
The broker says, Hey, this is my customer. My customer wants the cables. The deal is not going to go through unless we get the cables. If you want, you can give me a couple of thousand dollar discount. It was a decent chunk of thousands Discount, and I’ll go buy the cables for the customer so that we don’t lose the deal. I said, Okay, sure. But I’m not giving you that discount. You’re more than welcome to go buy it yourself. But this is what our contract read. I’m doing you a favor. This is the deal. Long story short, I ended up meeting that customer later. Usually then, for sure, when we were working with brokers, we didn’t want to pick off those customers, so we wouldn’t touch them. Let the broker have that relationship. I was at a convention later, though, and I met this customer, and he said, Oh, yeah, we got these lines from you. I said, Oh, I’m really sorry about that cable mishap. I feel bad about that. I just want you to know, I was really clear to the broker that this is not provided on the order. It was very, very clear in the sales order.

[00:09:00.110]
And he said, Oh, they told us since day one you weren’t getting cables. I said, Yeah, but then why did you want to back out of the deal? He said, No, we never did. I said, So then why did you need a couple of thousand dollars to make the deal go through? They said, No, that never happened. We never needed that. It was just a made-up story. The broker was like, Yeah, why not? I get a couple of thousands of bucks. We once had an order, I think it was Singapore. The order lands there and the client says it was damaged shipping. I said, Okay, that’s fine. Let’s refund you the order and we’ll file the shipping claim and ship it back to us. He said, No, but we need the product also. I said, Well, I’m not going to get a claim if you hang on to the product. We’re going to need to send the product back. He said, No, we need to get the refund, and we need to get the product back. I said, So what do we do with the money then? So the broker says, We’re going to hang on to the money until you get your refund from the shipping company.

[00:09:53.670]
Give us the refund, and we’ll disperse the rest of the money. I said, so you’re telling me right now that I have to sit on $30,000 a year You sit on the money because your shipper that you use is a bad shipper and you won’t even let us get the refund from the shipper. We can’t even manage it directly. We’re just so pigeonholved behind that deal. There’s so many deals like that. We, thankfully, had our heads up the whole time, so we never got scammed. I don’t think any of the brokers are scammers. Really, they have a hard job. They have to control a transaction that they’re not touching. They have to ensure that the seller does a good job and that the buyer does a good job, and they’re not there. How do they know that that transaction is going to go through? There’s no regulations. It’s not commercial real estate, where if you’re a broker, there are state laws that ensure X, Y, and Z happens in every single case. There’s a title company that says, If it doesn’t go through, we’ll cover it because we’re guaranteeing this deal. The title company follows all these restrictions, and none of that exists.

[00:10:52.710]
There’s no due diligence that you can do. You end up basically with a broker that has no control control over the buying and the selling side. Maybe they have a good relationship, and maybe they’ve done that transaction before so they can do a good job, but maybe they can, or maybe they get a buyer that’s ready to pay 20,000 more than the buyer that they have right now. They tell the other buyer, Hey, deal fell through. Sorry. It didn’t really fall through. They just found a buyer that can pay more and they get a bigger commission. Or on the seller side, tell the seller, the seller had X product, had a line rig for $100,000. I have a buyer for $120,000. All of a sudden, I find a seller that has it for $80,000. There’s nothing stopping me from taking that seller for $80,000. There goes your deal. There’s no transparency. The broker is by default, the only way they make their money, if they can keep everything exclusive and hidden. And me as a networker and connector, I would never want to be in that position where my livelihood has to come from black boxing and hiding all that information.

[00:11:57.520]
I want to be able to be as transparent as possible in every interaction and to be able to control the outcomes and make sure that, God forbid, we’re not going to have a transaction that reflects poorly on me. And that’s why I avoided getting involved in any middleman business for years. And then at a certain point, we said, This is crazy. The brokers are charging 15, 20%. They’re not offering all that value. We can offer the bulk of what our industry needs help in is the transaction like we talked about and the marketing. We can offer both of those for a fraction of the cost of the broker. It’s the 2024. You can do 90% of that stuff with technology and scale that up to such a high level where you don’t need to have a person in a seat for every single logistics role. You can get the first 60% in the quote done digitally and then get the last 40% done by an actual logistics role. We don’t need to have four logistics people. We can have two logistics people. All this economies of scale that a marketplace, a digital marketplace offers that we could solve for less than 15, We’re still very, very picky about who we take as a vendor.

[00:13:04.790]
We know that we could control. We’re not just taking any deal like that. Now, you’re coming from today to tomorrow that you have great gear, you can’t list it on the platform unless we’re a thousand % sure that you’re going to maintain that status of a gear supply preferred vendor. There’s certain promises, warranties, and things that come with that that we can’t offer unless we know that Nathan is the guy that he says he is, and here’s the verification steps that he’s gone through that every single vendor of ours needs to go through to make sure that they are going to be trustworthy and be able to ship the gear in time. We have full live access to their inventory, all the things that we need to ensure that this transaction is going to be amazing so that when your customer goes and buys that gear from Nathan, it’s just as easy and as smooth as buying that gear directly from us.

[00:13:45.520]
It’s really interesting. And the way you explain it helps me understand better now because I think anyone who’s worked in at least pro-audio for some time knows what it’s like to work in an industry that is largely unregulated. And someone who starts today as a sound engineer and someone who’s been working for 20 or 30 years and has a very high level of training and education and experience is also just a sound engineer. I’ve talked with other teachers about potentially how to regulate that. It creates for certain limitations in terms of how far and quickly you can go with your career. You move to a new city and then all of a sudden you start from bottom again because there’s no letters after your name or a piece of paper that says that you know how to do your job. You’re dealing with that at the same time as well, but trying to create your own, I don’t know if utopia is the right word, but your own little ecosystem where there’s just having a friend hold your hand through some of the steps of this process or give some oversight and make sure that you don’t make some of the big mistakes.

[00:14:54.910]
I think it’s going to get better. I think M&A is a little bit of a dirty word, especially in an industry that’s, for the most part, been pretty boots on the ground, hands-on. Ex-rock and roll guy becomes production company. Ex-rock and roll gal becomes new billing software for the industry. Everything’s been industry-related and everyone’s moving around different parts of the industry, which is nice because everybody knows everybody. We grew really fast. The only reason we grew so fast is because it’s such a small industry, and you treat people really well and you’ll grow quick. You’ll grow really quick, and that’s beautiful. That’s something that our industry has that’s awesome. But there are some benefits of all the M&A action and the Solitech and the PRGs and the Claire’s buying up all these companies in the eighth days. All these big mergers that have happened do provide some value because they bring a level of sophistication that’s going to create, in my opinion, more, I don’t know if regulation is the right word, but more consistency. I do think that we will see a high demand from some of these bigger conglomerates, the Solitech of the world, saying we need to know better who we’re hiring and how capable they are.

[00:16:10.720]
We need a proper certification. Cts is too broad. There has to be Audio engineer one, two, three, which receives X, Y, and Z certification. We know this guy knows what he’s doing. This guy knows what she’s doing. She can operate this board. He can operate this fixture and plug and play. You have that in any of the manufacturing industries or tooling industries or even software. Senior dev, staff dev, all those different levels are consistent across companies. It’s very easy for companies to mix and match and plug and play. Like you said, somebody who’s been working 25 years doesn’t deserve to be the same title as somebody that has been doing it for half a year on a summer internship. But if somebody is really capable, they should be able to get that certification right away. I do think that’s going to happen with more and more sophisticated capital invested in the industry that needs to be able to move faster and quicker and plug and play, I think that, I hope, God willing, that that starts to become a reality in the industry.

[00:17:15.700]
Well, Mendel, we talked some about gear supply. Now, let’s just talk in general about, I don’t know, some of the tips that you have for people for buying and selling and doing their own transactions in handling their own inventory. You have a lot of experience in this area. So what do you think are some of the biggest mistakes you see people making who are new to buying and selling used gear? Maybe they are a manager in a V company, or they just have their own small sound company? What are some of the problems they get into?

[00:17:49.800]
Yeah, that’s a good question. This is my favorite question to answer. I think it’s important to, number one, bucket yourself into what what your values actually are and what you need to receive at this. If it’s speed of transaction, that’s one thing. If it’s maximizing the actual dollars you get on the transaction, that’s another thing. Both of those are buyer or seller. If you’re a buyer, You just need it now. We just had 20 K2 that sold to the Middle East, literally with a six-minute phone call. The person accepted it. I’m not exaggerating. I got a call from this person. Hey, we need this. It’s going into an install. I need it right now. I said, Okay, let me get the paperwork. He said, No, I need you. We need to get this on a plane in two days. I said, Okay, just send me a wire. If you’re comfortable doing that, I’ll get you all the paperwork afterwards, but send me a wire now. Sure enough, $200,000 wired to the bank and ready to go. A company like that, that deal was K2 that had come out of a church that still had a warranty on it, had three and a half years of warranty.

[00:18:54.350]
The price was pretty close to what a dealer cost is, but they needed it this second. They wanted zero headache. They said, I’d rather go to you and buy something that I know still has a warranty that may not be the craziest deal in the world. And full transparency, our margins are pretty small on that because we knew how premium of a product we were getting, and then it still had a warranty. It was used in a church. This is that once in a lifetime package that’s going to sell itself because it’s in such great condition. A buyer like that, their value was speed. They wanted to make sure that they got this easily. They didn’t care about maximizing their value. Otherwise, they would have bought a five-year-old K2 system. When there’s a lot of those going around. They can buy one of those, and they could have saved 2,000 bucks a speaker, but that wasn’t what they wanted. They wanted to get something now and have zero headache, plug and play, install it into the venue, and be done with it. I think it’s important to really understand what you’re going after And once you decided that, then you can decide how to approach that.

[00:19:49.280]
I’ll give a couple of examples, and that will answer the question. If you’re a smaller production company, odds are you care most about value, dollar, price, where are you price-wise. If that is your number one concern, the best way you’re going to buy gear as that company is buying it through a marketplace, calling up local production companies around you, and piecing together bits and pieces in what you’re going to buy. That’s always going to be your most effective way to buy it because you have six speakers that this person doesn’t need anymore. They’re just not using it. They’re happy to get rid of it. It’s too small of a deal for someone like us to go in and buy it direct. I don’t know if I mentioned this, Gear Supply has two wings. There’s a marketplace where anybody can sell gear, anybody can buy gear. Then we have a separate side of the business, which is Gear Supply Direct, where we’ll buy gear directly. That’s how we started when I mentioned Gear Supply a few years ago. That’s all we did is just trade-ins. We bought gear in bulk. But we have criteria. We can’t buy less than $50,000 a gear at a time.

[00:20:51.440]
If you’re trying to save on value, find all those companies that are looking to sell $10,000 a year, $12,000 a year, and buy that gear, piece together system, build your own cables, check the auctions. Auctions are a great way to buy gear, not a good way to sell gear. They’re a great way to buy gear because they don’t get a lot of eyeballs on it. It’s timed. Our industry is too small for a timed auction. You’re not going to get a whole industry looking at a product in two days. If you want to get good value for your product, you need to put it out there for two, three weeks until you find that random Middle East company that’s ready to buy it that needs it right now. It doesn’t need a discount. They just need it right away. They’re not a great way to sell gear. But to buy gear, you can get crazy deals in an auction. When we look at auctions all day long, and I’m like, That’s crazy. I can’t believe they let that go at that price. But when you’re dealing with an auctioneer, they want zero liability. So you’re going to have to fly out there, test the gear, if they even let that.

[00:21:44.980]
If there’s any issues, it’s all on you. You may not have the right cables that you need. It may be five pin instead of three pin. There may be a couple of dead pixels on that video panel. But if you’re ready to do that, go out there and hunt for yourself. We can talk about the pitfall calls of that in a second. But go out there and hunt for yourself. That’s going to be the best way to do it. The most important thing, you mentioned this earlier, is if it’s too good of a deal to be true, it is too good of a deal to be true. That rule is not just nine out of 10 times, it’s eleven out of 10 times. There is so many people looking to take advantage of somebody who desperately needs a CL5. I get messages. I don’t know who… There’s this one scammer that sends us emails every couple of months, and he makes Jewish names and says Jewish names so that he thinks that that will get me to like, Oh, Mendel is clearly Jewish. Let’s mention something about Israel or let’s mention something about Passover. Sure.

[00:22:41.750]
He’ll overlook all other details about this. Exactly. If he thinks I’m Jewish, that’s funny. Yeah.

[00:22:50.540]
I get messages from this guy all day long. This is the second piece of advice. But the deals are always too good to be true. If this guy knew what he was doing, don’t give a deal that’s that good. Give me a deal that’s quasi good, and then I’ll believe him. A CL5 for 10 grand is not going to happen. An SXL for 30 grand is not going to happen. It’s just not going to happen. It doesn’t happen anywhere. We’re in 2024. There is nobody that sells a car without going on Canada Blue Book. There’s nobody that sells gear without picking at Facebook marketplace or Gear Supply and seeing what it’s worth. Those two good to be true deals, 9 out of 10 times don’t happen. They just don’t. Actually, let’s say 10 out of 10 because I don’t want anybody to say, Oh, this is the one. And then, Mendel, you were I’m not wrong. But the second thing is, get a video in real-time. Facetime whoever you’re working with. If it’s on Gear Supply, I’m guaranteeing that it’s coming out of our bank account if that deal goes wrong. Buy whatever you want a Gear Supply, 100% guaranteed.

[00:23:45.430]
If you’re not buying it on Gear Supply, FaceTime whoever you’re doing. Do not buy a single piece of equipment without FaceTimen them. That will answer everything you need. The first question you need to ask is, When can we do a FaceTime? Because all the scammers in three seconds drop They’re gone. They don’t exist. We had one scammer that said, Yeah, sure. Let’s do a FaceTime. His voice was like… He was using one of those voice changers. Oh, really? When it showed his face, I got on a call for one minute. I’m like, Okay, I don’t have time. Just hung up. It’s so obvious who’s a scammer and who’s not. It’s literally that one question is two-thirds of scammers will be gone. They want to continue the conversation. The rest will give you an excuse about when they’re available and then not show up to the call and whatever. But a video call is such an easy way to get through most of that stuff. There’s a couple of big questions you want to ask when buying gear. Zero numbers, that’s huge. Find the serial number, call the manufacturer. Every manufacturer’s customer support will look up a serial number for you.

[00:24:45.280]
They may try to sell you on service and warranties, et cetera, but they will all look up a serial number. They, just as badly as you, do not want fake gear being in the market because it hurts their brand reputation knowing that a fake row panel or a fake Chauvey fixture is out there and making Chauvey look like crap because it’s failing less than right. They would much rather find out that there’s a fake product, and you’re helping them because they can go after that fake product if there is a fake product. So number two is always get that serial. You need that serial. Don’t buy anything without a serial. I’m going to send you pictures of the serial number. If the serial number looks weird for any reason, I would back away from the deal. If the serial number looks like it’s been painted over or stickered on, I would back away. Unfortunately, there is a lot of stone gear that goes around. Not a ton, but it’s something that you need to worry about. That’s number two. Number three is get references. It’s such an easy thing to do. Our industry is so small.

[00:25:36.360]
There is no production company in the industry that doesn’t know at least one or two or three production companies that you know. Get a reference. If they are in Minneapolis, we just had this conversation to me and Nathan, Allied. Nathan didn’t know the one person that I knew in Allied, but he’s doing work with them next week. It’s a small industry. Sure.

[00:25:54.170]
If he had made up a company, I probably would have known. That’s the thing. Exactly.

[00:26:00.080]
If you don’t know who the company is and somebody else in that area doesn’t know who that company is, find someone else in that industry. If it’s a church integrator, call a couple of the church integrators in that region. Everybody knows everybody in this industry. If they’re a brand new company, I don’t know that I’d do the deal with them. They shouldn’t be selling used gear if they’re brand new. Those are three really easy steps that if you did those three steps, it’s pretty difficult for you to get scammed.

[00:26:23.420]
One of the first things when you open the Gear Supply website and there’s the pitch and it says, and taxes. And I was like, taxes? Why would I ever have to worry about taxes? And so, yeah, tell me a little bit about that, because I’m imagining that if I’m just buying and selling face to face someone else in Minneapolis, in my city, I don’t know if I need to worry about that, but I can see how it get more complicated, like crossing state lines, crossing country lines. So I don’t know anything about that.

[00:26:55.190]
Okay, high level. I’m definitely not an accountant, nor am I a tax consultant. That’s not just a liability disclaimer. That’s an actual disclaimer. I don’t want anybody to be taking my advice as face value. What I can tell you for sure is that if you’re selling on your supply, that’s taken care of for you because we have with our marketplace status and all the tax logistics that we need to figure out, we have it solved for every single state and every single jurisdiction. The countries that don’t have it solved, you’ll know when you do that, but all the main European countries and Asia Pacific countries are all taken care of and we can sell through any of those countries and buy in any of those countries, and you will have zero tax liability. It’s written in our contract. If for whatever reason you have some tax issue that comes up, comes to us, we’ll pay it. Don’t Just ask us. Ask us, we’ll pay it, but you can do it because it’s in the contract. High level, here’s what you need to know. There’s a law called the Wafer law that came into place. It’s not called the Wafer law, but it’s a wafer case.

[00:27:58.130]
Wafer was selling furniture across all these jurisdictions. Up until really a few years ago, and it was only a few years ago, it might have been 2018, 2019, you can sell things across state lines. Because somebody wasn’t physically picking up that equipment, furniture, in wafer’s case, in your jurisdiction, you did not have to pay tax on that. We would tell people, up until this law was passed, we would say, Hey, don’t pick up your gear. It’s cheaper for us to ship you your gear to your state because we’re not going to have to charge tax. That is no longer the case. Nowadays, after this wafer law passed, basically every single state that you sell to, you are obligated to collect and remit tax in that state. You can’t just remit tax in the state without signing up and filing to be able to remit tax in that state. So you need to go through a process that is state-specific. For all but 10 states, there are a little bit more than 10 states that have a group where you can sign up to be eligible in that bucket of 10 states or however many states it is.

[00:28:59.910]
And then you could remit tax in all those states using one form. So it’s a little easier. But for all other 40 or so states, you are going to be signing up and remitting in every single jurisdiction, every single state. And each state has their own laws. There’s use tax, which probably most people don’t know about unless your state has use tax and then sales tax. I’m not going to get into the differences between those two. The basic rule of thumb is if you’re selling anything over $100,000 or you plan to sell over $100,000 into a certain state, you officially have nexus in that state, which means even if you don’t have a physical presence in the states, you don’t have a warehouse in that state, you are obligated to be collecting tax in that state. There are some states that don’t even have that threshold. If you sell $1,000 a year, you need to collect tax in their state. But if you’re selling over $100,000 into any state, pretty much you’re going to be needing to remate tax in that state, and you have to find an accountant in that state and figure out how to remate in that state.

[00:29:54.450]
The caveat is if you’re selling to a reseller. In our industry, a lot of rental companies are technically classified as resellers. So when Costco buys product from, I don’t know, BOS speakers, so Costco stocks BOS speakers, they don’t pay sales tax to BOS speakers because BOS speakers is not going to be the final purchaser. Costco is not going to be the final purchaser of that. Costco is going to resell it to their customer. Their customer will end up paying that tax on it. If you’ve seen in Costco, they always offer you the business card or the regular card. The business card means You’re signed up with your reseller account on file, you’re buying and wholesale from Costco, and you’re going to resell that to the next person. So you’re not even going to pay tax to your Costco. So if you’re selling to a rental company that’s also a reseller, you can avoid paying tax because that rental company will be charging tax to whoever rents that equipment from them. That’s not so simple. You need to store their reseller certificates on file. Every single jurisdiction is different. But just something to know. So if you’re doing a one-off transaction and you’re not doing it on gear supply, I don’t know why you’re not.

[00:30:59.380]
But if you’re not, Not for whatever reason. There’s a lot of good reasons. You could be selling it to your buddy. You trust them. You’re not nervous. You just want to make sure you’re not in violation of a tax law. Call a local accountant in that area. Many, many production companies are resellers. A local accountant in whatever jurisdiction you’re selling to can tell you what you need to do to store their reseller account on file, and you could save them 10, 15, $20,000 in tax. So pretty important thing to know about. When you’re shipping overseas, I’m not even going to start to explain it. It’s very It’s very difficult. Use a broker when you’re going overseas. If you’re not using a broker, a broker, I don’t mean a use gear broker, I mean a tax broker. So there are shipping brokers, customs brokers, that will take all the liability of the customs and that and import export tax for you. They’ll tell you exactly what you need to do. Use one of those brokers. They’re regulated, they’re licensed, they’re insured, they can do everything you need to do. They’re not cheap. They’re going to charge a couple hundred dollars per transaction, but it’s much easier than getting sued and needing to pay sales tax in Uganda and having to fly out there and fight it.

[00:32:06.360]
Definitely use a broker if you’re not going through our platform. If you’re going through our platform, we got that all covered internally and we’re taking all the liability on our side. Those are the big things on the tax side. Let me mention one more quick thing while we’re here on the freight side. You do not want to use a budget freight company. If it’s the cheapest freight company, you’re not going to get a warranty. In the beginning, when we were working, we’d let our customers choose whatever companies they wanted. We don’t let that anymore because they chose a lot of companies that had a lot of issues. If I have to name drop a couple that I think would be amazing, Averet, Old Dominion, those two knocked out of the park every single time. If you use one of the freight brokers, their insurance is almost always going to be better than a freight company’s insurance. So again, use a broker again. I know I’m telling you not to use brokers, and I’m not saying not to use brokers either. There I don’t think all brokers are bad, and I think they have a hard job to do, and it’s very easy to end up in some of the situations that they end up because they don’t control it.

[00:33:07.380]
But if you’re selling it yourself, use a customers broker and use a freight broker and buy all the insurances they can offer because those insurances usually are pretty good Don’t use this fly-by-night free broker. Use one of the big C. H. Robinson, TQL, one of the big names. They will take care of you. And make sure to mention that it’s a used gear. The last thing I can say is when you package that gear, package that gear so, so, so well, because anything that can go wrong when it’s getting transloaded by some 9:00 to 5:00 forklift operator will go wrong. And forklifts will go through speakers, and forklifts will hit the sides of speakers. If you could ship it direct, ship it direct. Don’t do LTL, where it’s going to be passing through many different docs. But tell all this to a freight broker, and they’ll know how to make sure your goods stay safe, because it’s not just enough to have insurance. You don’t want your speakers having holes We’ll punch through them. It’s a headache. You don’t want to deal with it. Those are a couple of the big things to avoid. Then on the payment processing side, if you’re a vendor, unless you have that payment cleared in your account, don’t take credit cards.

[00:34:13.340]
Make sure that you’re taking something where that money can’t disappear, either a cashier’s check or a wire. I would not do ACH. I would not do a credit card. If you’re a vendor, there’s too much liability with that. People have returned or canceled charges on some pretty big charges. We learned the lesson the hard way in the early days before we were a marketplace and had all the security measures and insurances to protect us. So don’t use credit card unless you know the person on the seller and on the buyer side. Try to use a credit card. Make sure you have some way to protect yourself. If not, call an escrow service. There are escrow companies that will handle that middleman transaction. Again, they’re going to charge $1,000. This is why it makes sense to use a marketplace because you’re going to be paying an escrow service, a freight broker, and a customs broker, all their fees. Obs are it’s going to be more than 6% use the marketplace. It’s all in there. It’s all in the marketplace.

[00:35:06.220]
We are running out of time, but I do want to make sure that I get to some of these Facebook questions because Jim and Dave send in questions, and I really appreciate when people send those in. So I want to make sure we get to those. Let’s do the easy one first. So Dave says, how do people get in touch if they have a product to sell? So obviously, I just told him the URL, gearsupply. Com. But I guess if he has further questions and wants to learn about this, and obviously there’s some ins and outs, what’s the best way to get those questions answered?

[00:35:43.050]
Yeah. So if you go on geersupply. Com, there is a video chat function. During any business hours, during Eastern Standard Time business hours, you can reach your real-life person at any given moment and get any of those questions answered. Definitely hop on there. I’m happy to help. Again, all the same advice that I just gave all of our gear, groups know, and they can give all that advice to any of you guys and it can really help. If you even just have a question, Hey, I’m selling this a private transaction to a buddy of mine. I’m not really sure what it’s worth. Does this price sound right? Hit up one of the guys on the chat. I’m happy to have them give you a pro bono answer. To us, it’s just such a cool industry. It’s such an exciting industry to be a part of. I’m so grateful that we were able to grow our business this fast. The only reason we did that is because of how tight knit this industry is. We have a story. We were doing a deal in Vegas with a big manufacturer, and that deal in Vegas was a big venue and a chain of venues.

[00:36:44.820]
The manufacturer was trying to win that deal, and they won the deal based on our trade-in. I forgot exactly what the price was, but it was somewhere around $60,000 is what we had offered to buy back that old gear for. Because it was a big deal, the manufacturer asked if one of us could to fly out there and meet the client when the inspection goes on. A lot of times we use our network to do the inspections for us, but they wanted one of us to specifically fly out to Las Vegas, meet them on site and do the inspection and wine and dine and make a good impression on behalf of the manufacturer. Sure. I said, Sure, you know what? I’ll volunteer. I flew out there. I come out there and the gear is totally shot. They said that there’s issues with the rigging, and that happens. It will get or whatever. This gear, it was a BMB system, which that gear is pretty durable and reliable, and there’s no reason why that gear should have any issue after 10, 15, 20 years. The amplifier is 60,000 hours a minute. Oh, wow. Sixty-thousand. I don’t even know how you come to that number.

[00:37:48.820]
It’s just a crazy number. It was nuts. The speaker enclosures, the wood was actually splitting at the seams, basically every single inclosure. It was You can actually see inside the speakers through the wood. The speakers were totally shot. I came out there and I said, Holy crap, this is a disaster. I don’t know what to do because I know that my manufacturer that’s bringing us this deal really wants to win this deal. The reason why they’re winning it is because they’re offering a $60,000 buyback of their old gear. Who’s the one buying it back? Yours truly, Gear Squad Direct. I said, Hey, guys, let me step out and make a call. I called the CFO of that manufacturer and I Hey, guys, this is the story. I don’t think anybody lied to us. I don’t think anybody tried to mislead us. I think they just… Some new AV manager, it’s a leasing company that leases a facility. It’s a production company. I don’t think anybody really knew what was going on with the condition of the gear? What do you want me to do? He said, Mendel, I don’t want to make you guys take that deal.

[00:38:53.180]
I said, I get that, but how important is this deal to you? He said, Yeah, it’s pretty important. I said, Okay, it’s on the house. We’re taking it. We’re not changing the price. We’re not doing anything. We took the deal as is. Sure enough, we lost close to $30,000 on it. We sold it all as is. We sold it to one of the guys in our industry that I know loves these grab bag, mechanic special speakers. He took it all and took the drivers out and scrapped the parts. But that deal is the types of deals that make a reputation for yourself. We had another deal, actually, right when we started. It was a production company out in Nashville. They had reached out six months prior about a quote. We offered them $400,000 to buy back their old gear. They call us back the week before Thanksgiving and say, Hey, man, we’re ready to go. I said, Guys, the quote had an expiration date. This is six months later. I don’t know what the gear is going to be worth. It’s Thanksgiving weekend. I don’t know that I’ll even get to get a truck out there, let alone get $400,000 over to you on Thanksgiving weekend.

[00:40:01.710]
This is right when we started. I called the buddy and I said, Hey, we need to get this deal done. I really don’t want to let this client down. The price is not as good as I wanted it to be, but no, this is the first deal with this bigger client. It was a bigger manufacturer that was doing a trade-in. He said, Okay, let me figure it out. He went and borrowed money from a couple. This is a crazy story. He went and borrowed money from two or three people. Oh, wow. This is This is actually our second deal that we did. I really wanted to come out the gate swinging. The lenders, the biggest deal I had done up until that point, it’s like 70, $80,000. I never played with $400,000. I had no idea what that looked like you’ve been. The lender said, There’s no way we’re going to let you just run off with 400 grand. If you want to do this deal, we need to buy the gear. We’re going to make a separate entity. But because you’re in Ohio and we’re in Miami, we don’t want to have to, if God forbid something happens, fly down to Ohio and fight the case in Ohio.

[00:41:04.190]
We have to make an entity in Miami. We made a separate entity in Miami. The entity in Miami bought all the equipment, and we would have to purchase it each piece off of them, make a PO, SO, and then go out and sell it. That deal, we predicted it would be worth about $500,000. We sold it for 5, 12, and 60 days. I walked away with less than 10% of that upside on that deal. That whole deal, we flew in there Wednesday before Thanksgiving. Monday after Thanksgiving, all the gear is picked up. And again, I had to give away whatever it was, 80%, but I knew that I had a client that I could please to a very high level. And if that meant that I take a small, small cut of it, I’m happy to do that. And I worked my tail end off for 60 days, sold through all that gear. Took a lot of work, and I made very little off of that. But I have a customer that, to this day, we do tons and tons of business with. It’s a small industry. It’s an amazing industry. It’s an industry that helps each other out.

[00:42:05.610]
When you have that reputation, we sold some gear after to a company called Black Hawk in Nashville. It was a big deal a couple of hundred thousand. They had said, We need a reference. So I sent them to somebody else in Nashville, and they said, Okay, I’m sending you the whole wire right now. I said, That’s it. You don’t want to fly down, check it out. This was Right when I started. And they said, No, I called this other company and they told us about you. I realized right away how well… I was doing it because I thought it was the right thing to do. But the industry really repays that trust and taking care of other people. In this industry, if you want to grow quick, besides for offering a great product, if you’re trustworthy and transparent, the industry rewards that so, so, so heavily. It’s such a small industry, and it’s an amazing industry to be in because of that. So it is a cool space to be in. I know you got to wrap up, so let’s go to the other- Yeah.

[00:43:05.040]
No, thank you, though. Those are good stories. Jim in Australia asked about gray import equipment, which I’d never heard of. So hopefully you can explain that. But he said, what is the situation with warranty and service on gray import equipment? Traditionally, you would have been shunned by a local importer. Are we now in a situation where manufacturers are thinking globally about product support?

[00:43:29.640]
As a general rule, manufacturers want more of their products in more areas. What that means for what this person is calling gray products, they would rather have your used product reach a new industry, reach a new region, or reach an emerging market, or reach a market that couldn’t otherwise afford to buy that new and now has it used, then have another of their competitors sell into that market. That’s a general rule. Especially over the last couple of years, you see manufacturers really pushing hard to control that used gear pricing. That is an indication that they want to have more entry-level customers come into their products. They want to have more control of that so that they can offer proper training and ramp up to get their customers really up to snuff so that their product looks good and sounds good and that those fixtures or the video panel looks great when it goes out there. So as a general rule, I don’t think that that is the case that manufacturers don’t want their product in new markets. What they don’t want is they don’t want their product performing poorly in new markets. So they would much rather you reach out and say, Hey, I got this system.

[00:44:42.180]
What training do I need? Let me pay a thousand, $2,000 to get trained on this new wall so that it looks great so that two, three years down the line, it still performs great. To the contrary, actually, a lot of manufacturers like to be able to brag and show off and say, We want to sell the new product, but this product is so good that it can end up in one these emerging markets in a Brazil or in a place in Africa or one of the new Middle Eastern markets, a Dubai or one of these places that’s growing like crazy, you can sell that product there in six years from now, and it still will function well for the next three, four, five years, and we’ll support it. We may not have all the parts for it, but we’ll give training and we’ll give all the materials that people need to get off the ground and running. So I think that is important. Warranty, the reality is warranty is less about dealers and gray product, per se. It’s more liability. So manufacturers don’t want to be liable for old product. That’s anywhere and everywhere. Thankfully, our industry has product that has long shelf life.

[00:45:43.760]
So LA8, for example, from Elacoustic, is still, even though it’s discontinued, it’s still supportive for the next few months. That’s a 10-year-old amplifier, more than a 10-year-old amplifier. So there is a lot of shelf life for these products. The manufacturers will have parts on hand. Jbl and Meyers still have parts on hand for 20-year-old products. It is L Acoustic still have the original foam and paint for 15, 20-year-old products. You shouldn’t have an issue buying spare parts, etc. But definitely something to look into, though, to see if that product is discontinued and what spare parts that manufacturer has. The last thing is there are a couple of companies that offer spare parts on discontinued products, so you can give them a call before you buy that product. I advise if you’re buying something that’s cheaper, like a video wall or LED fixtures, where that price per unit is pretty cheap once it’s six, seven, eight, nine years old, buy spares, buy 15, 20 spares, because it’s going to be way cheaper buying 15, 20 spares now than it will be buying one or two spares directly from the manufacturer in four years from now when they only have 10 of them left in their charging premium.

[00:46:49.050]
So buy spares if you can. It makes me think about some of those little pieces of hardware that you need with an L-acoustics DVDAS system, which still show up a lot in Minneapolis for some reason. It was a popular I’ve worked on several shows now where it’s like, Are we going to have enough of those tiny little bars? We’re going to need 30 or 40 of them. Just get a lot.

[00:47:11.950]
That type of It ties right back around to that whole broker, fly by the steam of your pants type of thing. You don’t just need to know what you’re buying. You need to have somebody who sold that product before. I can tell you, you can’t just buy a a DDoS system with enough rigging to ship it and stack it. That only works for one angle. Dvdos rigging is not modular. You have to put on a DvDos, some of them are, but VDos is not. You have to have separate rigging pins or hinges for every single actual speaker. Just because you have it in a stack doesn’t mean you’re going to like a newer JBL V25, just move it up and move it down. You can adjust those angles without new pins, and you may I’ll be able to get those later. If you do get those later, someone might charge you a premium. Definitely work with somebody who knows what they’re doing when you’re buying and selling this gear because that will cost you a lot more money to fix than it will if you did it right the first time.

[00:48:12.160]
I like that you mentioned a couple of times to reach out and partner with the manufacturer because I’ve realized that, especially when I was starting out and I was a new student and people would say, and I would say things like, How do you align these two products and how do you make these two things work together? And then another teacher at a workshop or something would say, Oh, well, the first step is to contact a manufacturer. I would always be like, What? What do you mean? There’s got to be like, isn’t there a science way to figure this out? Can’t I just use my audio analyzer? I realized later, now being a teacher, now I’m saying that to students, and I realized, Oh, as a beginner or as a student, even though we really are glad that these manufacturers exist because we get to have these products, we see that as this weird love-hate relationship where we want their products, but then we don’t want to ever have to talk to them again to use them. And now I’ve really started to be on the other side where I’m like, no, they’re our partner.

[00:49:11.290]
And if you want to know what the delay time is for the alignment of these two drivers, first contact the manufacturer. They want it to work well. They want their product to sound good and for you to have a good experience. That’s their application. So reach out to them first. But I get a lot of those emails where people are like, hey, how do I make these two things work together? I’m like, The manufacturer wants you to do that well. It’s funny that you’re asking that to me.

[00:49:35.060]
Yes, exactly. That’s 100% true.

[00:49:36.130]
Minda, thank you so much for joining me today on SoundDesign Live. If people want to keep up with what you’re doing, where’s the best place for them to follow what you’re up to?

[00:49:46.780]
Follow us on Instagram, Gears by Marketplace or on LinkedIn. Give us a holler. Anybody in our gear team is ready to help.

[00:49:52.170]
Awesome. Well, that seems like a great place to end it. Thanks, Mindal.

[00:49:56.040]
Thank you, Nathan.