How to run a pawn shop? Definitely a tricky question. If you’re just getting into the pawn shop business and wondering about how to make it, read on! We’ll provide you with pointers for buying and selling used.
How to start a pawn shop
Before you can run a pawn shop, you need to get your business off the ground. There will be a lot of effort at this step of the journey, but it’s worth it. Here’s what you need to do:
- Get the right training: To run a pawn shop, you’ll need to know how to assess the value of all manner of goods. One way to do this is to spend time on a site like eBay, looking at the sell prices of electronics, jewelry, appliances, and so on. Over time, you can develop the knowledge you’ll need. If possible, a better way to get the right experience is to take an internship at a local pawn shop.
- Make a business plan: This doesn’t just go for starting a pawn shop. Before you start any business, you’ll want a well-thought out, five-year business plan. This includes having a business concept, conducting market research, creating a marketing plan, an operations plan, and a financial plan. Making a business plan is an article unto itself!
Next you will, unfortunately, need to deal with red tape. Starting a business, especially a pawn shop, means jumping through a number of hoops with the federal and state government.
Whew! That sure took a while. Now then, let’s talk about how to run a pawn shop.
How to run a pawn shop
The pawn shop will live or die based on your appraisal abilities. Being able to buy and sell for good prices is the chief skill of a pawn shop owner, which is why having the skills is so important.
After that, it’s business. You will make money from pawn loans and buys.
What is a pawn loan? Basically, it’s a quick and easy way for customers to borrow money from you, and it’s one of your biggest moneymakers. They bring in collateral, and you lend them money.
You will want to lend about 40-60% of the resale value of the item. That percentage will hold firm no matter what kind of item you’re dealing with.
Most of these items will be picked up again at some point, but in most cases you can expect to hold an item for at least a few months. You’ll make money on interest for as long as you hold the item, and if the customer defaults on the loan, you can resell the item and make money that way. A 15-20% markup is standard when reselling.
Buying items you’ll probably pay about 60% of the resale value, and hold it for several months. This will probably make you less money than your loans, but as a pawn shop, it’s your bread and butter.
If your pawn shop is going to thrive, you’ll need to attract customers. Some pawn shops thrive off the yellow pages. Some are making good money reselling their products online to reach a larger audience.
We don’t know what’s going to work for you when it comes to enticing people to call. You’ll want to experiment with search engine optimization, radio, TV, and print ads. Once you find what works for you, commit to it.
But once people are calling or coming into your shop, that’s where customer service is crucial. Phone etiquette is your friend. Pawn shops aren’t as impersonal as other business. People will be making deals with you, not just picking an item off the shelf.
Good customer service will make or break your business, so make sure it’s easy and comfortable to buy from you.
And there you have it! How to run a successful pawn shop. Did you find this helpful? Please let us know in the comments.