Pawn Shop Business Idea
If you enjoy wheeling and dealing, you might be interested in how to start a pawn shop. The primary operation of a pawn shop involves offering short-term loans to customers in exchange for a security interest in their property.
Typically, the item is held at the pawn shop, and the customer is able to retrieve it only after paying back the loan and fees. If a pawned item is not retrieved within a certain period of time, it becomes the property of the pawn shop. Sometimes, a customer may be interested in simply selling an item.
The other side of a pawn shop involves customers who come to the store looking for bargains. They want to purchase items at a discount compared to buying a new item in a traditional retail store. A pawn shop profits by reselling items to customers in addition to the fees charged on pawned items.
How To Start A Pawn Shop – Getting Started
When deciding how to start a pawn shop, consider the size and location of your new store. Make sure that you have enough space to display merchandise and to securely store pawned items. Choose a location that has plenty of traffic, but doesn’t have huge rent payments.
While you may not want to locate in the worst part of town, you probably shouldn’t locate in an upscale area either. Choose a location that is safe enough for customers to feel secure, but will be close to areas where people have the need to pawn merchandise.
In addition to a store, you’ll need a security system. A large safe will be necessary to secure jewelry, and you’ll need a locked gun room if you decide to accept pawned firearms. Display cases will be required for merchandise that’s for sale, and you will also need a selection of cash registers and computer equipment to track your business operations. Sales contracts, pawn forms, and other office supplies will also be needed.
In addition to basic business management and accounting skills, you will need to know how to evaluate the value of items when learning how to start a pawn shop. Customers will bring in any item that you can imagine from power tools to musical equipment. If you don’t have a good idea of each item’s value, you will quickly find your new business is losing money.
You must be able to quickly estimate what you will be able to resell an item for in the local market, and the acceptable loan value to offer whether a person is interested in pawning or selling. Organizational skills will also be important as items will have to be ticketed, stored, and retrieved during the pawning process. You will be responsible if anything is lost or stolen when the customer attempts to retrieve their item.
Licensing And Administration
When deciding how to start a pawn shop, there will be different types of licenses that are required. In any US location, you’ll be required to get a business license at a very minimum. If you choose to accept pawned firearms, you’ll need a Federal firearm dealer’s license.
Most other communities will require you to acquire licenses to loan money and may have additional regulations for short-term loans. In addition to licensing, make sure that you cover your business’s exposure to lawsuits by purchasing general liability and workman’s compensation insurance policies.
A good location will be critical to finding customers. Once word gets out about your good deals or interesting merchandise, people that prefer to use pawn shops will begin to come in. In addition to word of mouth advertising, a few radio commercials or print ads in the local papers will help bring in customers.
Once your pawn shop is a success, think about expanding. If you’re good at estimating the value of items, you could add an appraisal service. Other financial services could include car title loans or payday loans. Another expansion idea could be to open a traditional store that sells new merchandise.