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Posted: 9/11/2010 6:31:20 AM EDT
I am seriously investigating opening a pawnshop. Yes, I know it takes a buttload of money. Yes, I know it takes a long ass time to build your loan book to the point where you're bringing in enough money to pay the bills. Yes, I know you deal with a constant parade of hard-luck stories bearing junk. Yada, yada, yada, I've been hanging out at pawnshops for 30 years and have dreamed of owning one for about 20 years –– long before that stupid TV show came along. I know guns, tools, guitars, electronics, audio, knives and general merchandise. I'm learning about gold and diamonds.

Assume I already understand the downsides and challenges. Tell me what I don't know:

What pawn software program do you use? Why?
What's your percentage mix between retail sales versus pawn charge income?
What's your buy/pawn percentage (do you spend 50 percent as much buying as loaning? 80 percent? 200 percent?)
What's your default rate?
Any tips to reduce defaults?
Any idea what the average length of loan is (how long before its picked up)?
What security measures do I need to take (beyond a good alarm system, locks, safe, etc.)
What kinds of merchandise do you refuse to deal with (car audio)
What about insurance? Do you carry it on contents?
How do you attract new customers/market your operation?
Any tips/secrets to storage?
Any great ideas for retail display
For those of you who have started your own shop, what were the first months like? How quickly did the business/loan book grow?

Tell me what you wish someone had told you. Feel free to do it by IM or e-mail if you prefer.
Link Posted: 9/11/2010 6:36:59 AM EDT
Payout value for products is generally 1/5 th.
Link Posted: 9/11/2010 6:38:23 AM EDT
[Last Edit: 9/11/2010 6:39:28 AM EDT by N1Rampage]
"I'll give you like 5 bucks for it.."

Make sure your prices are 20% above retail new and if anyone wants to negotiate, kick them out!
Link Posted: 9/11/2010 6:41:27 AM EDT
Tag for interest.

I've always wanted to own a pawnshop as well.

Of course I already own my own retail shop now

Speed
Link Posted: 9/11/2010 6:43:42 AM EDT
Don't know much about pawn shops but I'll give you $5 for your idea. Sorry, that's as high as I can go. I have overhead, then it's going to sit for months..........
Link Posted: 9/11/2010 6:19:37 PM EDT
Open a Pawnshop and deal only in guns. Or a specialty pawn that deals in one type of item... Tools, Jewelry, music Instruments.

One of our best local gunshops is a pawnshop and he only loans on guns and does a booming business and doesn't have a shop packed to the gills with worthless junk. He doesn't have to deal with Meth-Heads or the rest of the normal ghetto white trash need money right now crowd...

Most of the regular pawnshops are packed floor to ceiling with Junk they will never sell, stacks of X-boxes hundreds of skill saws, car stereos, rusty handtools, craptastic ancient stereo equipment etc etc etc ......
Link Posted: 9/11/2010 6:21:41 PM EDT
Make sure you get a lot of buddies you can ask to "come down and take a look at it" before making a deal.
Link Posted: 9/11/2010 6:32:20 PM EDT
I am not an expert in this area, but I have a friend who can come here and tell us everything we need to know...
Link Posted: 9/11/2010 6:33:20 PM EDT
Originally Posted By salsa:
I am not an expert in this area, but I have a friend who can come here and tell us everything we need to know...


Link Posted: 9/11/2010 6:45:25 PM EDT
I tell you one thing . When a woman comes in and wants 2000 for a piece of junk pin and you offer her 15000. you then know you are not a real pawn broker and you go out back and eat a barrel Stupid show
Link Posted: 9/11/2010 7:09:05 PM EDT
I am pretty good friends with the local shops, so I can answer a lot of these for you.

What pawn software program do you use? Why?
-I know a couple of the local stores use CompuPawn. Its not a cheap program, but makes running the shop a lot easier (managing tickets, interest, etc)

What's your percentage mix between retail sales versus pawn charge income?
-I believe the majority of the money is brought in through actual pawns, but there is still a significant amount of income achieved through sales.

What's your buy/pawn percentage (do you spend 50 percent as much buying as loaning? 80 percent? 200 percent?)
-I know they give 25% of what an item typically sells for new. I know one store uses completed sales on eBay as a gauge for certain items, and pays out accordingly. They will give slightly more to "buy" and item versus pawning, but it isn't much.

What's your default rate?
-No idea on that, but I would guess around 40% or so.

Any tips to reduce defaults?
-Yes, keep a good log of your customers and their pawn history. CompuPawn will track the pawn history, and will give information on whether the pawn was paid in full, late, in default, etc. If a customer has a history of defaulting, then it will be up to you whether you continue accepting items from them.

Any idea what the average length of loan is (how long before its picked up)?
-No idea, but I would guess at minimum a couple of weeks.

What security measures do I need to take (beyond a good alarm system, locks, safe, etc.)
-You've covered the high points, but most of the shops have some sort of "panic button" that is easily accessed. I can tell you that a good CCTV/camera system is paramount, especially one with a digital recorder.

What kinds of merchandise do you refuse to deal with (car audio)
-Most refuse any car audio that isn't installed and hooked up. They also refuse TV's over 5 years old, but will make exceptions on flat screens. I know some of them refuse car stereo all together, simply because they can buy new equipment wholesale for dirt cheap. There's a huge market on car audio, so there's no reason to try and sale other people's used stuff when you can make a huge profit on new equipment.

What about insurance? Do you carry it on contents?
-Unsure about this one.

How do you attract new customers/market your operation?
-Advertising helps, but I think the biggest point is to diversify your merchandise. I know a few stores deal only in pawned items, but a few also stock new stuff to attract shoppers. For example, if you have an FFL and a decent assortment of guns, it never hurts to stock ammo, scopes, etc. Same applies with car audio, tools, and other equipment. Also, a big help is to make the store attractive to all customers, not just folks pawning their stuff. Keep the place clean and organized, and have a friendly staff.

Any tips/secrets to storage?
-Yes, expect your storage area to be as big (if not bigger) than your store. Also, given the amount of pawned outdoor equipment I see (lawn mowers, tillers, etc), it wouldn't hurt to have a covered area to keep the stuff out of the rain.

Any great ideas for retail display
-Shelves, shelves, and more shelves.

Tell me what you wish someone had told you.
-As a customer who has spent several thousand dollars ($5-8k) in pawn shops this year alone, here is my #1 recommendation: PRICE EVERYTHING IN THE STORE!! It is very frustrating to look through rows and rows of items, and have to ask "how much is this?" every time you find an item you are interested in.

Link Posted: 9/11/2010 7:36:55 PM EDT
Link Posted: 9/11/2010 7:40:44 PM EDT
Link Posted: 9/11/2010 8:41:08 PM EDT
This is from 7 years experience running a shop 10 years ago in OK for someone else, so take it for what it is worth:

What pawn software program do you use? Why?

We had a cheap pawn program. It would not be worth consideration today.

What's your percentage mix between retail sales versus pawn charge income?

Probably 20/80. We worked really hard at keeping reliable customers. We had bad ones too (no way to prevent this), but we bent over backwards to ensure people could keep their stuff rather than us sell it.

What's your buy/pawn percentage (do you spend 50 percent as much buying as loaning? 80 percent? 200 percent?)

We usually loaned about 50% of what we expected to be able to sell the item for, in case we ended up with it. Sometimes a little more for good customers, but that tended to be a bad decision. Purchase we would give closer to 60%, as long as it was a fast moving item. We looked at it this way, money loaned brought us 240% APR (set by the state), which is doubling your money every 5 months. The required time to keep something in pawn without an interest payment was 60 days, so that gave us 3 months to sell the item in order to maintain our rate of return.

What's your default rate?

We ended up with about a 20% default rate.

Any tips to reduce defaults?

As long as you get good merchandise you can turn over in around 3 months, defaults are not a problem. In order to reduce defaults, we were very explicit with our default policies and let our customers know that if they contacted us before the due date for an extension, we would go an extra month for the (at the same interest rate). There were occasions we held merchandise for as much as a year without an interest payment, but that was rare and I personally did not care for the practice. I am not found of having someone pay $340 to pick up an item I loaned them $100 on. That is one of the problems of running a shop for someone else.

Any idea what the average length of loan is (how long before its picked up)?

In OK, term of loan is 30 days with another 30 day grace period. The rate is flat for the first 30 days, then prorated per day. So, for a $100 loan, any time within the first month it is $120 to pick it up. Each day after the first 30 is $0.67 per day. The rate is 240% APR for loans under $150. After $150, the APR goes down fast.
What security measures do I need to take (beyond a good alarm system, locks, safe, etc.)

We had a handgun safe and a jewellery safe. We kept money in the jewellery safe as well. Bars for windows and doors. If someone can get in the building and rob you, they will.

What kinds of merchandise do you refuse to deal with (car audio)

Car Audio is definitely one. I would avoid anything you cannot readily test for function. You need to be sure you have a good diamond tester and gold/silver testing chemicals.

What about insurance? Do you carry it on contents?

No.

How do you attract new customers/market your operation?

We advertised in the newspaper and Radio, but things have changed since then.

Any tips/secrets to storage?

Have a lot of shelving and a system for locating something within a 2 ft cube. We had each layer of shelf label alphabetically and then each 2 ft section of shelf labeled numerically. Then we wrote the location of the merchandise on the pawn ticket. You must be meticulous about this or merchandise will get lost. Also, have certain layers of shelving for specific items (i.e. tool boxes on the floor, first shelf TVs, second shelf automotive tools, etc.)

Any great ideas for retail display

This is all up to your budget. For firearms and jewellery you need enclosed counters and a way to lock them. You need a set pattern to where you display like items. Clean and well lit will always get you more retail customers (and better quality customers) than dirty and dark. No surprises here.

For those of you who have started your own shop, what were the first months like? How quickly did the business/loan book grow?

When my dad started his shop, it took about a year before interest income started paying the bills (i.e. building, utilities, payroll). Steady growth was seen for 5 years, then things leveled out with normal ups and downs, and retail business growth after that. He focused heavily on retail with sporting goods, tools, and jewellery. Guns were his best selling merchandise, followed closely by jewellery and tools a distant third. Ammo, clothing, etc after that.

Tell me what you wish someone had told you. Feel free to do it by IM or e-mail if you prefer.

The best advice I every got, and the hardest to stand by, is when someone is across the counter from you, it is always a business transaction. It cannot be done on an emotional level, because 90% of the time, you will get screwed. By the people you KNOW won't screw you. It will cost you friendships and family relationships.

Also, go with your instincts. They will lead you wrong some at first, but will get better with time.

Last, if you don't know what something is worth, don't be afraid to research it with the customer standing there, but if you don't know if it works or not, don't take it.

If this is the info you are looking for, and if you have more questions, feel free to IM me. I am in NW AR these days, and my pawn knowledge if mainly from OK, but I'll help any way I can.
Link Posted: 9/12/2010 2:12:52 PM EDT
[Last Edit: 9/12/2010 2:17:15 PM EDT by Bladeswitcher]
Originally Posted By AuburnPhoenix:
This is from 7 years experience running a shop 10 years ago in OK for someone else, so take it for what it is worth: . . .

What's your buy/pawn percentage (do you spend 50 percent as much buying as loaning? 80 percent? 200 percent?)

We usually loaned about 50% of what we expected to be able to sell the item for, in case we ended up with it. Sometimes a little more for good customers, but that tended to be a bad decision. Purchase we would give closer to 60%, as long as it was a fast moving item. We looked at it this way, money loaned brought us 240% APR (set by the state), which is doubling your money every 5 months. The required time to keep something in pawn without an interest payment was 60 days, so that gave us 3 months to sell the item in order to maintain our rate of return.


Originally Posted By Stokes:
The inside line on a shop of a friend of mines is like this:

What's your buy/pawn percentage (do you spend 50 percent as much buying as loaning? 80 percent? 200 percent?)
Buying the merchandise will generally net you 10-15% more than pawning your merchandise..




I guess my question wasn't clear. I was not asking how much you allow on a buy versus a pawn. This is more of a cash flow anticipation question. Say you loaned $5,000 in X number of days. About how much would you expect to spend buying merchandise outright within the same time period?
Link Posted: 9/12/2010 2:16:41 PM EDT
Thanks to the guys who had first-hand information to offer.


Oh, and all the Pawn Stars-inspired jokes were funny as hell . . . no, really . . . you guys are truly clever. You should all quit your day jobs and become comedians. You'll make a killing.
Link Posted: 9/12/2010 3:43:15 PM EDT
Link Posted: 9/12/2010 3:51:02 PM EDT
Originally Posted By TEXASROOTERSBROTHER:
I tell you one thing . When a woman comes in and wants 2000 for a piece of junk pin and you offer her 15000. you then know you are not a real pawn broker and you go out back and eat a barrel Stupid show
He only did that because it was on TV...off camera? then its 200 for a 2500 item.

Link Posted: 9/12/2010 4:12:44 PM EDT

Originally Posted By tangeant:
Open a Pawnshop and deal only in guns. Or a specialty pawn that deals in one type of item... Tools, Jewelry, music Instruments.

One of our best local gunshops is a pawnshop and he only loans on guns and does a booming business and doesn't have a shop packed to the gills with worthless junk. He doesn't have to deal with Meth-Heads or the rest of the normal ghetto white trash need money right now crowd...

Most of the regular pawnshops are packed floor to ceiling with Junk they will never sell, stacks of X-boxes hundreds of skill saws, car stereos, rusty handtools, craptastic ancient stereo equipment etc etc etc ......
One of my favorite shops.

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