Be Your Own Boss

Preface

The following paragraphs that you are about to read are from my personal experience of starting and operating a pawnshop. I have tried to cover the most important areas. The rest of the information you will find out just by being in business. Everyday you will learn something new in your venture-good and bad. Even when I have experienced something that was bad, I took a step back and asked myself- did I learn anything from this event. A person can make a good living by owning a pawnshop if it is operated properly. I hope you will find this information helpful.

History

Pawnshops were the earliest forms of lending institutions and dates back to ancient times. The pawnbroker came with the first settlers to America. At the time this was the main source of consumer credit and everyone had at least one item that was worth something for a short term loan of cash. Pawnshops were not just for the poor either. People from all walks of life have used a pawnshop in one way or another. Some were borrowers and some were shoppers looking for a good deal.

This type of business served a need for the person who was stuck between paydays and just wanted a short term loan. You cannot go to a bank and take out a 7 day loan for gas to get back and forth to work. It just is not economical to do all the paper work for a $100.00 loan for 7 days. The current state of the economy makes it just the right time to open and own your own Pawnshop. People who took out an adjustable rate mortgage for their homes are now being hit with higher interest rates. This is increasing their monthly payment that came as a suprise and they were not prepared for it. Then you have the cost of putting fuel in your vehicle or to heat your home.

Laws

First you must check your local laws for a business like this. Everyplace is different and has different rules as how you can conduct this type of business and even what you can name it. Some localities detest the name of Pawnshop and want it only to be called a Buy-Sell-Trade Shop instead.

In my area I just filled out a DBA (Doing Business As) with the county court house. This was, of course after I had talked to the local Chief of Police about what kind of permits I needed to open a Pawnshop. He told me that our area really did not have any type of permits required, (the state has requirements-more on that later) but that he was more interested in what items I bought from my customers. He wanted a weekly report faxed on Mondays of what I had bought the previous week. I was very happy to comply with this request as we both had the same goal-to weed out the thieves from the good hard working people in our area.

Another fella in our town started buying and selling without contacting the Police and got into a whole world of trouble. He was not keeping paper work and had some stolen items in his possession. If you show the police you want to work with them it will save you a lot of headache and will come back to you tenfold when you need them (and at sometime you are going to need them). This is also a good way to deter criminals from coming to your area if they realized that you work closely with the local police.

State Laws

Make sure you check with your state to find out what licenses you will need to get from them. Each state may have different laws regarding pawnshops. You probably need a sales tax license and if you plan on selling guns you will defiantly need a federal firearms license. You can apply to get a firearms license in the following link:

Department of the Treasury
Bureau of Alcohol Tobacco and Firearms
P.O. Box 2994
Atlanta GA 30301-2994

Bureau of Alcohol Tobacco and Firearms

Right Size Building

I know that you are going to freak out with this next statement.

Location does not always matter. What I mean by this is-if you are meeting a need of the community you do not always need to be right in the high rent district. It is obvious that you cannot be 50 miles out in the boonies either-unless you have something to hide. People are just not going to drive way out of the way to shop your store because their time is worth something too.

If you are operating a honest and fair business you do not need to pay top dollar for a location and you are only going to make as much money as the market can handle. The people will find you if you are a short distance from the main drag and the operating costs will be lower. Besides if you are renting and you find out the location is not working out for you - you can just move to a new location. Just start out with at least 600 sq feet and find a storage place you can rent for the really big items people have taken loans out on. The 600sq feet is for display of items you have for sale.

Inventory

You must test everything that comes in and the same goes for everything that goes out. Set yourself up with a work area just for testing items. You do not want to get stuck with 16 DVD players and only a 1/3 of them work.

The same goes for selling items to customers-show them they work before they purchase-it makes them more comfortable with spending their hard earned dollar on a used item. Only buy good quality merchandise and maybe add a little elbow grease to clean it up before you sell it. Presentation of a product is everything and you will command a much higher profit if it looks like you care.

Some items that you might need to start your test area are Television, Air Compressor, Stereo, Battery Tester, just to name a few. I even had a washer and dryer hook up and allowed potential customers to bring in their dirty laundry. If your customers can see it work you will close the sale at least 99% of the time.

I also noticed if you let the customer have hands on experience they will be more likely to buy. When I first started out I kept a lot of items in display cases. When I removed some of the less likely to walk away items to an area the customer could put in their hand-the little sales soared. There is just something about holding that video game in your hand and getting the feel of it.

Something else you should be aware of is you do not always have to buy your inventory from your walk ins. You can scour garage sales or newspapers for great deals and resell them. It is just easier to have the customers bring you items-saves a lot of time and gas.

Buying & Selling

I buy and sell anything that is legal. If I can afford it I will even buy items that are no longer hot in the market place. If I can afford to store this item in about 5 to 7 years this item will be hot again. Some items take a little longer to become valuable again, but it will happen and may even bring in more that it originally sold for when new. Dishes are a big hit with the ladies. The men seem to like Remote Control anything. Take a look at one of my sites that have my items for sale-you will see that the possibilities are endless.

The above sites are just a couple of my outlets to turn over my inventory. There are going to be times that you are in possession of items that do not sell in your area. You will need an outlet to move this type of inventory and recoup some cash to buy other items that do sell in your locale. I use many outlets including but not limited to:

This next site is awesome-I recommend it highly. Bonanzle

Value Of Items

How do you figure what an item is worth? Well, I read every ad that comes in the newspaper-I watch Ebay sales-I watch what is being advertised on local websites-I really listen to what the teenagers think is the latest gotta have item and then I research the web for it-my ears and eyes are always open even when I sleep.

The following is an example:

A customer brings in the latest model widget. I know that this sells for retail at $119.99-but this widget is 2 months old. I divide the retail by 4 and then consider the condition. If the item is in good shape I will offer anywhere from $25-30.00.

Repeat Business

Let me start by saying that you must like people to be in this business. You are going to get a lot of different personalities walking through your front door. You are going to hear all kinds of stories. You must remain emotionless but polite. Remember some people have walked in your door because of a unexpected tragedy and they are in need of a little monetary help to get them through. Do not judge and do not get involved. Do not let your emotions get in the way of your judgment. Do not take advantage of the situation and be fair to all parties involved. If you treat your customers with fairness you will get repeat business from them and they will send all of their friends to you also.

Summary

I have tried to cover the most important areas of owning your own Pawnshop. As in any business you will learn things I have not even written in this article. I will tell you that I have had a lot of fun being my own boss and also meeting a need of the community. Good Luck and maybe you will be competing with me in my hometown.