Pawn shops fill a demand for quick and convenient loans for people who don’t want to or don’t have the time, to apply for loans from their banks. The main business of a pawn shop is to offer short-term credit with high-interest rates against pledged goods, but they also buy and re-sell goods from people who want quick cash. Starting a pawnshop requires you to meet all of the stringent requirements for a pawn shop license, including proven experience, a criminal background check, and a credit check.
Learn how to assess the value of goods. This includes electronics, gems, and jewelry, as these are the most pledged items at pawn shops. One of the best ways is to go online to an auction site like eBay and study what people pay for various goods. This will give you a good idea of the general retail value of items at a certain moment in time.
Bear in mind that over the course of time, trends change, so you’ll need to remain up to date with current retail values in order to assess correctly. You can also visit other pawn shops in your area to see how they are pricing items. Apply for an internship or a job at a local pawn shop. This will allow you to learn how professionals assess goods, as well as how they determine what percentage of the assessed value to pay in the event a customer wants to sell an item.
Create a business plan. This is a strategic plan that will guide you in achieving your goals for the business. You can find more details about how to write a plan here, but you will want to include:
Your business concept: The focus here is on describing your business and the market for your products and services. Market research: Market research is critical, as it describes the nature of the market you are entering into. Identify who your major competitors are, who your target market is, and the preferences and needs of your target market.
A marketing plan: This should describe how you plan on addressing the needs of your market, how you will communicate with customers, and how you will advertise your shop. An operations plan: This will describe your operations on a day to day basis. It would include, for example, how you will make loans, how you will acquire items to sell, how you will price items and what interest rate you will charge for loans. A financial plan. This would outline how you will finance your business, what your expected costs are, and projections as to your revenue.
Estimate how much start-up capital you’ll need. Using your financial plan determine your projected annual expenses and gross income. You’ll need to have enough capital to cover both your operating expenses and your customer loans. If you do not, you will need to take out a loan. Operating expenses include licenses, permits, insurance, a location, security system, contracts, employees’ salaries, display cases, accounting software and repair costs of goods you want to resell.