Shows on TV make running a pawn shop look exciting, and if you do it right it can be. But if you think you can go into it without preparation and succeed. . . you have a lesson coming.
Opening a pawn shop is like opening any other business, you need to take the right steps. So if you want to know how to start a pawn shop, keep reading.
We’re giving you a quick guide on what you need to know.
How to Start A Pawn Shop: Be Realistic
Running a pawn shop is like running an elaborate second-hand store. Yes, you can pawn things and trade for cash, but that’s not the bulk of your transactions.
If you knew that only, say 20%, of your business, would be pawning, would you still do it?
When you do pawn, you’re a money lender: a privatized bank. Are you up for that responsibility? There are legal rules you have to follow as a money lender.
We’re not saying it’s not worth it or the pro’s don’t outweigh the cons, but too many people don’t know what they’re getting into.
Figure Out Regulations
As a money lender, you’re held accountable by federal, state, and local regulations. Each level has it’s own hoops to jump through, though you may be able to get away with a local-license or state-licensed only shop.
Talk to an accountant or a lawyer to get the legal paperwork started and filed away. You don’t want to open your business just to get an order to cease and desist!
Front the Capital
Before you spend your time filling your store with stuff, make sure you have money you can lend to clients. Part of your business is a mini-bank and you need to be able to fill the drawers.
You’ll need to have a good cushion, in case you’re not turning a profit on loan repayments or getting customers in for the first few months.
Once you’ve got an egg that you can lend in and out of, that’s when you can start looking for stuff. Start with things that interest you and things you think people need.
Visit a local thrift store, what are the things they constantly sell out of or never hang on to? Put those items in your store.
Pick Your Location
In the pawn shop business, there’s a rule of eight. Your customers will come from an eight-mile radius around you, the majority of the time.
Make sure you find space in an area that has an eight-mile circle of potential customers around it.
With these steps under your belt, congratulations! You’re well on your way to opening a pawnshop. You can give and get items, loans, and build a loyal customer base.
Make sure you do your due diligence learning how to start a pawn shop and fill out the right legal paperwork, have a big bank balance, and are up for the challenge before you open your doors.
You can do this! Check out other articles about how to start, maintain, and succeed at your business on our blog. See you there!