How to Start a Pawn Shop
Begin by Outlining a Business PlanWriting a business plan is always the first step for any kind of business. A business plan helps you outline how you want to proceed and serves as proof to the bank that you know what you’re doing. It also allows you to identify the missing pieces in your initial plan.
Consider the following questions while drafting your first business plan:
What will be your base and ongoing costs?
- A computer system
- An accounting software
- Cash register
- Permits and licenses
- Security systems
- Building costs and rent
Who is your target audience?Pawn shops receive a variety of customers for different reasons. You need to find a way to promote your shop to cater to those who want to buy second hand items, and for those who want loans or to make some money.
How much money will you make?As an aspiring pawn shop owner, you need to consider how much you will charge customers and how you can increase your profit. Depending on your location, this amount will vary. These are only a few questions that you need to think about. Look up more resources on how to draft a proper business plan to get a better idea of how you should prepare to open your pawn shop.
Where do you want to do business?As mentioned above, the location of your pawn shop matters as this will be an approximate measure of how much you can charge, what type of clientele you will receive, and how many clients will be likely to enter your shop. Furthermore, depending on where you settle, it will give an indication of the size of your shop, the cost of rent, and allow you to think about a marketing strategy to advertise to different people.
Form a Legal Business EntityOnce you have your basic steps covered, you need to establish a legal entity. You can choose to be the sole proprietorship, or be in a partnership, LLC, or choose to be a corporation. Each is different and has its own advantages and disadvantages. This will influence your costs and the way you run your business.
Get the Necessary Licenses and PermitsYou need to think about the licenses and permits you need as a seller. Some states require you to have a secondhand dealer license. These are not only necessary for legal reasons, but it will also help gain the trust of your clientele as you are in charge of determining the value of their items.
PawnMaster has several built-in anti-theft features. Reduce or eliminate employee and customer theft with text messenger manager alerts, serial numbers, inventory tracking and employee history reporting. We also integrate with Eyeson Digital, so you can digitally capture transaction information.
|Cash Flow Optimization|
How Will You Finance Your Business?Start-up costs are the largest investment to get your business rolling. You need to find financing and start to organize the way you will allocate your costs. This involves opening a business bank account and obtaining a business credit card. You’ll be able to manage your personal finances separate from your pawn shop business.
Look for Business InsuranceA business insurance will protect your company financially. The most common type of insurance is the General Liability Insurance which protects you and the business from liability in case a customer gets injured on your property. You should also look into Worker’s Compensation Insurance if you’re thinking of hiring employees. This will cover their medical expenses and their wage if they ever get injured while working.
It’s Time to Hire EmployeesWhile new pawn shops are generally smaller and run by one person, you want to consider hiring more employees once you become a bigger store with larger clientele. This will require additional costs to your business such as employee salary and insurance.
Grow Your PresenceOnce you’ve established your pawn shop physically, it’s time to build your presence online. Use social media to your advantage to market to different audiences. You will be able to pull in new customers while keeping regular customers updated on your hours, services and inventory.
How Pawn Shops Make Money
Pawn Shops make an income in a variety of ways – from Personal loans, to buying and reselling items.. Making sure you have multiple services or means of revenue is important for the success of your business.