As I travel across this country touring pawnshops from coast to coast, the most common challenge facing owners is rising inventory levels.  Their monthly sales are simply not keeping up with the amount of “pulls”, also known as inventory added through forfeited loans and purchases.  The conversation usually begins like this:

“How do I correct this long-term?  Because if I don’t correct it, I can’t loan competitively which means I can’t stay in business.”

I usually respond with questions of my own. 

“How are you paying your employees? Are they eligible for sales bonuses each month?”

Answers vary, but typically it’s a convoluted formula with little to no impact on their monthly wage – usually less than 5% of his/her check will depend on sales performance.  Well, you get what you pay for.  You want more sales each month?  Pay on sales only.  Want some knockout sales performances?  Pay huge bonuses for huge sales production.  Absolute fact – You want higher sales, pay huge sales commissions!

As my friend John Thedford of Smart Financial likes to say, “Keep your compensation plan simple. Make sure the employee can always compute their commission check each week.”  Powerful words and he’s right.  For the last 11 years, I paid anywhere from 3-6% commission on all sales (including the full value of layaways) plus a monthly bonus opportunity from $100-$500.  Simple math for employees (managers included), full-time focus on sales.    And, once an employee begins to earn a regular diet of high commissions and bonuses it becomes an expected part of monthly income – they will do whatever is necessary to continue earning it – thus, continued excellent performance.

The idea here is to align your company’s long-term goals with your employees’ short-term needs.  You want more sales and lower inventory levels, they want a bigger check.  Historically, if you take an examination of your store’s financial statements, your “killer” months almost always implied “killer” retail sales.  Average months, average retail sales.  Poor months, poor retail sales.  The other revenue factors rarely vary month to month so why not focus your time, energy and money on a factor you can control – sales.