How to Run a Pawn Shop

A well-run pawnshop can generate good income.

A well-run pawnshop stands an excellent chance of making a profit. For this reason, it is a very attractive business to start. Pawnshops were started for the purpose of providing short-term loans to people who were stuck between pay periods. It takes care and organization to properly run a shop, but if done correctly, the payoff will be well worth the effort.

Things You'll Need

• Licenses (depending on state and type of merchandise sold)

Instructions

1. Research your state and local laws regarding a pawnshop. You want to ensure you are adhering to the law to prevent trouble with the authorities. Unfortunately, pawnshops are oftentimes unfairly associated with stolen goods, so it is in your best interests to contact the police. They may request a weekly or monthly inventory listing. Complying with this reasonable request will go a long way toward demonstrating to the police that your business is legitimate.

2. Obtain the proper permits. You do not always need one to run a pawn shop, but you may need one depending on your merchandise. The best example is firearms. Many pawnshops have them, but you cannot simply load a case with guns and start selling them. You need to obtain a license from the Department of Treasury and follow the proper waiting period and paperwork procedures.

3. Rent or buy a location for your pawnshop. You will want at least 600 square feet to display your merchandise and ensure you are in an accessible area. An isolated location is considerably less attractive than one in a thriving business hub.

4. Gather inventory. You can do this several ways. Search your own home for items. Check with friends and family to see what they can give (or at least sell cheaply). Then scour garage sales, eBay and other online sites for items at reduced prices.

5. Test your inventory. You do not want to acquire dozens of items only to discover few actually work. If you develop a reputation for selling shoddy merchandise, your business will suffer. Let customers test the products (except firearms) before they buy. If they are confident the merchandise works, they will be more likely to buy and your pawnshop will see more profits.

6. Price your items properly. Make sure you keep up-to-date on the latest products and their selling prices. Offer to buy at around 25 percent of that price. For example, a customer brings you an item in good condition you know is worth $200. Divide by four, which is $50. That is the price you should offer the customer.

7. Build repeat business. Treat your customers fairly and respectfully. A person pawning personal possessions is not likely in a good frame of mind. Treat him with compassion and do not try to gouge him on price. By the same token, if you do not sell shoddy, broken merchandise, customers will know you are a legitimate business and will likely patronize you again.

References

• How to Start Your Own Pawnshop
• Starting a Pawnshop Business