Tips For Opening and Running a Pawn Shop
Are you thinking about opening up a pawn shop business? If you are a “hands-on” individual who enjoys talking to customers, chances are you'll love this line of work. It gives you the opportunity to network with your customers while looking at some unique items. When it's done right, running a pawn shop can be a financially rewarding venture. On the other hand, however, it can also create an endless drain where your money contains to spiral downwards.
Getting a Pawn License
To legally operate a pawn shop in the U.S., you must have an active pawn broker license. Check with the secretary of state's office for the area where you intend on opening a pawn shop. Typically, you'll need to fill out an application and pay a fee ranging from $1,000-$2,000. This may seem like a hefty application fee, but it's quickly returned once you have a successful pawn shop up and running. A worker with the secretary of state's office should point you in the right direction towards obtaining a pawn license.
In addition to a pawn license, you may also need a business license for your county. The good news is that business licenses are much cheaper than the actual pawn license. Depending on where you live, you should be able to acquire one for around $20-$50 bucks. Remember, though, you'll need to get it renewed once a year in order for it to remain active. Operating a pawn shop without the necessary licenses places you at risk for getting shut down and/or fined.
How Pawn Shops Operate
Pawn shops earn money through several different outlets. When people come in and sell their goods to a pawn shop, the owner will then place the goods back on sale for a higher price. The difference, or margin, is essentially profit made from the buying and selling of the product. As a pawn shop owner, you'll have to learn the ins and outs of product pricing. If you purchase a product from a customer at a high price, you might actually lose money on the transaction; therefore, it's essential that you know exactly how much a product is worth before you buy it from a customer.
If you still aren't comfortable pricing items, you can always seek guidance from appraisers and jewelry professionals. Under no circumstances should you purchase a product if you aren't 100% sure of its authenticity.
Another way pawn shops earn money is through loans. A customer may visit a pawn shop to get a short-time loan to pay off a bill or some other expense. In addition for the loan, the customer will give the pawn shop a product to use as collateral. This may include things like watches, necklaces, rings, electronics or any other valuable item. If the customer fails to bring their item back within the given time period, the pawn shop keeps the product as collateral.