Do you want to start a pawn shop from scratch? Or you need a sample pawn shop business plan template? If YES, then i advice you read on.
Are you looking for a recession proof business? Then look no further, you have got one right here. Yes, you can become a pawn broker and start a pawn shop. This is one of the oldest businesses in the world and it doesn’t look like it’s about to stop paying people’s bills.
A pawn broker offers a kind of loan to people and collects their personal items as security for the loan. Let’s face it, almost 80% of people in the world love to acquire stuff; I mean that’s why we work so hard anyway. To feed ourselves and our family, live in a beautiful house, drive the best cars, wear the best clothes, accessorize with some gold and diamonds, the list is endless.
Point is, we all love the good stuff but sometimes when the chips are down and things are not looking too good, we need money to do the important stuffs. Yet, we don’t want to be tied to a bank loan just because of $500. The banks wouldn’t even give you a loan just so you could travel to see your parents during Christmas.
Then, you think of your expensive gold wristwatch and the pawnbroker down on 5th avenue and off you go; you offer your wristwatch as collateral for the loan, agree on the interest rate and period of payment and off you go, $500 in hand.
However, if you fail to stick to the repayment agreement, just say goodbye to your wristwatch because the pawnbroker has a right to sell it off to recover his funds. But you are still in luck though because unlike the banks and other financial institutions, your loan defaulting stunts would not get to the ears of the credit bureau or appear in your credit report.
Borrowing from pawn brokers is an easy way of getting short, quick loans and that is why a lot of people have embraced it. This is a very good business you should consider starting a pawn shop especially if you live in Nigeria where this kind of business is not so popular yet highly needed. Before you starting a pawn shop, you need to understand how the business works. This is how it works:
How the Pawn Business Works
Potential clients would come to you with some of their personal possessions which they wish to pawn, these items may be jewelry, electronics and other personal items with value and then you as the broker would assess the value of the items being offered to determine the value, originality and liquidity-ability to be able to easily sell it off to recover your money.
You would also verify the ownership of the item by asking for proof of ownership and identification; this is necessary to protect yourself from getting stolen items. You may also be required to supply law enforcement agents with regular details of recently pawned items in case of stolen goods.
As a pawnbroker, you must learn the art of identification of precious stones and gems. If a client brings diamonds to you, you must be able to recognize and ascertain that they are original or you may lose your funds.
You would also need to know how to determine the value of loans to give out based on the items being pawned. The first factor you would take into consideration is the resale value of the pawned item. You must be able to decide on how much you can conveniently sell it off if need be. You can easily determine resale value of items by checking internet auction sites to see what people pay for different items.
The next factor to take into consideration is the demand level of the item. Items that are generally in high demand like laptops and mobile phones can be sold easily may be more attractive to pawnbrokers than household goods. Other things to take into consideration are storage, likelihood of repayment, interest rates and legal requirements. To set up your pawn shop, you should take the following steps-:
Starting a Pawn Shop – Sample Business Plan Template
1. Acquire Knowledge and Experience-: You can do this by working for a pawn broker for a while or by attending training courses. This is very important because you would need to learn about the laws guiding this business, how to value items, how to sell off, how to protect yourself and a lot of other intricacies of the business.
2. Write your business plan-: You need to research on what it takes to start this business and then find out how much it would cost you. You also need to decide on how you would run your business, make profits and how you would expand your business. All of these should be written in your pawn shop business plan.
3. Get a License-: This business is highly regulated by the law and you would need some licenses and permits to start. Before you apply, ensure that you do not have any criminal records or credit problems as this may disqualify you. You must also have a healthy financial net worth.
4. Rent a shop-: The next step is to rent a shop in a busy business district to enable customer’s easy access to you. You also need a place that is highly secure because you would be dealing with items that are of value and you wouldn’t want to be robbed or have them stolen.
5. Put some security features in place-: Also, because of the worth of the items you would be handling, you must fortify your shop with extra security and make it break-in proof.
6. Rent storage space-: Next, you have to look for a secure, safe place where you can store your items from theft.You can use bank safe deposit boxes for items like jewelries and precious stones.
7. Draft your customer contract forms-: It is important that you have a contract form that your customers would be mandated to sign to show that they agree to all the terms and conditions of the contract. You can get a lawyer to draw up a contract for you.
8. Get insured-: It is also smart to get insurance coverage for your business in case you run into any losses or problems.