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Pawnshop Owner

Pawnshop owners carry on a tradition that can be traced back to ancient China. Their role as collateral loan brokers who offer consumers a quick, convenient source of small, short-term loans remains relatively unchanged.

If you're looking for variety, opening your own pawnshop provides it. "The pawnshop is unique in that it's not a repetitive day-in-and-day-out, same-old-thing job," says Brian Smith, president of the National Pawnbrokers Association.

"We sell everything from heavy equipment to jet skis to car stereos to DVD players to jewelry. There is almost nothing we will not sell," Smith says. "Then, to make it interesting, we loan money on almost anything someone can bring in. The same variety comes in the store as goes out the doors."

Pawnshop owner Michelle Hartwich says she never knows what might come across her desk or how successful each day will be.

"That's the uniqueness of the business," Hartwich says. "You may have only one hammer today, it's gone tomorrow and it's not like you can order another one."

Michael Isman has been in the business for 47 years. He says that getting started may be the biggest hurdle to owning your own pawnshop.

"You need to have $50,000 to $100,000, you have to have some inventory to sell as well as showcases [to display it] and you have to have money to lend," says Isman.

"It's difficult to start from scratch. I ran a grocery business and went from there," says Ted Pincher. He has owned a pawnshop since 1984. "You need a lot of capital to do it correctly."

Pincher says that owning a pawnshop can be a lucrative business, but it might take as many as 10 years before you see a profit.

Hartwich agrees. "We're only in our third year. We haven't made any money yet, but we're having a lot of fun," she says.

Isman says the second hurdle to owning your own pawnshop is knowing how much items are worth. "You have to know [product] values, to be able to look at [an item] and know how much to sell it for in order to determine what to loan it for," he says.

Knowledge of the value of a wide variety of products, particularly gold and jewelry, is a must. Pawnbrokers need to know the retail price and current market price of every item on which they loan.

Pincher says pawnbrokers must also watch trends. At one time, his shop loaned $200 for VCRs; now, such items are almost worthless. "Items change, and [item] values change," he says.

Pawnbrokers agree that knowing values isn't something that can be learned at school. "I don't think you can learn that in any course," says Pincher. He says this knowledge comes with experience.

As a member of the National Pawnbrokers Association, he also relies on the organization to provide research on new items and other educational support.

"We get a lot of valuable information from the association," Isman agrees. "It provides advice, trading, networking and a single united voice when dealing with governments."

Both Isman and Smith recommend working in the business before opening your own shop.

"Take a job as a salesperson in a pawnshop, and get to know what things are worth and how the business works," says Smith. "It is much more complex than it seems."

He says that working at a department store, reading the classified ads or doing anything else that can increase your product value knowledge of items that could end up in a pawnshop is helpful. "If you loan too much on an item, you decrease your profit in most cases," says Smith.

"You should know something about marketing, storage and finances," adds Isman. "Even university business programs don't teach [entrepreneurship]. You need experience."

Once you have the capital and feel confident about your knowledge of product values, it's important to find a suitable business location.

Pawnshops are highly regulated by state and local governments. Individual cities usually have local laws that may limit the number of pawnshops and specify the locations where they may operate. Some place pawnshops in industrial parks, "but there's no way you can make money out there," says Isman.

Most successful pawnshops are located in the downtown core. "A location with high traffic is a must, as with any retail establishment," says Smith.

In addition to knowledge, a good location and the necessary licenses, pawnbrokers need good people skills.

"It's a hard-nosed business. When someone comes in with an item, you can't listen to their stories. You have to go beyond and look at the item," says Pincher.

Hartwich says that's her least favorite part of the business. "You have to think with your head, not your heart," she says. "There are a lot of sob stories....People promising to buy things back. No matter how sad the story is, you have to justify the loan."

Making the loan is just half of the business. Pawnbrokers also manage a retail store. Hartwich says she's trying to promote the recycling aspect of the pawnshop.

It's important to have clean, well-lit stores with clean merchandise. "This is not a flea market, so do not treat it like one. Make your sales floor well organized with clearly defined sections for electronics, jewelry, tools, etc.," says Smith. He says cleanliness and the move to high-profile locations has improved the reputation of pawnshops.

Smith says that now, most cities see pawnshops as legitimate businesses that pay taxes and hire people, just like other businesses.

"In the past, the poor reputation was earned, but we have done a good job dispelling those old scenarios and running clean, respectable operations," he says. "Nowadays, if you do not run a respectable business, you will not make it."

Pawnshops have lived with the reputation as fencers, but Isman says that "this has nothing to do with reality." He says it's important to note that all people and goods that come into a pawnshop must be reported to police within 24 hours.

"The incidence of stolen property is [about] less than one-10th of one percent of all property brought to pawnshops. [Criminals] are by and large going to avoid pawnshops because they're going to get caught.

"The odd item comes through...but it's likely that it's 18 months old, has changed hands many times and the guy [who] brings it in hasn't got a clue it's stolen," says Isman.

Like many businesses, word of mouth is the best advertising for pawnshops. Owners also use the Internet.

Isman uses the Internet not only for sales and promotion, but also to look up the value of items. "You can see what it will sell for,...get a real-world price. You no longer have to be concerned, 'Can I sell this item in a showcase?' but 'Will it sell on eBay?'" he says.

As long as consumers continue to require short-term credit, pawnshops will be a vital part of the economy. Smith says that if you're well-prepared and have the capital, the pawnshop business might be for you.

"This is a good time to get in the business. The barrier to entry right now [is] cash, but there is a huge loan demand due to the recession."

"Entrepreneurship is the only way to go," says Isman. "And unless there's massive incompetence, pawnshops never go out of business."


Pawnshop Links
Visit this site for a listing of pawnshops around the world
A meeting place for pawnbrokers

National Pawnbrokers Association
This site includes a publications section
A company providing support, networking and financial services for pawnbrokers

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OCAP believes that financial literacy and understanding the financial aid process are critical aspects of college planning and student success. OCAP staff who work with students, parents, educators and community partners in the areas of personal finance education, state and federal financial aid, and student loan management do not provide financial, investment, legal, and/or tax advice. This website and all information provided is for general educational purposes only, and is not intended to be construed as financial, investment, legal, and/or tax advice.