Despite all the risks and fears, pawnshops today are a fairly profitable business. Consider the most profitable areas of this activity, the principles of their work, and consider the dangerous twists and turns on the way to becoming a business.
What you need to open a pawnshop:
- renting the premises;
- sheeting the whole place with iron wire;
- installing and setting up video surveillance;
- installation of an alarm system and taking the object under protection;
- the purchase of special furniture, safes, safe deposit boxes, to store the pawned property (this equipment must be of two types – for daily and long-term storage);
- car pawnshops must be equipped with car parks in the surrounding area.
A universal loan office will require between 50 and 100 m² of rentable space. If the establishment will only accept precious metals, this figure can be reduced to 20-30 m².
Staff
The staff of any pawnshop is small. Except for the owner, it may consist of 4 people.
- Commodity valuator
- Security Guard
- Accountant
- Manager
The most dangerous and risky position is that of the quality surveyor. He must evaluate goods correctly so that the company was not left short; he must follow the market and have a good understanding of the value of the jewelry. Distinguishing gold from fakes is also very important, so a good stable of experience is needed here. In addition, it may be useful to check gold bars for sale to estimate the current price.
What else is needed to open a pawnshop?
Good software will be needed to ensure a high level of service so that customers are not delayed.
Weighing and valuation equipment is also an initial requirement. This includes scales, magnifying glasses, and equipment to determine the authenticity of diamonds.
There is no need to spend too much on advertising, and a possible place for it could be near the main premises. Also works well posters on public transport.
Pawnshops as a business – is it profitable to do them?
The procedure for obtaining credit in a pawnshop is very simple: a person pledges a thing and gets for it a sum not exceeding 95% of the appraised value. This loan is given only for one month.
If at the end of the month the borrower is unable to repurchase his property, the property is remortgaged, but the interest rate and the cost of storage go up. If the item cannot be redeemed a second time, it will be sold at a public auction.
A pawn shop is much more convenient than a bank as a lender of small sums. There is no paperwork, there is no need for proof of income, and the cash is disbursed within a couple of hours.
A good return can be achieved by using one of the following business strategies.
Profit from interest paid
In this case, it is in the owner’s interest to ensure that the inventory does not lie idle and is eventually redeemed by the borrowers. For them, it is acceptable to keep only 5-10% of all pledged valuables.
Profitability and payback period of the business
The payback period of any pawnshop 1,5-2 years, but it is the first years of operation are decisive for its future development. Already after six months begins a difficult moment of crisis, when the “burst” of about 30% of such institutions. The main thing – to hold on to the market for the first time, and then the enterprise will begin to work already without loss.
If your pawnshop existed for two years, the business can be considered successful.
On average, one pawnshop should bring $4,000 in profit every month, without deduction of taxes. To make such a profitability figure, one office must lend out up to $120,000 in cash.
It can be said that this is a fairly profitable business with a short payback period, which is why many operating companies are opening pawnshops as an additional business.
Video – What is Profit?
Interesting Related Article: “What Type Of Trading Makes The Most Money?“