Starting A Pawn Business

STARTING A PAWN BUSINESS

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STARTING A PAWN BUSINESS

A pawn business offers customers collateral loans and buys, sells and trades items of value. Pawn businesses allow customers to pawn something valuable in exchange for a short-term loan. If the customer returns the money, and the interest due on the loan, the item is returned. But when the customer cannot pay back the loan, the person who owns the pawn business, or the pawnbroker, sells the item for a profit.

There is more to starting a business than just registering it. Here is simple guide to starting your pawn business. These steps will ensure that your new business is well planned out, registered properly and legally compliant. The guide will also help you answer the question whether it is the right fit for you.

 

Steps to Starting a Pawn Business

STEP 1: Plan your Business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

  • What are the startup and ongoing costs?
  • Who is your target market?
  • How much can you charge customers?
  • What will you name your business?

What are the costs involved in opening a pawn business?

It is possible to open a pawn business for as little as N5,000,000, but most cost much more. Since pawn businesses make most of their profit from providing loans to customers, possible income is limited by the amount of money available to loan out, so it makes sense to have a significant amount of capital before opening a pawn business.

  • Rent: Your largest fixed-cost is rent. Most pawn businesses find it better not to choose locations in the high-rent business district, but it is still important to find a location convenient for your customers. Pawn businesses need enough space to display, test, and securely store items.
  • Operating capital: Reserve the bulk of your budget as operating capital. This is the money you will use to make loans and to cover the expenses of running a pawn business.
  • Security: Pawn businesses have a lot of valuable items and tend to keep a lot of cash on hand. This makes them attractive targets for thieves. Installing a top-of-the-line security system is important for preventing loss and reducing the cost of insurance.
  • Insurance: Pawn businesses need comprehensive insurance to protect themselves from loss and legal liability. The amount of insurance a pawn business must carry depends on the state where it operates.
  • Initial inventory: While an extensive inventory is not advisable, an empty showroom does not give the best impressions to customers. Make sure you have at least some inventory in stock before opening the doors but don’t spend too much of your entire budget.
  • Computer system: You will need a computer system for keeping records, printing receipts and researching. Any low-end computer and printer will more than suit your needs.

 

Starting and Running Your Retail Business

STARTING A PAWN BUSINESS

 

What are the ongoing expenses for a pawn business?

Rent, utilities, salaries, and security are all part of ongoing expenses associated with owning a pawn business.

Who is the target market?

Since a pawn business makes money in multiple ways, it needs to attract more than one type of customers to be successful. In order to make money off short-term collateral loans, the business must have customers who need cash to pay for something immediately, do not have or do not want to use other forms of credit, and has a source of income to pay off the loan and interest to redeem the item. To make a profit by selling items, the pawn business needs customers who want to save money buying secondhand items.

How does a pawn business make money?

Pawn businesses make money in two ways. The first way is to offer collateral loans and to make money on the interest rate. The second way is to sell items at a profit.

How much can you charge customers?

The maximum amount pawn businesses can charge customers on a loan is controlled by the state. According to the National Pawnbrokers Association, charging N150 on a 30-day, N1,500 loan is typical. Pawn businesses usually markup items they sell between 15% and 45%.

How much profit can a pawn business make?

The amount of money a pawn business owner makes varies greatly by region. Typically, it depends on the amount available for loan, negotiation and interest charged.

How can you make your business more profitable?

Many pawn business owners add sideline businesses to increase their profitability. Some common side businesses include check cashing, storage, online sales, and appraisal services.

What will you name your business?

Choosing the right name is very important. Check for availability with CAC and register it. It is also very important to check for domain availability and purchase the domain to secure it for your web presence.

 

Why Do You Need A Domain Name?

STARTING A PAWN BUSINESS

 

STEP 2: Form a legal entity

Establishing a legal business entity prevents you from being personally liable if your pawn business is sued.

 

STEP 3: Open a business bank account

 

STEP 5: Set up business accounting system

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

 

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down. So, get them!

 

STEP 7: Get Business Insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

 

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

How to promote & market a pawn business

One of the best ways to promote your pawn business is online. You should invest the time and money to create a Facebook page and a website. If you tend to deal with one type of item more than others, like gold or guns, you should consider advertising on sites which cater to people who buy these items.

How to keep customers coming back

Many loan customers come back multiple times a year, so it is in your best interest to provide good service and a fair price. It is important that you avoid alienating anyone and that you make your store as inviting as possible for everyone.

 

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

 

Why You Need A Good Web Hosting Partner

STARTING A PAWN BUSINESS

All the Success!

 

For more information, call or email us today.

3B Hakeem Dickson Road, Lekki Phase 1, Lagos Nigeria
+234 1 291 7328, +234 803 343 4776, +234 809 334 4776, +234 808 933 8444
info@bervidson.com , www.bervidson.com

 

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