Marketing Your Pawn Shop to Potential Buyers: It’s All About the Data

sg389u13qThough the market is ripe for independent pawn shop owners to sell their businesses at top dollar, the majority of pawn shop owners are still selling at prices that don’t reflect the true values of their businesses.

Why is this?

Most of the time, the bottom-line reason a pawn shop isn’t sold at a price that reflects its true value is that the potential buyers were presented with incomplete or ineffective data.

When potential buyers aren’t supplied with the right data, or aren’t presented with the right data in a way that makes a pawn shop’s tangible and intangible assets clear, it becomes easy for them to point at potential risks, real or imagined, and use those risks to drive down the selling price.

Pawn shops are already considered high-risk business ventures.  If you’re trying to sell a pawn shop, you need to be able to show potential buyers why your pawn shop is a comparatively low-risk investment by benchmarking its assets against the assets of national, regional, and local pawn shops.  In other words, you need market intelligence, and you need to know how to use it.

In addition to needing market intelligence to present your pawn business as a low-risk business venture, you need it to develop profitability ratios that buyers will find enticing and indisputable.

Most pawn brokers are too busy managing everyday operations to complete all of the tasks necessary to obtain the market intelligence they need to achieve the highest possible sale price.  They simply don’t have the time and resources available to gather data from multiple sources, analyze it, and package it for potential buyers.

This is precisely why it is so important for independent pawn shop owners to reach out to pawn shop exit strategy consulting experts before they reach out to potential buyers.  Pawn shop exit strategy consultants that have the expertise and in-house processes in place to perform in-depth analyses, market pawn shops strategically, and deliver results can be lifesavers to any pawn broker that needs to sell at the optimal price in order to meet future goals—whatever those goals may be.

Does Your Business Broker Know the Pawn Industry Inside and Out?

Last week, in our blog post, “Need Help Selling Your Pawn Shop?  Watch Out for Exit Strategy Consultants Who Don’t Put You First,” we discussed the importance of working with exit strategy specialists who put your interests above the interests of buyers.  This week, we’d like to discuss the importance of working with exit strategy specialists who not only put your interests first, but are specialized.

As an independent pawn shop owner, you know that your processes are significantly more complex than, say, the processes involved in running a doughnut shop, clothing store, or a even an auto mechanics shop.  Zoning and other regulations and the licenses you need to run your pawn business also tend to be more complex than those of other businesses, even when those businesses are similar in size or have similar profit margins.

Unfortunately, many pawn shop owners who are ready to sell reach out to “catch-all” companies that claim they have the expertise to sell almost any kind of business—including independent pawn shops.  This is almost always a mistake.

Time and time again, the Stallcup Group team has heard the same story from pawn shop owners who’ve worked with “catch-all” companies to try and sell their pawn businesses.  It goes like this:  The pawn shop owner gets tired of trying to teach the pawn business to a consultant that is supposed to have the expertise required to sell their pawn business, but in reality, knows very little about what makes pawn shops tick.  Time, resources, and money are wasted as a result of working with a business broker that doesn’t have a thorough understanding of the pawn industry—much less an understanding of what it takes to market an independent pawn business to buyers.  Eventually, the owner ends the relationship with the “catch-all” business broker and turns to Stallcup Group for assistance.

The moral of the story is that if you’re considering selling your independent pawn business, you need to work with pawn shop exit strategy specialists who are knowledgeable when it comes to selling pawn shops—not flower shops and restaurants.  Pawn shops are different animals; in order to sell them at the price you deserve, you need a business broker that knows how the major companies operate and negotiate, can accurately analyze your pawn business’s tangible and intangible assets, knows how to help you achieve certain agreements, and has a proven track record of selling pawn businesses at impressive prices.

You wouldn’t go to a general medical practitioner when what you need is a dentist.  Don’t turn to a “catch all” company when what you need is a pawn shop exit strategy specialist that knows the pawn industry inside and out.

Why You Need to “Authenticate” the Value of Your Pawn Business

If a customer were to walk into your shop claiming to have a baseball signed by Joe DiMaggio, you wouldn’t think of giving him or her a loan without first seeing a letter of authenticity.  You would also assess the baseball’s attributes.  Does it have inscriptions that add to the value?  Is there a personal inscription, such as, “Best of luck, Burt,” or, “Knock it out of the park, Billy?”  Did Joe sign the ball, “Joltin’ Joe?”  You would make sure you knew the baseball’s worth before making the customer an offer or completing a transaction.

When you’re ready to sell your pawn shop or shops, essentially, you become the customer.  You have to know what your business is worth and be able to offer proof that backs up your claims.  You can have the most valuable independent pawn business in the country, but you won’t get what it’s worth from the national pawn shop buyers if you don’t have your financial information in order and haven’t properly assessed your business’s tangible and intangible assets.

A baseball signed by The Yankee Clipper can go for half of what it’s worth when a letter of authenticity doesn’t accompany it.  Your pawn business needs to be “authenticated,” too, or you could miss out on thousands, or even millions, of dollars that you could have and should have gotten.

Uncovering what your business is really worth may be a pain, but let’s face it:  a much bigger pain is finding out later that you got convinced to sell your business for less simply because you hadn’t used the right financial methodologies to come up with numbers that accurately reflected its value.

Stallcup Group can help you determine your business’s true value, put the right data in your hands, and walk you through every step of the closing process.  We give you all of the information you need to prove your business’s worth and force multiple buyers to make competing offers based on a base price that you set rather than on their own pricing models.  In other words, we put you in a position of power.  When it comes to negotiations, would you really want to be in any other position?

What Are Your Pawn Shop’s Intangible Assets?

When pawn shop owners are ready to sell, it is often the intangible assets that are the most difficult to uncover and relay to potential buyers.  Some of your shop’s intangible assets might include:

Regional zoning and licensing restrictions.  When local governments prevent the building of new pawn shops in certain areas, the values of existing pawn shops go up.  How much more valuable a shop becomes as a result of zoning and licensing restrictions is difficult for most owners to determine.  Just as it takes qualified realtors to help homeowners determine the right asking price, it takes experienced business brokers like Stallcup Group to help pawn shop owners properly evaluate their businesses.

Close proximity to national competitors.  If you think like a buyer—in other words, if you think like a major pawn company—you’ll understand the reasons buyers prefer to purchase independent pawn shops that are close in proximity to competing shops.  In order to translate that desire into dollars when it comes to the sale of your pawn shop, you have to know the ways in which a large company will change your business model in order to compete with the competitor down the block and across the street, and how much those future changes impact the value of your pawn shop now.

Demographic considerations.  Ideally, major pawn companies want to buy shops that are located in areas that have a high population density or are growing in population at a fast pace.  Other characteristics regarding location, such as close proximity to universities and public transportation hubs, also increase buyers’ purchasing desires.  Buyers will also take into consideration the accessibility of your store.  If customers have to make a U-turn in order to get to your shop, or if parking is limited or difficult, you may have to work harder to achieve your desired sale price.

In addition to intangible assets that have to do with location, a business may have many other intangible assets that are “hidden” or difficult to analyze.  When you’re negotiating with major pawn companies, you should be able to not only list your shop’s tangible and intangible assets, but prove their values.  Do you know what intangible assets would make your pawn shop more valuable to buyers?  Do you know the true values of all of your assets?

Contact Stallcup Group today.  Turning a shop’s intangible assets into data that will influence buyers’ offers is one of Stallcup Group’s specialties.  We’d welcome the opportunity to help you turn your intangible assets into tangible dollars.