It’s Prime Selling Time for Multi-Store Pawn Businesses

If you ask any seasoned pawn professional what thing has had the most impact on the pawn industry in recent history, they’ll most likely tell you that it was the listing of the three pawn giants on the New York Stock Exchange in the early 1990s.

Ever since the three major pawn companies, Cash America, First Cash, and EZCorp, began taking on public investors in the 1980s, the three pawn giants have been competing to gain the biggest share of their market by buying up independent pawn shops across the US and abroad.  Since it is more profitable for these giants to invest time, money, and resources into purchasing pawn businesses that are made up of multiple shops, multi-store pawn businesses in the have been getting scooped up at a fairly steady and rapid rate for more than three decades.  As a result, there are now relatively few US-based multi-store pawn businesses left for the major pawn companies to purchase.

Sellers Beware

If you are the owner of a multi-store pawn business, you may have already been approached by one or more of the major pawn companies and presented with offers to buy.

If you are currently considering an offer or thinking of selling, perhaps the biggest mistake you could make is thinking that because you are in a position of power due to the current market landscape, all you need to do is pit one or more buyers against the other in order to close at the highest possible dollar amount you are capable of achieving.  Why?  It’s just not true.

The major pawn companies are trying harder than ever to not only buy valuable independent businesses quickly, but to gain as many advantages as they can during the buying process in order to make their investments as worthwhile as possible.  Make no mistake:  The major pawn companies are not throwing their monies around; they are doing everything they can to buy up the majority of the market strategically.  As the powerhouses of the pawn industry, they are using all of their resources to make potential acquisitions as profitable as possible.  In other words, when it comes to closings, they’re not going to do you any favors, and they’re not going to give you what you want simply because there are other buyers in the mix.

Sellers Relax

The good news is that you don’t have to through the selling process alone, and you don’t have to accept the best offer on the table blindly.

One of the main reasons Stallcup Group has had so much success in the pawn exit strategy consulting business is that its leaders have an advanced view of what is going on in the market.  They understand the tactics that the major pawn companies employ in an effort to avoid paying what an independent pawn business is actually worth, and have put in the time required to develop strategies that keep the ball in the seller’s court.

Enough time has passed since the major pawn companies appeared on the New York Stock Exchange for a considerable amount of expertise to be gained by those who are on the side of the seller.  If you’ve been approached by one or more of the major pawn companies or are considering selling your multi-store independent pawn business, contact Stallcup Group.  Stallcup Group will ensure that rather than being forced to sell your pawn business to highest bidder, you are empowered to sell to the right buyer at the right price.

Three Ways to Make Your Pawn Business More Profitable—and Sellable

Your pawn business may be doing well, but doesn’t mean that you can’t make it even more profitable, or, if you’re planning on selling your pawn business, more irresistible to buyers by reassessing some of your current practices and making key changes.

Below are three things that you can do right now to make your pawn business more profitable while simultaneously preparing to appeal to buyers.

1. Charge the right loan rates.

In some cases, low loan rates can help an independent pawn business.  If you can get more of the market as a result of low loan rates, charging less than your competitors may actually help you to be more profitable.  On the other hand, charging higher loan rates could also help you be more profitable, depending upon demographics, your shop’s location, and other criteria.

Do you really know if your current loan rates are the optimal rates for your independent pawn business?

If you’re planning to sell your pawn shop while the market is still a seller’s market, you need to know whether or not your current loan rates are enabling your pawn business to earn to its full potential.  Uncovering this information may require the help of third-party exit strategy specialists who can perform financial analyses that reflect accurate profitability ratios.  Even an initial low-cost or free business evaluation by such professionals can help you uncover the true value of your pawn business and point to areas in which you might be able to achieve higher profits.  Having accurate information regarding your pawn business’s true worth allows you to create realistic goals for your business, determine when it would be most profitable for you to sell your business to the right buyer, and plan for the future.

2. Keep the right number of people in the right positions.

When you’re an independent pawn shop owner, it can be tempting to hire your favorite nephew, uncle, or old high school buddy when you don’t really need an additional employee, but having more people on staff than your pawn business requires can be a recipe for disaster if you hope to sell your pawn shop in the not-so-distant future. While it can be painful to turn down certain applications, hiring more people than you actually need is like adding extra bacon bits to a loaded baked potato:  unhealthy. Having too many people on staff creates scheduling conflicts and often forces pawn shop owners to either keep too many people on the floor or cut the hours of regular employees to accommodate a newly hired employee’s needs, which can cause high turnover.

Hiring people to be managers, assistant managers, or closing managers, etc., and paying them a higher wage when you don’t really multiple levels of management can also hurt your business. While you should provide incentives to employees, before you make those incentives a higher salary or hourly rate, consider offering commissions for high sales numbers, excellent performance based on your observations and customer feedback, or other things that are important to the success of your pawn business.  Offering the right types of incentives can not only help you be more profitable, but help you foster a positive work environment that inspires employee loyalty and improves service levels.

3. Regularly revisit—and revise—your business plan.

Is your state or county requiring that you obtain new licenses that could potentially make your business more desirable in the eyes of the major pawn companies or other potential buyers?  Is the surrounding neighborhood experiencing significant growth that could change the worth of your pawn business?  Are other shifts in the market or economy impacting the value of your pawn business?

Whether you want to make your current pawn business more profitable, reorganize your pawn business’s capital structure, close your current pawn shops and open new ones, or are looking for the smartest way to enter into retirement, you should constantly be revisiting and revising your business plan in conjunction with local and big-picture market changes.  Your original business plan may be outdated or just plain nonsensical when you take into consideration all of the changes that your pawn business has experienced both externally and internally as a result of shifting market trends and the upgrades and strategic decisions you’ve made as a business owner.  If you modify your business plan as changes occur, you will increase your chances of making better business decisions down the road or over time.

Whether you’re looking to sell right now, while the window of opportunity for sellers of independent pawn businesses is wide open, or planning on selling in the future, making your business more profitable and using those profits smartly TODAY will put you in a better position tomorrow.

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.

Let’s Connect at the Pawn Expo!

Just a reminder:  Stallcup Group will be at the National Pawnbrokers Association Convention Pawn Expo 2012 in Las Vegas from July 17 to July 19.  If you’re planning on attending, contact us!  We’d welcome the opportunity to connect with you at the expo and learn about the goals you have for your pawn business.

See you there!


I Should Have Left Vegas on Saturday

I recently took a vacation to Las Vegas with a couple of friends to celebrate some milestone birthdays. Everyone in the group enjoys gambling, which, as you might guess, was the primary activity. Eating a lot of good food was the second.

Thursday night at the tables went well, and I ended up a couple of hundred dollars ahead. Friday night went even better. Somehow, I parlayed my hundreds into thousands! I was ecstatic, and had a sense of invulnerability. It was obvious I was on a heater and couldn’t lose.

Then came Saturday.

On Saturday, the dealers whose chip trays I had pillaged the two nights before suddenly started changing the name of the game from blackjack to “you lose.” I got very good at it. Basically, I would place money on the table and they would take it from me…hand after hand after hand. My thousands quickly became hundreds. Before I knew it, my hundreds became numbers with minus sign in front of them. Finally, Sunday came and it was time to go home.

On the way home, I sat contemplating what had transpired. I tried to justify the ridiculousness of my experience by saying, “Well, I spent as much as if I had taken a trip somewhere else”. But who was I kidding? If I had spent the same amount of money somewhere else, I could have at least seen an ocean, some mountains, or significant monuments to human accomplishments. I saw none of those things. I simply went to the desert, sat in a dark room for three days, and lost a bunch of money.

My Vegas trip got me thinking about the reaction I often get when I approach a pawn shop owner about planning an exit strategy. The typical response I get goes a little like this: “In the last few years I have made more money than I ever have. Why on God’s green earth would I want to sell my business now?”

The simple answer is that you should want to sell now because your business is worth more now than ever, and because there is absolutely no guarantee that its value will continue to increase, or, for that matter, remain as high as it is now. Stallcup Group’s financial models suggest that a 25% decrease in the price of gold, which is not out of the question in the current market, would decrease the value of pawn shops somewhere in the neighborhood of 32%—which is almost one-third of their current value! This is one of the many reasons we are encouraging pawn shop owners to take a pause and consider how much their stores are worth today, and how much—or how little—they may be worth tomorrow.

Because business is good, pawn shop owners today may feel as invulnerable as I did in Vegas, but the reality is that along with the price of gold and other variables, the value of their shops can turn on a dime.

Wondering what the value of your business is now? Stallcup Group can help. Contact us for a free, no-obligation analysis of your business’s worth. Once our analysis is complete, you will be able to make a truly informed decision. Whether you decide to stay in or exit the market is completely up to you. We’ll just give you the information you need to make the right choice.

Don’t wish that you’d left Vegas on Saturday. Consider planning your exit strategy today—before the tides turn and you’re left trying to justify having stayed too long at the table.

Jeremy Bowman, Executive VP, Stallcup Group