Selling a Pawn Shop Isn’t Like Selling Just Any Small Business

sg14098sdkJust about every book or article on how to sell a business advises business owners to do things like search the Internet for buyers and market their businesses online. This might be good advice for the majority of small business owners, but it’s not good advice for independent pawn shop owners.

If you’re an independent pawn shop owner and you’re not passing your pawn shop or shops down to the next generation or selling out to a partner, your best (and perhaps only) buyer is probably going to be one of the major pawn companies. If you want to sell your pawn shop for top dollar, the last thing you want to do is look up these companies, give them a call, and ask them what they will pay you for your business. Go this route, and you will practically guarantee that you do not sell your pawn shop for anything near what it’s actually worth.

The major pawn companies have been buying independent pawn shops for years, and have gotten very good at it! They have put tools, resources, and processes in place to help them get the most out of each new acquisition. If you don’t have a team on your side that has its own tools, resources, and processes in place, you can quickly find yourself woefully underprepared for what these buyers present to you and ask of you in an effort to drive down your selling price.

Unfortunately, even if all of your financials are in order and you have a solid understanding of your business’s advantages and disadvantages, it can be very hard to combat the analyses that the major pawn companies are able to perform. You need objective pawn shop exit strategy consultants to compile and analyze all of your pawn business’s unique characteristics, combine the information with relevant pawn market information—while keeping in mind the overall economic climate, and then present all of the data in a way that buyers can’t dismiss. Go this route, and you will practically guarantee that you will sell your pawn shop at the best possible price.

Arm Yourself with Pawn Shop Business Selling Knowledge

sg2304v98ajIt is now more important than ever for pawn shop owners to arm themselves with selling/closing knowledge.

Most pawn shop owners don’t put a lot of thought into selling their businesses when they’re just starting out. Nevertheless, a pawn shop’s typical business cycle and the rate at which the major pawn companies are buying independent pawn shops show us that most pawn shop owners will sell—perhaps sooner than they might have originally predicted.

If you’re a pawn shop owner, whether you’re planning on embarking on a new business venture, reorganizing your capital structure, or hoping to retire, you should know exactly where you stand as a potential business seller at all times. If and when the right opportunity to sell comes along, knowing precisely what you want and need and where you stand in the current marketplace will prepare you to do everything you’ll need to do to get the highest possible return on your investment and honor all of the hard work you’ve put into your pawn business.

Below are some questions that you should be able to answer long before you actually engage in the selling/closing process.

  • Why are you selling?
  • What physical and intangible assets are you selling?
  • Is it the right time to sell?
  • Do you have to sell?
  • What is your pawn business worth to you?
  • What is it worth according to your objective pawn valuation?
  • What is it worth to a potential buyer?
  • Is your business ready to be sold?
  • Does the way your business looks appropriately reflect its value, or could/should it look better?
  • Are your financial and other records up to date?
  • Can you account for every piece of inventory?
  • Are all of your agreements and licenses current?

Finally, the most important question you need to ask and answer is: Do you have the right pawn shop exit strategy consultant to assist you throughout the selling/closing process?

Even if you’re not thinking of selling your pawn business any time soon, there is no time like the present to prepare to sell. The one certainty in life is that nothing is certain. You never know when the opportunity to sell might come along. When it does, you’ll be much more likely to make the right decisions if you’ve done yourself the service of arming yourself with selling/closing knowledge ahead of time.

Click here to review Stallcup Group’s sales preparation checklist.

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.

Why Sell Your Pawn Business When Business is Good?

The poor economy has put many small businesses to the test, but thanks to an increased need for quick loans coupled with a larger base of first-time pawn shop customers, many independent pawn businesses are thriving more than ever. They’re in a financial sweet spot, which is why so many of them are surprised when they hear that now might actually be the perfect time to sell their pawn shops.

Why in the world would you want to sell when everything is going so well? Here are three big reasons:

1. Your business is worth a lot right now, which means that you are likely to get a high return on your investment if you sell now. Certainly, there is a chance that your business could continue to increase in value and sell for more money down the road, but there is also a chance that your business could decrease in value. Selling when you are most profitable eliminates the risk that you will get a low return on your investment later—perhaps at a time when you need capital most.

2. Any time anyone, include buyers, performs a business valuation, prospects for future earnings are taken into consideration. When sellers can demonstrate a strong track record of earnings, their businesses become more appealing to buyers and they are able to demand a higher selling price.

3.  This is a time when the largest corporate pawn businesses are looking to acquire independently owned pawn shops in a race to gain greater market share. These companies, which are vying for dominance, have a deep interest in buying you out and have plenty of money to do it.  This race won’t last forever.  Eventually, one of these companies will become the clear winner.  When this happens, it may be considerably more difficult to sell your independent pawn business—much less to sell it at a high price.

If you’re still uncertain about the idea of selling your pawn business while it’s thriving, you might do well to meet with a professional exit strategy consultant that can take into account the unique characteristics of your business, the current market, and other factors, and point out the specific gains you could get by selling sooner rather than later. A simple consultation may be able to help you get enough perspective to make the decision to sell or not to sell a relatively easy one.

Marketing Your Pawn Business to Potential Buyers

To market your pawn shop to any of the major companies, you have to know what it is that they’re looking for in an acquisition.  A major pawn company isn’t going to tell you all of the reasons that your independent pawn business may or may not be particularly valuable to them so as not to give away their hand.  This is why you have to come up with your own accurate estimates that will prove, beyond a shadow of a doubt, what your business is worth now—and what it will be worth to the buyer once the buyer takes over.  Do not allow the buyer to determine the worth of your business!  With a little help and a thorough analysis of all of your pawn business’s unique characteristics, you can effectively market your business to the major pawn buyers and demand the sale price you deserve.

One thing to keep in mind as you strive to gain an understanding of the worth of your pawn business is that independent pawn shop owners, like owners of other small or mid-size organizations, tend to think their businesses are more valuable than they actually are.  Even if they are able to come up with a good method for determining the worth of their business, a lack of objectivity almost always sneaks into their calculations.  This results in inaccurate values, which the major pawn companies will immediately recognize and seize upon during negotiations.

For most pawn shop owners, the only way to ensure that the method they’re using to determine their pawn business’s worth is good and that their calculations, value determinations, and asking price are correct and in alignment with one another, is to work with exit strategy specialists that know the pawn business inside and out.

By working with exit strategy specialists who have a history of working directly for or with the major pawn companies and can pinpoint all of the things about your business that buyers are going to take into consideration—including its unique characteristics and the changes that the buyer will make that will increase its profitability in the future—you can even the playing field during negotiations, and even stack the odds in your favor.

Why Close Your Pawn Shop When You Can Sell It?

When pawn shop owners talk to Stallcup Group about the value of their businesses, in addition to talking about their assets, they inevitably wind up talking about how much they value their businesses on a personal level.  We hear stories about how pawn shops were passed down from family members, about how by making various business choices, they positively impacted their communities, and about how they’ve served the same customers for several years and know many of them by name.  They talk about their most valued employees, and how it will be strange or bittersweet to no longer see them on a regular basis.

As an independent pawn business owner, you’ve invested more than time and money in your business; you’ve invested your blood, sweat, and tears in building your business into something in which you can rightfully take pride.

There are a lot of reasons to sell your pawn business rather than simply close it. One big reason to sell rather than close is the current seller’s market (thanks to the race the major pawn companies are in to outdo each other by buying up more of the market). But perhaps the biggest reason you should sell rather than simply close down is that if you find the right buyer, whether that buyer is someone you know, such as your current manager or family member, or whether it’s one of the major pawn companies, is that if you find the right buyer, some of the things you value about your business and its legacy in your community don’t have to disappear along with your pawn shop’s signage.

Obviously, if you sell your pawn business to someone you know rather to one of the major pawn companies, you have a greater chance of seeing the new owners run your business in much the same way you’ve been running it.  But even if you sell your business to a major pawn company, you can build certain assurances into your selling agreement that will enable some of the things that are important to you, personally and professionally, to be carried out once your business is out of your hands.  The selling price is important, of course, but what else is important to you?  Do you have certain partnerships that you want to see remain intact?  Do you want your current employees to be given the opportunity to apply for positions within the new business before the buyer advertises job openings publicly?

To build certain assurances into your selling agreement, you need solid representation that understands what is important to you, what is important to the buyer, and can negotiate terms using solid financial data and analytics that can be used as bargaining chips to achieve not only the highest possible selling price, but the other concessions and terms that are important to you.  Trusted exit strategy specialists can also help you understand what is achievable so that you enter into negotiations with a clear idea of what it is you’re asking for and what it is you may actually be able to get.

There are definite benefits to be gained by selling to a major pawn company.  When you sell to someone you know, the finance agreements tend to be longer, which means your immediate payoff is less.  A large immediate payoff can not only help you move quickly into the next phase of your life or career, but help you to do things like give valued employees generous severance packages.

Whatever your decisions for dissolving your independent pawn business, the one thing you should be one hundred percent clear on is that closing your business is almost never the best option.  Why close when you can sell, especially when you can sell responsibly to a buyer that you can trust to continue to operate in a way that you can feel good about?

Achieving Lenient Non-Compete Agreements

One of the reasons that independent pawn shop owners are reluctant to sell their businesses to the major pawn companies is that they are concerned that due to strict non-compete agreements, they will be unable to open new businesses quickly enough to meet their needs.

Standard non-compete agreements restrict pawn shop sellers from opening any new pawn shops within 10 miles of sold shops for at least five years.  For those in the pawn business who aren’t seeking to exit the business entirely and don’t want to have to relocate in order to pursue new ventures, not being able to open new shops for five years can make put an end to any dreams of selling very quickly.

Fortunately, if you have stellar representation during the sale of your pawn business, it is possible to lighten the terms of your non-compete agreement significantly.  How?  If you have experienced representatives like those at Stallcup Group on your side—people who know the tactics buyers use to achieve strict non-compete agreement terms and can perform financial analyses that reveal the true value of your shop—you can leverage their negotiations experience and conclusive data to get top dollar for your business and put in place a non-compete agreement that is lenient enough to enable you to meet your future goals.

Contact Stallcup Group to request a case study that explains how our team recently helped a group of pawn business owners/partners achieve an ideal non-compete agreement.  If you have questions regarding the potential sale of your pawn business and the steps you might need to take in order to be successful during and after the closing process, we will be happy to provide you with a free initial consultation as well.