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.

Key Questions You Need to Answer Before You Try to Sell Your Pawn Shop

sg238509v3Before you reach out to a potential buyer of your stand-alone pawn shop or multi-store pawn business, there are several questions you need to be able to answer. Here are just a few of the most important ones:

  • How long have you been in operation?
  • How many people do you currently have on staff?
  • Where are you located?
    • What is unique or significant about your location?
  • What are your milestones?
    • What have you been able to accomplish and how did you accomplish it?
    • What were your biggest struggles and how did you overcome them?
  • If a new buyer were to take over, what things might the buyer have the ability do in the future to grow the business?
  • Who are your biggest competitors and how does your business stack up against them?

If you don’t want to waste your time talking to potential buyers of your pawn shop that aren’t really serious, preparation is key. In addition to being able to answer the questions above, you need to have your financials in order and the ability to present them in a way that is attractive and makes sense to buyers. You also have to know the true value of your pawn shop.

Gathering the right financial data and determining the true value of a pawn shop are arguably the two most critical and difficult things any independent pawn broker must do in order to achieve the best possible selling price for their business. Unfortunately, because most pawn brokers enter into the selling/closing process without representation—or, without the right representation—they wind up providing multiple potential buyers with incomplete or unimpressive financial data and simply going with the buyer that presents the highest bid—without ever knowing how much their business is actually worth!

When you have the right exit strategy consultant on your side before you reach out to potential buyers, you can get all of the important questions answered ahead of time. On top of that, you can essentially put an end to old-school bidding wars that in today’s pawn market aren’t particularly beneficial or effective, and start working with the right potential buyer right out of the gate.

Looking for a complete sales preparation checklist? Click here.

Interested in a free pawn shop evaluation from a qualified Stallcup Group exit strategy specialist? Click here.

Shop Talk: Is it Time to Transform Your Pawn Shop into a Paradise?

Two pawn shop owners recently received positive press by overhauling their shops and setting their businesses apart from the competition.

In the Midwest Messenger:
On September 11, 2012, the Midwest Messenger reported that Decatur, IL pawn shop owner Greg Jump and his manager, Sara Mobley, had successfully transformed Jump’s pawn shop into something unexpected and special. In addition to the items you’d expect to find in a typical pawn shop, the Decatur shop is now selling a large amount of Native American items. According to the article, “Mobley has made a number of contacts with Native women who design and sew shawls, regalia dresses, maiden dresses, vests and beautiful beaded items for the shop. There is a display case full of beaded jewelry and women’s accessories and ceremonial adornments. Everything is handmade.”  The shop also sells Native blankets and handcraft.  The Midwest Messenger calls the shop “a paradise for Native theme collectors.”

On News-journal.com:
News-journal.com
, a news site serving Longview, TX, recently published a lively article Jeff Mercer, an East Texas pawn shop owner that is in the process of giving his shop a makeover. While Mercer doesn’t appear to be focusing on any specialty items, he does “offer patrons transitional pawnshop services in a clean, wholesome environment,” the article states. In addition to the pleasant environment, two things that set the shop apart are “weapon ownership transfer services for a flat fee that includes an FBI background check” and plans to “expand its sporting goods lines,” Mercer is reported to have said.

Want some good press to boost your pawn business’s sales? Maybe it’s time to offer specialty items or to give your pawn shop a facelift and break away from certain stereotypes. Who knows? By shifting tactics and changing your presentation, people may one day consider your pawn shop a “paradise,” too.

 

Shop Talk: Traders Ignore Profitable Pawn Shops and Pay Day Lenders

The Street reports that pawn shop and pay day lenders are trading down.  Easy Corp’s revenues and earnings per share are up, but the company’s stocks are down 36 percent for the year.  Similarly, pay day lender stocks should be doing well, but are not.

In the video below, The Street correspondent Debra Borchardt talks to Brian Sozzi, senior analyst at NBG Productions to find out why pawn shops and pay day lenders aren’t getting the attention from traders it would seem they deserve.

Sozzi recommends taking a look at First Cash.  According to Sozzi, First Cash is doing a lot of things right.  They’re currently the largest player in Mexico, winning out over Cash America, and their stocks are doing better than most.

Are you a trader trying to determine which characteristics you require of other pawn shops in which you hope to invest?  Are you a pawn industry professional looking to build your pawn business into one that traders will see as profitable even during tumultuous economic times? Whether you’re an investor a pawn industry insider, it appears as though First Cash is worth watching.

Shop Talk: Finally, a Movie with “Pawn Shop” in Its Title

“Pawn Shop Chronicles,” a new movie by Wayne Kramer, is a thriller about a man searching for his abducted wife and those involved in her abduction.  Apparently, the main characters are all connected by a small-town pawn shop.  The cast is considerably large, and includes stars such as Elijah Wood, Matt Dillon, Brendan Fraser, and Vincent D’Onofrio.

It’s fun to see that pawn shops are finally being recognized by movie makers.  While we at Stallcup Group would rather see a movie that features our team helping independent pawn shop owners successfully sell their businesses at incredible prices, for now, we’ll have to settle for what “Pawn Shop Chronicles” producer Jordan Schur calls, “a superbly written mind-bender of a story that grabs you from the first line, and doesn’t let go.”

Currently in production, “Pawn Shop Chronicles” is slated to come out in movie theatres in early 2013.

Why Specialty Pawn Shops Should Consider Diversifying

There seems to be no limit to the kinds of specialty pawn shops currently doing business.  Today, specialty pawn shops not only focus on buying and selling things like jewelry, guns, electronics, and musical equipment, but big-ticket or somewhat unusual items, such as motor vehicles, fine art, and specific types of antiques and collectibles.

Specialty pawn shops can provide highly valued services.  Pawn shops that specialize in musical instruments and sound equipment are considered a necessity in musical cities like Austin, TX.  In cities ripe with art lovers and artists like so many cities in New Mexico, for example, pawn shops that deal in fine art are fantastic resources.  Pawn shops near large bodies of water that deal in recreational water vehicles like boats and jet skis can also be a huge help to their communities.

Unfortunately, though specialty pawn shops may be highly valued by their customers, major pawn shop buyers typically don’t put a lot of value on them.  As a result, owners of specialty shops can find it very difficult to find buyers when they decide it’s time to move on and exit the business.  Often, owners of specialty shops simply have to sell off or liquidate their inventories instead of selling their businesses as whole units.  The majority of specialty pawn shops just don’t fit in with the national pawn companies’ business models, and therefore, are too much trouble for the national pawn companies to take on and turn into typical chain stores.

If you’re planning on selling your specialty shop or shops within the next few years, consider diversifying by seeking out and accepting a wider variety of items.  If you begin diversifying at least one or two years prior to selling your shop, you will have a much greater chance of selling to a national pawn company that will give you the kind of closing price that will enable you to retire well or turn around and begin your next business venture.

Whether you’re a specialty pawn shop owner or the owner of a more traditional pawn business, contact Stallcup Group for information on what you can do now to make the process of selling your business easier in the future.  Stallcup Group can not only help you determine what you might be able to expect out of the sale of your business, but help you meet your future goals by assisting you throughout every step of the negotiation and closing processes.

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

Shop Talk: It Never Pays to Steal, Especially if Your Wife’s a Police Officer

Skyler Belgarde of Mountain Man Trading Post in Anaconda, MT, had never seen anything like the beautiful pendant brought in by a customer who said he’d picked up the piece while stationed in Thailand with the Navy.  The ruby and diamond-covered piece, Skyler estimated, was worth about $1,000.  The man agreed to pawn it for $800.

A couple of weeks later, a police officer walked in and asked Skyler about the piece.  Skyler confirmed that he had it.

Here’s the twist:  The piece actually belonged to the police officer!  Apparently, she and her husband were former Navy sweethearts who’d gotten into some kind of spat or dispute that had led the husband to decide to steal the pendant from his wife and bring it to Mountain Man Trading Post.

Once Skyler had confirmed that the pendant was in his shop, the police officer walked outside and sent her husband inside.  The husband promptly paid off the loan.  Skyler hasn’t seen husband or wife since.

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.

Shop Talk: Anyone Interested in a Second-Hand Urn? Anyone?

Not too long ago, a gal called Ed Hale at At Watt & Marconi Pawn in Sacramento, CA, and asked if he would be interested in buying an urn intended to hold cremains.  She claimed that the urn didn’t actually have cremains in it, but nevertheless, Ed wasn’t interested because, as he said, “You can never really know if something used to be in it.”

Before getting the urn gal’s call, Ed had taken a call from a guy wanting to sell a pacemaker.

It was probably just a coincidence that someone selling an urn and someone selling a pacemaker both happened to call in, but you have to wonder:  Had both items once belonged to the same person?

Ed wasn’t interested in the pacemaker, either.