Over-Valuing Inventory Is A Big Pawnbroker Mistake
One of the biggest mistakes you can make as a pawnbroker is to over-value your inventory. A tendency to over-value is prevalent among independent pawnbrokers operating inside and outside of the United States. Customers today are savvy, especially Millennials. Technology defines their generation, and with a quick mobile search, they will find out if your items are overpriced. Do not underestimate your pawnshop customers’ ability to find that information online while in your store. You cannot effectively grow your business when you make the big pawnbroker mistake of over-valuing and over-pricing.
The Result Is Stagnant Inventory
Amassing a store full of desirable items takes time and effort, especially for independent pawnbrokers, who may handle the bulk of daily operations personally. This hard work is commendable. Be proud of your accomplishment, but filling your inventory is half the battle – you have to move it to win in this industry. There is no one reason that some pawnbrokers move inventory quickly while others do not. However, there are two types of people who get in the pawn business: retailers and collectors. Which one are you?
What You Will Take Is The Right Price
For many successful pawnbrokers, the amount they will take is the right price. This practical approach is called value pricing. It bears repeating, the price of an item is the amount you will take for it. This method bypasses lengthy negotiations and endless haggling with customers when you will get “what you will take for it” in the end. Skip all the rigamarole and decide what you will take for it from the get-go. Over-valuing inventory and charging unreasonable prices, stunts pawn business growth. If you want to grow your business, inventory must move with a quickness. Think about it this way, when inventory sits idol, that is your money, not earning a return.
Lack of Understanding of Financial Metrics Is Another Big Pawnbroker Mistake
The second big pawnbroker mistake is a complete lack of understanding of financial metrics in general. In addition to a lack of awareness of the vital role, metrics play in running a business. Specifically, there are Key Performance Indicators (KPIs) pawnbrokers need to understand, track, and evaluate to make sound business decisions. Unfortunately, many pawnbrokers do not have a clue when it comes to metrics.
Understanding The Most Important KPIs
When Pawnshop Consulting Group performs an initial evaluation of a business, we look at about ten different KPIs. The most important of which is Loan Yield, the annual return on the outstanding loan balance. It is essential to intimately understand your loan yield if you plan to achieve any level of measured success in the pawn business. Moreover, comparing your loan yield to your peers in comparable markets is paramount to making strategic business decisions. Service charges in the United States vary from state to state and factor into your loan yield. For instance, California is a low yield state, and Florida is a high yield state. Pawnshop Consulting Group has the state by state data available to forecast yields for stores fully optimized in most any U.S. market. Contact Pawnshop Consulting Group to get a grip on metrics. Stop holding back your business by making this big pawnbroker mistake.
Inventory Yield looks at the combination of inventory turns and margins. This KPI is an indicator of how well a store manages the investment they have in their inventory. It reveals whether you make a reasonable return on your inventory investment and whether you move your inventory. Forfeiture Rate, Net Profit Percentage on Revenues, and Return on Assets are also KPIs to be literate in when running a pawn business.
Pawn Industry Image Improvement
By 1996, the state and national pawnbroking associations and national pawn chains and local stores have spent considerable energy to improve the pawn industry image. The image-enhancing recommendations from many trade journals and association discussions were twofold at that time. One group of suggestions focused on increasing community involvement and giving back by working with the local media to foster communication, taking an active role in community affairs, creating a local business advisory board, or a newsletter. Two, they urged upscaling of the store image with improved lighting, attractive interior, and exterior signs, and an absence of bars. [Jarret C. Oeltjen, Florida Pawnbroking: An Industry in Transition, Vol 23 Florida State University Law Review 995 (1996)]. Not all pawnbrokers followed these recommendations back then, and even though the better part of 25 years the messaging has not wavered, many still do not today.
Poor Store Cleanliness Is The Third Big Pawnbroker Mistake
However, avoiding this big pawnbroker mistake would help their stores if they did. The number of pawnbrokers numb to their environment and blind to the dimly lit disorganization around them is shocking. Foul-smelling, disgusting shops filled with stacks of unknown, lifeless inventory, and bad attitudes are more common than you can imagine. Unfortunately, customers notice disarray, and if they come in, they are not likely to return. The bottom line is that a bright, clean store will perform better than a dark, dank one. If you run an unkempt store, you are making a big pawnbroker mistake.
Lead The Way To Success
Successful pawn operations have strong leadership at the helm. Motivation comes from the top and trailblazing leaders, inspired to look for ways to innovate and improve continuously, motivate everyone around them. Treat employees and customers with dignity and respect and lead by example with a driven work ethic, and success is imminent. In multi-store operations, this concept carries through to the team leaders in individual stores. With the right personnel in place, a pawn operation, most often, will flourish. With growth comes the need for more staff, those hires must be of the same ilk as the winning team you already have in place for continued success.
Purge Negativity and Promote Positivity
Moreover, it is worth noting that, as a pawnbroker and leader of your operation, you set the company culture. Communicating your vision for your business with a sincere integrity and expressing the motivation behind it will rally others. Along the same lines, negativity, no matter where it originates, limits progress. Whether you or a member of your staff come to work with personal baggage, spewing negative energy, find a way to stop it. Certainly, constant complainers who do not want to be there do not make a winning team.
Real Opportunity In An Unpredictable Future
According to the IBISWorld Pawn Shops Industry in the U.S. – Market Research Report, when unemployment rises and consumers become short on income, more households put up their goods as collateral to obtain cash for bills and other immediate personal expenses. In February 2020, this report predicted a rise in national unemployment in 2020 and added the possible increase presented a potential opportunity for the industry. There is no doubt that the significant increase in the worldwide unemployment rate is unfortunate for many but does represent an opportunity for the whole pawn industry. With integrity, we can help others.