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I get asked all the time, where do you think Pawn is going in the future? Developing software every day you need a vision of the future. And since Bravo is industry specific for pawn, I am constantly researching our business. In this email, I have decided to focus on 3 areas.
1. Commodities
2. Regulations
3. Small business.
1. Commodities. – Gold, Silver and Diamonds. This topic is really difficult to forecast and I caution any dependency because it’s market and politics driven. But I believe Gold and Silver will continue to slide downward and within the next 2-3 years gold will slide to $900.00 per ounce. Diamonds will hover and slide as well until Jewelry Market finds its way back into affordability for lower and middle income. It’s China stupid. Global growth is still pointed to ASIA and commodities will hold firm while China develops. The Chinese are spenders and as they move their population to lower and middle class, they will purchase Gold and Diamonds. What about America? I think our lower and middle income earners are spent keeping up, and gold at $900 makes it hard for our general public to afford jewelry, especially anything past a wedding ring.
How does this affect Pawn? What percentage of your assets and business is Gold and Diamonds? 60 – 70 - 80 percent or more? If it’s higher than 30% of your business, it’s really important. The Gold Rush is over and simmering fast. Everyone and their mother are in the gold business today. You are starting to see these fly by night businesses shutting down, but many are looking to get into pawn business, and these future competitors will continue to try to peel off your business.
a. Navigating the price of gold. Really think this through. It’s always profitable when the price goes up, but you can get stuck and go broke on the way down.
b. Supply – There are fewer items out there. It’s time to think about diversifying your loan portfolio to replace the lost revenue from the lower value and supply.
c. Scrap, Refining vs. Retail – it’s time to think about allocating dollars back into selling jewelry to the retail public.
Retail Sales – There was nothing to do with Jewelry over the last 5 years other than smelting and refining, it was the right move. However, the best pawnbrokers are the best retailers. Pawnbrokers that find the most efficient liquidity for their buys and defaulted loans are the ones that win big.
2. Regulations. Yes, a constant stream of more effort will be required over the next 5 years. First you need to know that, I am a Conservative Liberal that believes strongly in Capitalism. I don’t believe that our industry information will be targeted specifically as an impediment to the safety of our government, but our stores, industry, and relationships with the citizens of America are a conduit to a big percentage of the Real America. I have always believed that our customers are the real people of America. Simply, our customers are the ones that are impacted first by the forces of the economy and what they hear on the TV, Radio, Twitter, Facebook, etc. As a side note, be aware that pawnbrokers have a high moral responsibility in our society.
a. The pawnbroker industry is stuck between law enforcement, because we touch merchandise from the public, and banking, we charge interest. We collect data every day for law enforcement and banking. We have all heard over the last 30 years that data is everything. Well these entities are starting to see they can’t live without data. They will be looking for more. The most recent Boston Bombing incident has set precedent how the collection of data can solve what has happened.
b. $Money$ - Taxes. This is what is going to suck. Our transaction will be taxed somehow in the future. Government is going to clamp down on all business’s tax collection.
c. Pawn Stars and Hard Core Pawn TV shows has brought our industry into the mainstream. They are both 2 of most watched shows in the World. The Pawn Industry is no longer just known by those that use them. I happen to love both shows.
Pawnbrokers of the future will have to be compliant and report accurately to Law Enforcement. I mean accurately with accuracy. ID’s, Finger Prints, Images, and more are all growing requirements across America. There are more arrests and citations of pawnbrokers than ever. The ATF has stepped up their audits; the ATF compliance division has increased their staff by 300%. Pawn regulations across America have increased city by city over 100%, and that’s this year, alone. Watch your legislatures changing language from as, to should, to require, to must. Taxes. Many small businesses are known to curtail the reporting of taxes. Bottom line our government is broke, they are spending more, and they will look more aggressively for sources of tax revenues. Be wise.
3. Small Business. – We are the backbone of America. We make it happen. We create jobs. We work hard.
a. Competition. One very clear way to get ahead today is to own your business. Small business growth over the next 5 years will be unprecedented.
b. Big Business. These guys are fierce and want small business market share. From Online to the Big Business on the street they have big money and data.
c. Safety and Real Estate – the cost of opening a safe and secure store today is expensive. Retail locations can be leased at the best prices in over 20 years. Make sure you get great terms and long options.
HOW TO BE A BETTER PAWNBROKER?
What is a better pawnbroker? You all have different ambitions and measures, and they are all correct. For this discussion I will focus on Customers, The Store, and Profitability.
1. FIGURE OUT HOW TO SPEND MORE TIME WITH YOUR CUSTOMERS. I love small business and I believe that small business is what makes America strong. It’s you that makes it happen and it’s why I write articles like this and create software to help you. Bottom line, it’s going to get harder. Only the strong survive and if you play ball the correct way, there is more success available today than ever. Yeah, that’s right. It is all about the customer and you. And while the Big Retail boys have to depend imagery, you have the customer in your hand, face to face, every day. The key though is to figure out how to make sure that you have the time to stay in front of the customer. With all of the pressure that I describe above, today’s small businesses need to figure out how to stay lean, efficient, and profitable.
2. THE STORE NEEDS TO BE PRESENTED IN THE BEST WAY POSSIBLE. This is a huge effort but the experience that you offer your customers is the respect you have for this this business and yourself. I used to look at these factors. Your parking lot, behind and under the counters, back room, safe, bath rooms, light bulbs exterior signs. If these are all in place then your store probably looks pretty good. This is Retail 101, it does not take a lot of money and everybody can do it.
3. PROFITABILITY. At the end of your career or passing along to your kids, it’s all about how much you have created in value. What did you start off with and how much did you sell it for? Just like the pawn business the day you started.
a. The 2 highest prices paid ever for a shop company? Highest price paid by number of stores and dollars in inventory and loans.
i. SuperPawn – 2004
ii. SuperPawn Franchise 2012 – Giles Family Tucson Arizona.
I bring this up for two reasons. There is effort handsomely paid for when done correctly and both were accomplished with the same
• Pawn Systems
• Execution
• Philosophy
THE SECRET TO THE BUSINESS
Well, there are a few dozen secrets and the Giles paid for these secrets through our SuperPawn franchise and the got rich paying for it. So, let’s start off with one of the most important, the acquisition process of the item. The basic item brought over the counter, through the doors of your store, or parked in front of your building. Every item has a form of profit. How do you translate each and every opportunity in a profitable transaction? How do you maximize each opportunity and squeeze out the cost in creating the profit?
I look at incremental profit in each and every ounce of effort. If you write 20 loans a day, 6 days week, times 50 weeks that’s 6000 loans a year. Focus on making $5.00 - $10.00 more per item, this adds up to 30 – 60k per year just on your loan business. Most people focus on margin. What do you think?
I figured this out by analyzing the life cycle of the pawn transaction and the physical effort, cost for dollars invested, the space it took up, how many times you have touch it, for each full transaction. It’s crazy how much time we spend on each and every item and quite frankly there is a ton of waist, an unproductive investment. After you think about it, it becomes obvious and then where is the easiest fat to cut.
answer In the beginning and that’s it. You start the transaction with the best research, compliance, consistency, accuracy, and organization. The transaction should be completed within 3 minutes. When I say complete, I mean the complete life cycle of the transaction.
The system should do everything. And I mean all the way to selling or collecting interest for the item. I mean cash in your register without any extra effort.
Its sounds easier right? It is. It was. It worked.
Steve Mack
Former founder and CEO - SuperPawn
