A B C - Always Be Closing
A Little About the Author
Sam Reading is the owner of two thriving Pawn Shops in Idaho. He is a family man. He makes each day a day to help other pawnshop owners through support by sharing his business, Pawn Leads, an automation platform designed explicitly for pawnshop owners, and through looking for solutions to help build the pawn industry to its most significant potential.
The only limit to our realization of fulfilled goals of tomorrow will be our doubts of today. You are never too old to set another goal or dream a new one.
There has been a ton of chatter about margins on bullion and precious metals. Gold is coming into pawnshops and going out at an all-time high. Customers continue to seek the highest price they can for their gold and silver. As a pawnshop, you want top dollar for gold melt. Invest your time and energy into earning more money through the concept of “Always Be Closing” this is the ABC of pawnshops.
Pawnbrokers wonder what to offer and have questions about the return on investments they have made buying gold. Some people say 60%, some 90%, some 98% over spot, and the answers differ vastly.
What is the best premium to charge? Is there a right or wrong answer?
The truth and foundation to any good business are to remember that no one knows another person’s company better than the business owner. Every business owner needs to figure out what works for them.
As the business owner of your pawnshop, you know your customers better than anyone. You know the essential elements of each lead that comes into your store and assist your team in closing the deal. Your company’s success depends on your unique knowledge and the model you have to achieve results.
There is a different answer for every operation, and you know what yours is.
Stop Listening to Others
The bottom line is to stop listening to the advice you receive from all the other pawn shops out there and figure out what works best for your business. Do you know your competitors, the ability contained in your team members, what model will work to make you successful, what pricing works for your customers, how about the personal needs of your team and your clients? All these things are unique to your business.
When you take a minute and look at your bank account, the revenue is left after paying overhead. What operating costs does your accounting firm regularly pay to keep your doors open? You understand very well that no one knows your business like you.
Other Pawnbrokers As Support
When others take the time to give you advice, they are doing so out of support and concern that you receive valuable information that will help your business thrive. The missing piece is they don’t know their business model, but they don’t know yours. They understand how to increase gross profit in their stores but don’t have an in-depth understanding of your investors, your buyers, the services you offer, how you implement these, and how you achieve day-to-day success.
Although other pawnshops may have similar characteristics, no other pawnshop is just like yours. You know the bottom line about your avatar, your customers. You understand the elements of your community. You know how to identify quality leads and potential customers. You know what negotiations work within your pawnshop and what negotiation process doesn’t work. You know how your sales team performs and what motivates them to close deals. You know how your team will aim to please you through an agreement made with a customer sent over by your competition and how they know what disappoints you.
Believing in a nice margin is motivating, and we strive to do it. All pawnshop owners want to sell large retail volumes and raise their pawn balance. How this is done is the key. Is what you are doing moving forward each day, taking you towards your goals. Pawn loans equal income. Remember that every deal has its place during the negotiated agreement—profitability matters within your threshold.
Have you considered that several smaller margin deals that close with minor effort and negotiations with the customer will add up to the same as a huge deal that closes and takes an excessive amount of time and effort on your sales team’s part as well as yours? Sometimes it is simply impractical or effective to focus on huge profits when a series of smaller margins add up quickly and raise your bottom line.
Let’s consider a pie cut into many small pieces, all equivalent to 1/16 of the pie compared to a pie cut into large half slices. The result is the pie is still the same size no matter how you cut it. The key is understanding if your store and the sales team have supported two half slices or 16 smaller slices. Which makes sense for your operational process and to your investors?
Some Key Takeaways To Consider:
Turn More Transactions
Every transaction is money in the bank, and instead, it is large or small; by closing a deal, you make some profit. Working with each customer to meet their needs and search for ways to get them involved in your business is a win-win. Customers want to be a part of a pawn group when they need it. Your clients will return again and again and become lifetimers if they feel the essential elements of the service you offer are honest and transparent.
Instead, the customer is selling items or buying them; they want to be involved and know your services meet their needs. Customers need to know that when they bring an item in for a collateral loan, the negotiation process will be apparent to all parties involved and that your team will work together for the best possible outcome.
Do you ask for reviews from your clients when they leave? Reviews ratings are a great way to see how your store is doing within the context of the community you live. How do you measure up against your competitors? Reviews ratings are like a report card and tell businesses what their clients think about them.
Profit More Per Transaction
Each transaction is a business agreement that involves revenue. If you pay too high for a luxury item, you will not be able to sell it later at a reasonable rate so you can make a profit. If you loan too much on an item of value, you may not be able to recoup your cost should the customer default on the loan terms.
Successful business practices involve knowing and understanding how each transaction contributes to your bottom line.
Sales are significant, but understanding how the deal is essential and what works best for your business is critical.
Pricing strategies are essential, but understanding how prices affect your business and what works best for your business is a must. What is the best alternative to get the most out of each transaction based on your business characteristics?
So much of the input another shop gives is based on their operating system, what works for their area of service, and how their buyers respond to what they have on their sales floor. Another huge contributing factor to their perspective is how much money they have on hand to lend as a collateral loan or how much their investors are willing to chip in. If you don’t have the same characteristics, it is essential to remember what works for them may not work for your store.
Work On Your Overhead
One way to impact your business’s bottom line is to look at overhead. Are there areas of unexplained costs? Is there an example of cost savings involving supplies or other fixed costs you can reduce to increase the revenue left? Part of wealth management is knowing your costs, fixed costs, and the expense you experience by doing business.
The ideas and figures you come up with will be different for your business compared to someone else’s. No one knows your pawnshop company as you do, so remember to consider the wise words of other business owners but rely on your finance knowledge. Take the time to meet with your bookkeeper and go over your accounting to identify areas that interest you as a savings area.
An Example of a Skilled Negotiator
The underlying premise:
Look for reasons to say Yes and close a deal.
Letting a deal walk with profit on the table from a customer you want to do business with lets money walk out the door.
As a pawnshop owner, I believe that the value of pawnshop services is wrapped up in a nice margin. I’ve been called out for making 1ok on a deal on more than one occasion when I should have paid more to the customer, and I have also been called out for making less. I believe that every deal has its place during the art of a skilled negotiation process—profitability matters within your threshold. I’ve done deals on 100k+ in bullion with as little as $800 margin at the time. Because it made sense, and I was aware of other issues that needed to be addressed and were more important than just the money I was hoping to make.
Good wealth management starts with understanding how to coordinate all the moving parts of your business financial portfolio and situation into a comprehensive plan. This is much like negotiating within your financial situation, so you know how to and where to include tax savings, how to have investments, and when to leverage outside money to help close a big deal.
The pay at the end of the day is dependent on your ability and effectiveness with wealth management.
Profits start by knowing your own business, your team, your competitors, your clients, your process, your buyers, your sellers, your community, your investors, the market price on retail items, your negotiation skills, the value of a deal lost as well as the value of a deal closed, how one party can impact your business by a positive review as well as be detrimental with a poor review, and lastly know your strategies to find solutions if something isn’t working.
Why because I know my pawnshop business, and I know what works and hasn’t for me.
Cost Per Transaction vs. Profit Per Transaction an Example In My Shop
It is near too impossible to be a leader in a community with crazy margins all the time. No doubt like I have done, you have considered in your strategies how to achieve your business goals pricing objectives best, whether you want to achieve maximum short-term or long-term profits, achieve market stabilization, or increase market share.
For me, team member time value is probably more important to me than the profit percentage on the dollar. Reducing the “cost per transaction” and increasing the “profit per transaction” is what comes down to in my company. This is similar to inventory turn.
If we have 2 500 transactions a month or $10,000, how much are my labor costs, and how much is my fixed overhead per transaction? How can I increase the margin per transaction over the total amount of transactions to net more at the end of the month?
Here’s something to consider. Let’s compare one $20k transaction that my business makes $250 on (1.2% margin) with a deal worth $100 that I make $30 on (30% margin).
As I said before, every deal every day has a place. Are you so cash-flush you need to have more out on the street through a collateral loan? Are you cash tight and need to turn more?
Is your focus on customer satisfaction and building relationship compared to your competition which focuses on profits? Have you set the goal for your business this year to hold the market share of all gold, silver, and precious metals transactions? Maybe as courses by topic this year for your sales teams is to provide each of them with education on negotiation, good negotiated agreement examples, and how to use the negotiating process to their advantage.
One party isn’t better than another. What’s the saying by CS Lewis, “Two heads are better than one, not because either is infallible, but because they are unlikely to go wrong in the same direction.”
Working together as pawnshop owners to help each other negotiate different solutions to meet individual strategies and goals is very helpful. But keep in mind that the other party sees things from their perspective and their business example, which may differ from yours. Pawnshop ownership isn’t set in stone, and one party isn’t infallible while the other is. Problem-solving and considering suggestions will lead to a broader understanding of options. How you choose to apply the tips will lead to your successful business adventures. Key takeaways from the information your provided will help you in moving forward to achieve those dreams you have for your shop.