Q: My husband and I like to watch that History Channel show Pawn Stars. But I can’t believe that some people would actually sell their valuables to these guys. Don’t they know that you never get a good deal at a pawnshop?
A: I like watching Pawn Stars too and am similarly amazed that someone would bring in, say, their 17th century map and expect to get anything close to top dollar for it. But the show is always entertaining and the items they buy are usually pretty interesting.
Beyond that, I think there is plenty to be gained from watching Rick Harrison, his dad the “old man,” his son Big Hoss, and comic relief Chumleigh do business. These guys know a thing or two about making a profit, and if you pay close attention, there is plenty to be learned from the highly rated show about how to successfully run a small business.
1. Buy low and sell high: This age-old maxim is on full display on Pawn Stars, and in fact, these guys are the best at it. Yet we never really see the “sell high” part on this show, and we don’t have to, because they are so good at the “buy low” part.
I once represented an antiques dealer who worked about 20 hours a week in his shop. He made a great living, played basketball every afternoon, and took vacations all the time. “How do you do it, Johnny?” I once inquired. “It’s all in the buying, Steve” he replied.
Johnny knew, just like the Pawn Stars guys know, that you are almost assured of making a profit if you buy your product at the right price. Do that and the selling becomes the easy part.
2. Be willing to walk: The most interesting part of the show is the negotiations between the sellers and the shop. First of all, you will never see Rick & Co. make the first offer. They know that is the kiss of death in a negotiation.
Second, they know what an item is worth (or if they don’t, they find out), and thus they know how much they need to buy it for in order to make a profit. So they will start their part of any negotiation at a price near where they want to end up, but with some wiggle room left in.
Yet the negotiations almost always go something like this: The seller makes an offer, Rick counters, and the sellers cave in, almost every time, and by shocking amounts.
Seller: “I want $500 for these baseball cards.”
Rick: “Sorry amigo, the best I can do is offer you $150.”
Then, instead of coming back at, say, $450, the seller usually says something like, “Can you do $200?”
Never, never negotiate like this. Come down slowly, incrementally. Never chop your offer in half, for when you do, two things happen:
- The buyer knows you can be had, and
- You lose all leverage
The real leverage you have in any negotiation is your willingness to walk away, to not do the deal. If you want to see Rick Harrison sweat, take your vintage Colt 45 into the shop, know what it is worth, offer a fair price, and then be willing to walk away when you are offered chump change for your treasure.
3. Be careful when working with family: The Harrison family clearly likes working together, but you can bet that there are behind the scenes fireworks that we never see. Such is the case with any family-run business. The challenge when working with loved ones is that it is pretty tough to fire them when things don't work out.
Here is how Rick Harrison puts it in an interview with Inc.: “The best part of my business is working with my family, and the worst part of my business is working with my family. There’s a lot of ground rules that have got to be set before you start and everyone’s got to agree to them. If one person’s putting in a lot more work than the other person and that one person wants more money because of it, that could cause problems in a family-run business.”
So, enjoy Pawn Stars, just don't become so enamored or star struck that you let Rick buy your valuables for pennies on the dollar.
Today’s Tip: What did small businesses hit by Hurricane Sandy learn from their experience? According to a recent survey, The Hartford Small Business Pulse: Storm Sandy, impacted owners suggest that fellow small business owners should review their property insurance coverage, invest in a generator, create a backup of important records and develop a business continuity plan. Good advice, that.