The following is an interview of entrepreneur Randy Russotti as conducted over email by Jaime Lewis on September 5, 2012. Mr. Russotti was using the idea of opening a pawn shop for the purposes of this interview.
Q: Tell me a little bit about your plan for a pawn shop.
A: “I have been in the real estate business for over 30 years and have extensive experience in the commercial end with buildings and leases. I have a close friend in North Carolina that is already a gun dealer and has all the licenses and has all the paperwork for background checks with the FBI. He is also highly skilled at repairing guns and all the ammunition and styles of weapons and most important he has been going to gun shows for almost 40 years so he asked me if I could find a location and be a business partner. My degree was in finance and marketing and a minor in accounting and my best friend is an attorney in New York who has offered to do all our paperwork and start our S corporation name when we are ready. A close friend Tammi at a local print shop is a web page designer and my gun dealer partner is already active on Ebay and other sites trading weapons and ammunition.”
Q: Wow, it sounds like you have a lot of stuff already in place! But, what challenges do you expect to face as you open your store?
A: “I am looking at 4 possible locations at this time. Two are foreclosures owned by local banks and they will structure a deal where I can lease purchase the properties with the lease payments going toward a principal reduction on an agreed upon price for two years. They both need two years of steady payments then the lease will become a mortgage at 4% interest spread over 20 years. I will sell Guns, ammunition, electronics,sporting goods and jewelry since one of my employees is a licensed jeweler. A big part of the pawn business is loaning people money and jewelry is a popular item for collateral.”
Q: How many employees do you hope to have? What challenges are you expecting to face as you open your store, and how will you handle them?
A: “I am hoping to start with 4 total. An expert in guns and ammo. A licensed jeweler for that area and two others one for office and administrative and one to run the front desk for electronics, jewelry and musical instruments, sporting goods, motor cycles and 4 wheelers and lawn equipment. Start up costs for inventory to stock product will take capital from all 3 investors lined up. We are like a consumer store and a lending institution but we will lend money at roughly 22% and the return comes slowly back in cash every month. But we will have collateral that by state law has to be held for as long as 30 days. But long term the numbers look good and my investors have plenty of capital to handle a long term successful business and they will own a percentage of the company as well.”
Q: What of your past experiences will influence how you operate your present venture?
A: “I ran a company with 29 employees grossing over $1.5 million in gross revenue and learned many many valuable business and entrepreneur lessons in this venture. Prior to that I owned and operated 23 apartments in Lauderdale by the sea in Florida. My real commercial real estate business is essential since my partners want to utilize the willingness and desperate measures the local banks are offering us. We have one location that is perfect with a parking lot one partner would buy across the street for a car lot for used cars we can take in and loan collateral on by securing the title. I was also a mortgage broker in Florida and I am very familiar with crunching numbers and I have always done my own accounting.”
Q: I can tell your experience will benefit you greatly. What will be your marketing strategy/target market?
A: “We will do a billboard [near] the location and the bank has offered to finance it at a discount if we sign for 12 months. Our target market is wide because both my licensed jeweler who is well connected in Miami and my Gun broker who sells, trades and buys guns world wide via the internet leaves a vast and open plethora of opportunities. Locally we will lend money at 22% and loan out about one third of what my experts think we can get. Electronics a bit tricky since the prices for new stuff falls constantly. When the economy is down, lots of people are pawning, few are buying so real cash out the door and having used inventory that I must sell is one of my biggest concerns. An ideal customer for me or target audience will be the one who pays the interest every 30 days and keeps re pawning the collateral each month. The yearly return on my investment is over %200 percent. There will be incredible bargains since many never pick the items back up they just wanted the cash and you never see them again until they have something else to pawn. WE BUY GOLD!”
Q: What tactics will you use to help overcome your competition?
A: “Quality service and reputation is very important. Running a stable business in the community. I work well with law officers who get all of our tickets each day. I know how to loan people money and service better than my competitors. I have studied them in depth in the area and the surrounding counties. I also have plenty of time to study my competition and get ready.”
Q: How do you plan to fight the stereotypical negative connotations that go along with pawn shops?
A: “That is the biggest problem we face. It simply goes with the difficult business law connected and stolen property, pawn tickets reviewed daily by the local police. All my partners, friends and investors have asked this question and I have not found a quality answer from anyone including competitors shops when I also asked this question.”
Q: What is your plan for insuring that you don’t purchase stolen goods from clients?
A: “Everyday I will prepare a list or pawn ticket. Item pawned, amount of money loaned, serial numbers, inspection,and record driver license and all name, address and information standard for NC privacy law and the pawn broker gives all the copies of each days tickets to the local police officer that handles our paperwork daily. I cannot sell any item for a certain number of days period until all police investigations are complete 90 days held in storage minimum by law so as to allow claims by police of stolen property can be investigated.”
Q: What security measures do you plan to put in place in your store?
A: “One of the locations we are looking into is a bank and they have a reputable security company in place that is local. The bank has a vault as well. The other places we will have to install an extensive security system and the locations are all in the center of town. Response time by local police is estimated at under 4 minutes from alarm going off. I have 4 insurance companies as well willing to give quotes based on the amount needed to insure. Minimal amounts of cash will be kept on the premises and we will have a minimum of 2 bank locations with adequate security boxes. Tickets of cash collected each day will be accounted for and multiple security cameras on both the register and other locations will run 24 hours a day and sent to a back up storage drive.”
Q: Do you have any final words of wisdom for an aspiring entrepreneur?
A: “[U]nderstand the importance of accounting and finance in any business venture. Do as much research as possible on your competitors and study your investment risk. Financial resources are hard to come by but if the first capital infusion is successfully implemented then banks and venture capitalists are more likely to jump in. They want to see you have your own personal financial skin in the game and at risk and then they feel much more inclined to help you grow. Grow slow and gradual and keep your initial overhead low. There is always plenty of time for expansion and growth for most businesses.”
