Buying and Running a Canadian Pawnshop

[Aaron Porter]

Investment Info:

Retail other investment.

Purchase price: $200,000
Cash invested: $100,000
Sale price: $350,000

Located in Alberta Canada. Purchased as an operational pawnshop. Tripled projected annual revenue within 3 months. Continued hands on operation of the business for 4 years before stepping away. Sold out of business in 2017, retained ownership of the property and leased to the business. Sold the property in 2019.

What made you interested in investing in this type of deal?

I originally wanted to purchase the building as it looked abandoned to build a restaurant. However, after finding out that there was an operational pawnshop that had been in business for 50 years and was financially viable I scrapped the restaurant idea and put my efforts into the pawnshop. Being 25 at the time I loved the idea of owning the property and having a business that I could run that had great annual revenue.

How did you find this deal and how did you negotiate it?

I was driving through Cardston visiting my in-laws and was wanting to make a move from where we were living. I saw a small for sale sign in one of the windows and decided to go in and enquire what was for sale as the building looked abandoned. I negotiated directly with the owner who was awesome and I had my father in-law to help with the logistics as he has put together many real-estate deals.

How did you finance this deal?

I borrowed $100,000 at 9% from my father in-law and we (my father in-law and I) negotiated with the selling to vendor take back $100,000 at 6% for 3 years with a balloon payout at 3 years. after 3 years I refinanced my house, which I had done a complete "down to the studs" renovation, and took out the equity to pay off the seller. When I sold the business I paid off my father in-law.

How did you add value to the deal?

I did some minor renovations to the property. Mostly clean-up and declutter. But I also changed the management of the business, upgraded the operating systems and did some minor advertising. I managed the business until the day I sold it. At the time of purchase the annual gross revenue was approximately 350k annually to the time of selling the business the annual gross revenue was almost $1million annual.

What was the outcome?

not only was I able to provide a very good living for my family while I was operating the business I was able to purchase a business with $0 down, and walk away after 4 years with approximately $100K.

Lessons learned? Challenges?

The main lesson that I learned was to no longer do business with family. It causes too many points of contention. I also learned that just because you are spending time working in your business does not mean that you are going to make any more money. The key to good business is to grow and put in the systems and processes to keep the business going whether you are there or not.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

When I sold the property I worked with Mike Walker with Lethbridge Real Estate .com