Negotiating Like A Pawn Star
February 25, 2011 | By Kevin Vela
If you haven’t yet tuned into the History Channel’s Pawn Stars, I highly recommend that you check it out. It’s 1 part history, 1 part comedic gold, and 3 parts business acumen. The pawn shop is successful because they buy low, and sell high. And these guys have turned buying low into an art form. They follow a few simple rules for negotiating, and I think these translate beautifully for any startup or small business who will likely be negotiating on a regular basis.
Know your stuff
If you are not prepared, the other guy will be. Now I’m not sure if Rich (he’s on camera the most) is the smartest guy on the planet, or if the producers feed him his info, but he certainly is well prepared to negotiate on every item that comes into his store. And when he doesn’t know, he calls in an expert.
This is a great lesson for everyone. One reason why Rich is so successful is that he thoroughly knows the items he’s negotiating over. He knows their value, their lineage, and their resale market. Oftentimes, he knows significantly more about all three of these areas than the item’s owner, and this always gives him the upper hand.
Keep emotion out of it
From time to time, you will see the Gold and Silver Pawn Shop guys get really excited about an item when it walks in the door. But this excitement disappears when the negotiations start. In fact, you’d think that the Pawn Stars guys really don’t even want the item anymore. Rich and crew know that the owner of the item is a) looking for money and b) at one time was attached to the item and no longer is, or c) found the item by pure dumb luck and is getting a free payday.
The Pawn Stars guys are largely immune to emotion due to their experience and the fact that their job demands it to be successful, but it doesn’t prevent them from using a lack of emotion to their advantage.
Hold your ground
Here’s a recent negotiation that I saw:
Rich: What do you want for it?
Naïve Item Owner: $10k
Rich (laughs): I can give you $2k.
Naïve Item Owner: How about $7,500?
Rich: I can go up to $2,500, but that’s as high as I’ll go.
Naïve Item Owner: How about $3k?
Rich: I’ll give you $2,800 but that’s my final offer.
Naïve Item Owner: Deal.
By staying close to his original offer, and moving in smaller increments at each rung, Rich has systematically convinced the other side that the value of the item is really much, much closer to his beginning offer. The first rung is likely a shock to the owner, but once the owner commits to the negotiation by staying in it, Rich knows that he has the owner hooked. Also note that Rich never starts the negotiation. Always let the other side go first, so that you can react to them. It’s much easier to set your limits after you know their starting point.
Be willing to walk away
This is the ultimate close, and one that the Pawn Stars guys use often. If you go into the negotiation willing to walk away, then you’ll never get a deal that you don’t like.
Posted in General Business
Kevin Vela is the managing partner at Vela Wood. He focuses his practice in the areas of venture financing, mergers & acquisitions, corporate law, capital raises, and real estate investment activities. You can see Kevin’s attorney profile HERE.