Pawn Stars Teaches Entrepreneurs How To Not Negotiate

Pawn StarsI was recently working at my kitchen table while my adolescent son was watching the History Channel’s reality TV show Pawn Stars. The show caught my attention, as a litany of extremely unsophisticated individuals sold their family heirlooms and other “treasures” at cut-rate prices to the professional negotiators who star in the show.

Having appeared on a reality TV show, I am well aware of the lack of reality involved in such shows. As the Producer of the show I worked on told me, “There is very little that is real in reality TV.”

Even taking into account the show’s lack of reality, I found it to be an entertaining way to coach my son regarding basic negotiating tactics.


If you haven’t already subscribed yet, subscribe now for
free weekly Infochachkie articles!

Multiple Teachable Moments

The banter was incredibly consistent, irrespective of which of the Pawn Stars was doing the buying. The discussions went something like this:

Pawn Star: “What’s ya got there?”

Rube: “My grandfather told me it is a _________________” or “I’m not sure.”

Pawn Star: “How much do you want for this thing?”

Note: If the item is not a family heirloom, the Pawn Star’s question is: “Do you mind if I ask what you paid for it?” The Rube always tells them the amount they paid.

Rube: States the amount, in the form of a question, often sounding more like a plea. For instance, “I’d like to get $150?”

Pawn Star: (Arms folded and shaking his head back and forth) “That’s not going to happen.”


Rube: Fills the silence with an apologetic statement and in some cases even reduces the amount they “want,” effectively negotiating against themselves.

Pawn Star: Proceeds to explain all the things wrong with the item (chipped paint, cracks, discoloration, etc.). After pointing out the flaws, the Pawn Star says, “Knowing that, how much do you want for it?”

Rube: Continues to negotiate against themselves, often offering yet an even lower price than previously stated, without the Pawn Star ever countering the initial price.

Pawn Star: Once he agrees to a low-ball price, he unfolds his arms, smiles broadly and shakes the Rube’s hand, while saying, “Let’s write up the paperwork.” The handshake psychologically locks in the seller and reduces the chance of seller’s remorse thwarting the deal.

Adolescent Education

My son and I role played the typical Pawn Star negotiation, with me playing the role of the Rube, as follows:

Son (as the Pawn Star): “What’s you got?”

Me (as the Rube): “It is a 1932 decoder ring that was put in cereal boxes by Post. I have seen prices on eBay and private auctions which range between $150 and $225, depending on condition. This item appears to be in VG-EX condition, which makes it worth about $200.” 

Son: “What do you want for it?”

Me: “A market price which leaves you enough room to make a reasonable profit. Since you are the expert, what percent margin do you think is fair?” Focusing on the potential margin diverts the negotiation from the overall price, while highlighting the difference between the market price and the price the Pawn Star is willing to pay.

Son: “How much did you pay for it?”

Me: “That’s not relevant to its current market value or the percent of your margin.”

Son: “Do you have plans for the money?”

Me: “I appreciate you are trying to make conversation, but what I do with the money, if we are able to agree upon a fair price, is not pertinent to our negotiation. You are the expert. What margin would you like to make on this item?”

If this were a real pawn store negotiation, the store owner would likely terminate the discussion once it became clear that they would not be able to extract their typically egregious profit on the transaction.

Tactics You Can Use In Any Negotiation

As noted in Monopoly, there are three skills which are vital to the success of every startup: (i) selling, (ii) networking and, (iii) negotiating. In addition, an entrepreneur’s two most valuable assets are time and money. Thus, judicious Frugality is vital, irrespective of the amount of money a startup has in the bank. Thus, even though pawn store negotiations are atypical of the type you will encounter operating your startup, studying them does yield some valuable lessons, such as:

JV vs. Varsity – The Pawn Stars have a huge home field advantage. They buy and sell items all day, every day. The typical seller might sell a handful of items to a pawn shop in their lifetime. As such, the Pawn Star negotiators are professionals, while the Rubes are rank amateurs.

The paradigm is similar to the relationship of Venture Capitalists (VCs) and entrepreneurs during the fundraising process. The most prolific, serial entrepreneur might raise money from a VC a dozen or so times over their entire careers. Conversely, an experienced VC can easily craft hundreds of fundraising transactions over their professional tenure. This experience puts them at a tremendous advantage, which is why entrepreneurs should offset this experience deficit by relying on battle-tested startup lawyers, as discussed more fully in Roping In The Legal Eagles.

Powerful Knowledge – Not only is negotiating experience important, but knowledge about the item being negotiated is also crucial. A surprising number of sellers on Pawn Stars have little-to-no knowledge about the item they wish to sell, let alone its approximate market price. This significantly handicaps the seller, as they are unable to evaluate the Pawn Star’s counter offers. It also makes the sellers reliant on the Pawn Star’s experts, who have a vested interest in providing information that favors the buyers and not to the sellers.

BATNA – Most of the Pawn Star Rubes do not appear to have a Best Alternative To a Negotiated Agreement (BATNA) in mind when they enter the store. They clearly want, “as much as they can get,” but they generally are unwilling to walk away without a deal. As noted in Maximize Your Exit, it is impossible to obtain an optimal result if you are not prepared to negate the deal.

Qualified Buyer – Just as you should qualify your sales prospects, you should perform similar research before approaching a potential buyer. In one episode of Pawn Stars, a Rube brings in a sketch by well known artist. During the negotiations, the Pawn Star negotiator says something to the effect of, “I run a pawn shop, not an art gallery, I can’t pay that much.” The seller should have listened to this remark and sought out an art gallery. Instead, he sold his art to the Pawn Star at a deep discount.

Thus, one of the key considerations to ensure a successful negotiation is to only enter into discussions with a negotiator capable of agreeing to terms that will maximize your outcome. Getting the “best price” from someone who cannot afford to pay a market rate is not a successful negotiation.

Use of Funds – Rather than trying to maximize the value derived from their item, many Rubes hope to generate enough cash for a specific purpose. In one instance, a Pawn Star seller wanted enough money to go on a trip, while another wanted to buy a gift for their grandchildren. Your intended use of the proceeds should remain separate from the market value of the item being negotiated.

Close the Bid / Ask – In many negotiations, there remains a spread between what the seller wants and what the buyer is willing to pay. One way to bridge this gap is to identify non-financial variables that can supplement the value of the overall deal.

For instance, a startup might request premium service at no charge or smaller, more frequent deliveries to allow them to reduce their inventory levels. In the case of a Pawn Star negotiation, the sellers should first identify one or two items in the store that they want, before the negotiation commences. Once it is clear a gap exists between the “bid and the ask”, they can request that the Pawn Star negotiator “throw in” one or more of the previously identified items, to augment the purchase price. This might be advantageous for the Pawn Star, as the list prices of his products already include a hefty margin and thus the real cost of including one or more additional items is less than their perceived value.

Consignment – One-sided negotiations can sometimes be neutralized by utilizing unconventional approaches. In the case of pawn store sale, the seller might realize more money, albeit over an extended time period, if they partner with the pawn store and sell their item on consignment. In this way, the store would not purchase the item from the seller. Rather, they would place it for sale in their store and once it is purchased, they would retain a portion of the proceeds and remit the balance to the original owner.

Entertaining Tutorial

I encourage you to watch a couple of episodes of Pawn Stars, preferably with your children, and identify the sellers’ mistakes and how they could have obtained a higher price for their treasures. By avoiding some of the more obvious negotiating missteps, you may never become a Pawn Star, but you may become your startup’s negotiating star.

John Greathouse

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

Twitter LinkedIn  

  • Cliff Elam

    Great post, especially the part about teaching your kids.

    When I got rid of 30+ boxes of Sci/Fi from the 70’s/80’s I let my kids sell a few boxes at the used book store. I’ve known the owner for 25 years, so I setup the scenario’s in advance. Each kid sold one box “cold” and then a few hours later went back to sell another box with a negotiating point that was age appropriate: “all the covers are pretty”, “this box has a lot of popular authors”, and “I think you’ll sell these books for $150, I think I should get more than $25.” And then each kid took home more money.

    We love Pawn Stars – and my kids (9, 12, 15) are always yelling at the sellers: look it up on eBay! So they know something important from watching the show\ and doing their own selling.

    What also struck my kids (and me as well) was that there are times when the PS guys *know* the person has a $15K brooch and not a $40 bit of costume tat. And they tell them or bring in the expert. And I have made the point to my kids that this is an important thing to be as well: honorable. (I’m old fashioned, shoot me with a Chumley special!)

    Finally, watch Storage Wars for lessons on how not to manage a multi vendor market. Fascinating.


  • John Greathouse

    Cliff – good points.

    You are correct that the PS guys often to pay a fair price, even when they could probably rip the person off. Not sure how much of this has to do with the cameras rolling, but I want to hope they would do the “right” thing, even if America was not watching.

    Thanks again for your feedback.

  • You need to get some tweet buttons on your site so I can retweet these articles!

    Great insight.

  • Great article. What fun.

    I find that the son does a far worse job of negotiating than his elders, despite a script.

    What reality show were you on?

  • John Greathouse

    Thanks Hartley. We do have a Twitter button in the top right and at the end of each article, but we are open to suggestions for further placements. Let us know what else we can do to make it easier to spread the word!

    Thanks much


  • John Greathouse

    I was on the Food Network’s “Private Chefs of Beverly Hills” – lots of funny stories I can tell you offline…

  • John:

    I guess great minds think alike. I’d been kicking around the idea of a marketing email for my alternative dispute resolution practice incorporating “Lessons from Pawn Stars” for about 2 months. Yesterday, I emailed a draft to my friend Cliff (above) and he sent me a link to your post. You make some excellent points that I did not in my first draft (and might incorporate into a later draft). I was glad to see that someone else views the show as an excellent teaching tool on negotiation.



  • Anonymous


    We will be entering VC negotiations within a few months. My lawyer is young, startup friendly, intelligent, but only has experience being on the VC side of the table. Should I look for someone with more experience working for startups in negotiation?

    Also, I know many of the VCs through my family. They have either known my family or been in business with us for years. How will this effect the negotiations? Is it purely cutthroat, or does having a history generally make things easier on the startup/entrepreneur?

  • Scott,

    Re your lawyer, you might want to check out: If you feel he meets the criteria I outline in this entry, then you are probably OK. Being “young” isn’t a problem, as long as he is familiar with the pitfalls related to startup funding deals. There are certain traps you want to avoid and it is often the provisions which are NOT in the agreement that are more significant than those which ARE in the agreements.

    Re VC with family connections, this is probably to your benefit. However, you know these folks. If you sense they will stab you in the back, then don’t do a deal with them. I am not family with the entrepreneurs I fund, but there is not a single one that I will knife in the back to make a buck. It is too easy to make money otherwise and I value my pride / reputation too highly. You need to assess how highly the folks you are dealing with value their respective reputations…

    Best of luck to you.


  • I disagree with you.

    I think the reason they are still in business is because the Pawn Stars are very straightforward with the negotiations.  They treat it like a business (make a profit), not like an opportunity to screw people over.

    I’ve seen quite a few episodes where the Pawn Store had to pay significantly more because they called in an expert to evaluate.  In these situations, the seller benefited at the expense of the Pawn Star.

    The Pawn Shop is a business, and they are just looking to make a profit.   There are many risks involving trying to resell old items.

    The reason they Pawn Stars terminates the negotiation when the seller will not budge, is because they must make a conscious effort to ensure a profit, or they will go out of business.

    Running a physical business, with physical employees is very expensive.

  • SpiffyDave

    It must kill the Pawn Star guys to have an expert come and and tell the “customer” how much their item is really worth. Would a real pawn store really do something like that? Hardly.

    Great article on negotiating. Very few of those customers hold their own in the store.

  • John Greathouse

    “Spiffy” – I think that the rubes do even more poorly in a ‘real’ pawn shop. We are seeing a very sanitized version on the show. Thanks for the kind words.

  • John Greathouse

    Joe – I don’t think we disagree all that much. I acknowledge that the experts can level the playing field. However, keep in mind that the ‘experts’ are friends of the Pawn Shop, not the folks selling things. In a fake reality TV show, that doesn’t matter much. But if this were a real pawn shop, the expert would simply support the pawn shop owner’s position.

    You are correct, the pawn shop guys have to make money and are taking a risk. I totally agree. My larger point was that entrepreneurs can learn how to avoid leaving too much money on the table by watching how professional negotiators eat the lunch of novices.

Follow John’s Startup Oriented Twitter Stream!

Follow John’s Startup Oriented Twitter Stream. He promises to never Tweet about sunsets, kittens or awesome burritos.

Please support the site
By clicking any of these buttons you help our site to get better
Social PopUP by SumoMe