Money service businesses (MSBs), often known as check cashing shops, are becoming more popular throughout the US as opposed to being exclusive to low-income communities. Payday advances and loans are among the many services that check cashing firms provide. With an expected growth of over 5% in 2022, the industry is one in which there is growth. To capitalize on that market, you may launch your own check cashing company.
To become an entrepreneur and establish a business, however, you must first acquire the necessary skills. Thankfully, you can learn everything you need to know from this step-by-step manual to start and grow your profitable check cashing business.
Step 1: Find Out if this is the Right Business for You?
Positives Vs Negatives
|Earn a portion of each check cashed to make some good money.|
Market Expansion – It is anticipated that the industry will continue to grow.
Provide persons in need with immediate financial assistance.
|Rules – Must register with the federal government and be subject to rules|
The possibility of check fraud or bounce-back losses exists
- Size of the market and past growth – The US check cashing services market is now valued $19.1 billion, having grown 2.5% annually over the preceding five years.
- Growth forecast – Check cashing in the US is expected to expand by more than 5% in 2022.
- Number kf Enterprises – 4,604 check cashing establishments will be in operation in the US in 2022, according to statistics.
- Number of employees – The US check cashing sector will employ 140,358 individuals in 2022, according to industry statistics.
Cost of Starting Check Cashing Business
A check-cashing business can be launched for between $55,000 and $115,000 in startup costs. Capital required for check cashing or loaning makes up the majority of the cost. Rental of a storage facility and preparation are additional fees
Is Check Cashing Business Profitable?
States have a range of 1% to 12% for the maximum check cashing fees. Roughly 3% is the average rate. After rent, expenses, and labor, your profit margin should be in the neighborhood of 30%.
You may cash 80,000 checks per week in your first year or two, earning close to $125,000 annually. If we use the 30% margin, this would result in a profit of $37,000. You might deposit $200,000 worth of checks each week as your company grows. You’d bring in a handsome profit of over $94,000 with $312,000 in revenue each year.
- The significant sum of money required to get going.
- Adhering to governmental regulations.
Step 2: Create a Strategy
Identify a Gap
Examine the services, costs, and reviews of check cashing establishments in your neighborhood. You’re aiming to fill a market gap. For instance, the neighborhood may lack a company that cashes personal checks for large sums of money or a check cashing establishment that also sells money orders or prepaid cards.
Your word-of-mouth advertising may gain momentum as a result, drawing customers in right immediately.
- Cashier’s checks
- Checks for wages
- Money from tax refunds
Check with your state for the maximum fee that can be charged for check cashing services. Payday loan interest rates are restricted per state as well. While the average annual percentage rate on payday loans is 400%, the majority of check cashing charges are below 3%. After rent and costs, your profit margin should be in the neighborhood of 30%.
To calculate your markup and final price points after knowing your costs, utilize this Step By Step Profit Margin Calculator. Keep in mind that the prices you use at launch should be flexible and subject to adjustment as the market demands.
Your target market will be diverse and comprise people of all ages, therefore you should diversify your marketing by using platforms like Facebook, Instagram, and TikTok.
Renting a storefront will be necessary. On websites like Craigslist, Crexi, and Instant Offices, you can find commercial space for rent in your neighborhood.
These general guidelines may be helpful to remember while selecting a commercial space:
- Accessible by public transportation in a central location
- With plenty of natural light and ventilation
- As your firm expands, your lease might be made more accommodating.
- A space that is ready to use and doesn’t require any substantial upgrades or repairs
Step 3: Write a Business Plan
A plan is important for any business. This will help you guide your new business through the launch process and keep your eye on your main goals. A business plan also helps possible partners and investors understand your business and its goals better:
- Executive Summary: A brief outline of the whole business plan that should be written after the plan is done.
- Business Overview: A summary of the company’s goals, vision, purpose, assets, and control structure.
- What we make and what we do: Explain in detail what you’re selling.
- Do a SWOT analysis and look at market trends like changes in demand and growth opportunities.
- Competitive Analysis: Look at your key rivals’ strengths and flaws and make a list of what makes your services better.
- Sales and Marketing: Look at the unique selling points (USPs) of your business and come up with sales, marketing, and promotion plans.
- Management Team: An overview of the team’s tasks and professional backgrounds, as well as a business structure.
- Operations Plan: Your company’s operational plan includes how it will get supplies, where it will put its office, what its most important assets and tools are, and other practical details.
- Financial Plan: A three-year plan for money, including start-up costs, a break-even analysis, predictions of profits and losses, cash flow, and a balance sheet.
- Appendix: Add any other papers related to money or business.
Step 3: Create a Marketing Plan
Some of your business will come from passersby or people who find you online, but you should still spend money on marketing! Getting the word out is especially important for new businesses because it will bring in more customers and make people more aware of the brand.
Link your website to your social media accounts once your site is up and running. Social media is a great way to market your business because you can make posts that are interesting and sell your goods.
- Facebook is a great place for paid ads because it lets you target specific groups, such as guys under 50 in the Cleveland area.
- Instagram has the same perks as Facebook, but it’s for a different crowd.
- Website: Search engine optimization (SEO) will help your website show up higher in appropriate search results, which is a key part of making more sales. Make sure your website has clear calls to action. Try changing the size, color, and placement of calls to action like “Book Now” This could bring in a lot more customers.
- Google and Yelp: Getting mentioned on Yelp and Google My Business can be very important for getting people to know about your business and buying from you.
- Signage – Place striking signs at your shop and online.
- Blog creation – Create a blog and post frequently. Share on many websites and vary your content.
- Paid social media advertisements – Use sites that can help you contact your target audience and run focused ads.
- Pay-per-click marketing – Use Google AdWords higher in search results. Do some keyword research beforehand.
- Testimonial – Share client testimonies regarding how your check cashing service benefited them.