The first thing Holmes does in the story is identify his new client, Jabez Williams, as a pawnbroker. Williams says he is looking for the Red-headed League after a representative gave him a job and then disappeared one day. Holmes can tell immediately that the case is not what it seems, and it is possible that the man Williams has employed is not what it seems. After evaluating the case, Holmes decides to take it. He is quite sure it will be interesting. He finds the problem fascinating, because he is pretty sure the causes are more sophisticated than Williams believes.
Williams was supposedly chosen because he had red hair, and was paid to do nothing but copy from an encyclopedia. He wasn’t sure it was legitimate, but he took seven sheets of paper to the office and found everything ready for him.
Upon visiting the shop, it does not take Holmes long to identify several clues. The man has dirt on his knees as if he has been kneeling. He spends a lot of time in the basement. He works for less than the going rate. A comparison between the new employee’s features and a man he knows reveals that the assistant is actually John Clay.
“John Clay, the murderer, thief, smasher, and forger. He's a young man, Mr. Merryweather, but he is at the head of his profession, and I would rather have my bracelets on him than on any criminal in London. –
Now that he knows who the man really is, Holmes can begin to figure out what is really going on. Since Clay is a criminal, it is pretty clear that he is up to no good. After visiting the shop, Holmes began to devise a plan. Evaluating the situation, he taps on the walkway in front of the shop and determines that it is hollow. He must weigh his options, because he does not want to spook Clay. He chooses to develop his plan carefully. He decides that to implement his plan, he needs police. After selecting them carefully and discussing the situation with cops, he gets a consensus that the man has dug a tunnel to the bank next door.
As soon as the men break in, Holmes springs into action. He knows exactly who is there and how many there are, and they are soon arrested.