Know Who and Why
Whether you’re still in the planning stages or looking for an option to grow your business, one option you might want consider is bringing in a partner. A partner can shore up needed expertise, relieve a cumbersome workload and provide additional capital. The partner who provides the right contribution in the right areas can help your company achieve new levels of sales and profitability.
This article doesn’t discuss whether having a partner is right for you or how to arrange a partnership. For more discussion on what goes into those decisions, join us at the forum.
Overlapping vs. Complementary Skills
In a best-case scenario, each partner brings a unique set of skills to the table. One might know miniatures and board games well, while another knows CCGs and RPGs. One brings back-end strength (accounting, bill-paying, and planning) and another has front-end skills (customer service, good employee relationships). Each of you manages the section of the store that you know best. While you might listen to the other partner’s opinions, if you bring unique skills, it’s easy for you to establish authority over that area, which means fewer disagreements.
To a degree, having overlapping skills in a certain area is good, too. If you both agree on something, then it’s a relatively safe bet that you’re making the right call. If you disagree on something (“should we blow out GURPS and use the space for something else?”), then you can state your opinions, weigh each case’s merit and come to a mutual decision.
Some people can make friends with anybody. Five minutes after the door-chime goes off, they’ve made a new friend and been invited into a customer’s home game. A partner with this skill can turn casual gamers into weekly customers and turn browsers into buyers. The skill is worth money.
This broad category includes display management, how to read and design a planogram, floor layout, signage, etc. No matter what products you carry, where you place your store, or how you staff your company, at least one of you must have this skill already or develop it in short order.
Management experience can come from an office, a restaurant, a retail store, or even a home-based web business. It includes skills like recruiting, hiring, training, scheduling, record-keeping, cash management, loss prevention and a host of other skills.
Often, people believe that game category knowledge is enough to qualify them as a partner. In some circumstances, it might. An acute knowledge of a game can certainly generate exceptional sales of that game. A partner who can turn $20,000 per year of Games Workshop sales into $120,000 can be an asset to your company. Similarly, a partner who can improve product sales merely by identifying which products in a line you should add to your inventory and which you should discontinue can add profitability for that line. When you and your partners list your assets, mention which game genres you think you can manage right off the bat or learn in a short period of time. This list might help determine which product lines you’ll carry, and thus influence your initial financial projections.
Money isn’t a skill, but it’s still a valuable asset—in many ways, it’s the most valuable. You can learn inventory management. You can improve your customer service. Getting more cash, though, usually takes much more dedication, time and luck. A partner who brings a cash infusion can be a great benefit. A partner with cash and some other strength can help build a strong store.
The tricky part that requires your judgment is the value of that cash. Skills and time have value, too. A partner who provides nothing but “sweat equity” might put you over the top, too.
Don’t underestimate the value of mundane woodworking, plumbing and drywall experience. A handyman might save you tens of thousands during your build out stage and thousands each year in ongoing repair and maintenance costs. At one point, I worked out the math regarding a full-time handyman on staff: building a whole suite of custom fixtures for the store, keeping the lighting fully operational, creating terrain drop-ins for the game tables, replacing ceiling tiles, painting the walls, etc. It didn’t work for a single store, but If I had had 5-6 stores, I’d have done it.
Not a Partner, But…
Sometimes a prospective partner is not the right candidate for a partnership but might make an excellent employee or demo volunteer. Depending on your needs and their goals, you might offer them a share of ownership after working a certain number of hours, or as a reward for helping a product category reach a certain sales threshold.
Workshop Scenario 1: Startup
Let’s say that you’re tight with money and disciplined with your spending. You’ve saved up $20,000 toward your goal of opening a game store. You and your wife have decent credit and you think that you have $50,000 in home equity. You’ve done your homework and want to open a smallish game store with CCGs, RPGs, minis and board games. You plan to have a small game room with which you’ll run tournaments and demos but no open gaming. You played D&D in high school, almost 20 years ago, and you got back into it when 3rd edition came out. Since then you’ve played some D&D minis and started playing a little Magic: the Gathering with friends.
One potential partner, Anne, is an accountant with $5,000 cash to invest; she’s also good for a line of credit for up to $50,000. She plans to work 10-20 hours per week in the store except for tax season, when she’s too busy with the day job. She’s a casual player of Warhammer and 40k and D&D and she’s played some board games, but she’s not too much into those. Gaming is relaxation for Anne. She gets all the competition he can handle at work.
Brett has a couple of thousand dollars in savings (let’s call it $3,000) and works as an Assistant Manager at Toys R Us. He’s a typical “alpha gamer” and probably has more games in his apartment than your store will when it opens. He’s played everything, with everybody, and he loves them all. Brett has a low credit rating; his history shows regular payments but few purchases made over time. He plans to quit his job and work full time at the store.
Carl brings about $5,000 cash and about $10,000 in credit (on plastic) to the table. He’s a graphic designer by trade and works from home, but business has fallen off and it’s not sustaining him right now. He wants to work full time at the store. He plays non-Magic CCGs and all kinds of RPGs, especially indie games.
Workshop Scenario 2: Store Upgrade
Your store is three years old. You started off with a solid base of GW games and a smattering of RPGs and CCGs, both of which have gone up and down with the market since you opened. You do about $120,000 a year in the miniatures category, including paints and painting accessories. Your sales of other categories (RPGs, CCGs, CMGs) stays in the $10,000 to $15,000 range, and you generate another $8,000 with snacks and miscellaneous uncategorized sales.
You’re nearing the end of your first lease and wish to consider a partnership. Who you bring on, if anyone, determines whether you renew the lease or seek out a larger space. You have learned the industry thanks to your experience, friends met at conventions, and online networks. Now you’re looking to add sales volume by expanding your product lines or shoring up sales in a weak category.
Your first candidate is a CCG demo volunteer named David. He’s had success at other stores, where he sees tournament attendance of 20-30 on a regular basis. At your store, he gets the same 4-8 people showing up, barely reaching the minimum numbers to avoid the tournament “fizzling” from a lack of attendance. He thinks that, by bringing his customer base to you and working solely at your store, he can double or triple sales of the game he plays. He has no cash and isn’t willing to risk his credit, but he builds interest in the games he plays.
Emily is a restaurant manager who works 60 or more hours per week. She can dedicate no more than a half day each week to the store, but she can invest some $10,000 in cash. In return, she wants a limited partnership: a 10% share of any profits and the right to buy games at cost. She’ll participate in the occasional tournament for just about any game, but she can’t commit to a league or other regular events.
Fred is an IT tech. He works on contract, usually for six months to a year at a time. He has good income when he’s working, but his irregular pay and a divorce from a few years ago make for mediocre credit history. He’s offering $20,000 in cash, part of which he wants to spend on a PC LAN, console LAN or both. He’ll maintain it, and when he’s not working, he can work in the store. Fred plays mostly electronic games, but he also plays 40k and certain genres of RPGs.
Which answers are right? Well, that depends on a lot.