Introducing FLGS

I’ve learned a lot about game retail since I bought my store. I’ve considered re-entering that arena several times under different circumstances, and I’ve recently come up with a situation that allows me the best of all worlds. I can keep doing what I’m doing and still be a retailer. I’ve started a company called FLGS. If you’re not already familiar with the acronym, it stands for Friendly Local Game Store.

The company includes two partners—me and a friend I’ve known since ’97 or ’98. Phase I of the plan calls for the two of us to work conventions only until we bulk up to a certain amount of inventory on hand. Working only at conventions gives us a few critical advantages. It allows us to work around other obligations. There’s no rent. We don’t need to commit to a $100,000 commercial lease. We have no employees to pay. I’ll share more details about the exact figures later, but let’s just say it’s way cheaper than most of the plans I get paid to write.

The Convention

RapierCon has a decent history—8 years or so. It’s a small con, with between 200 and 300 attendees. The convention sees fairly low turnover. It’s the same faces every year for the most part. The core attendees are members of a miniatures-based game club that sponsors the con. They play Games Workshop games, but historicals are their forte. Old white guys are the norm.

As it turns out, that’s my old customer base. I knew I’d run into a lot of faces I knew. I could even place most of the names. I was not wrong.

I figured it would be small enough and casual enough to make a great shake-down cruise.

The Good

Knowing a lot of the attendees by name (and army in many cases) helped. Many people came over just to say hello. They might not have made a special trip to the table otherwise.

For the opening cash, I opened up my wallet and broke into a change jar. Between the two I had $150, which I figured would be plenty. Most transactions would be electronic, through Square. Of the cash, some would be exact change, some would be with small bills that would provide change for future transactions, and some would be large bills that needed change. A trip to the bank turned it into the denominations I wanted. Now that’s fixed and that money stays with the cash box for re-use. Easy peasy.

The Bad

We set up late at the convention. That was my fault. I made an assumption about what time the event was due to start based on previous events, and I was wrong. So we missed out on a few hours of sales. As it turns out, the convention hall was nearly empty during that time. We probably didn’t miss out on much sales. After all, those people were still around later, and there were no other vendors with our product mix.

We weren’t able to hang our signs. We didn’t have double-sided tape. We had some duct tape, but it was apparently very old. The adhesive simply didn’t hold. The sign fell down several times, and then we gave up. In retrospect, we should have been able to secure them to the front of the tables, but I just thought about that.

We didn’t get as much merchandise as I wanted and so didn’t get the fixtures I wanted to display them the way I had planned. More inventory would have generated more sales. Better display would have generated more sales.

I’d hoped to add some surplus D&D Miniatures from my own collection, but I didn’t find time to sort them before the convention. I have a LOT of minis. I had a decent collection already, and then I bought out the personal collection from the guy who bought my old game store. I think he claimed it was over 2,000 figures. I have many figs set aside now. They fill a medium-sized box. I’m guessing I have 500 or more figs in there for sale. I’ll keep culling my collection for another week or so.

The Lessons

The con kit needs double-sided tape for hanging the sign. And scissors.

My neighbors with the awesome dice game are graphic designers by trade. They had beautiful banner signs that they purchased for cheap. They were full-color and cheaper than our one-color vinyl crap. I’m going to learn where they had those made and improve our image.

We had planned to have extra people available if sales required it. It went smoothly. We did not need them.

We need a price gun and tags. Or dots and a pen.

I intend to run a game next time, if possible. I’ll let players keep the D&D miniatures that I provide for their characters and coupons for free dice with a t-shirt purchase.

Our t-shirt prices were variable based on size. We’re going to average them out (in our favor, of course) and charge a flat fee. I don’t like the idea of charging big people more for their clothes. There’s no point in making them feel self-conscious about their size like that.

The convention host said he preferred cash for the table fees. Not “required” cash. Next time, I plan to offer a mix of product for prizes and some cash. That could save anywhere from $15 to $75.

The Numbers

Our sales goal was an ambitious $1,000. I say ambitious because the convention was going to have 300 people or fewer. Anything more than $1/head is a good convention, and setting a goal of over $3/head would be high for many people. Personally, I was unhappy with anything less than $1,000 after several years at my store before, but this situation was going to face several disadvantages versus that one. For one, we had much less inventory to choose from.

We spent more than I would have liked on books, but it was on short notice and the main point was to bulk up to a “critical mass” of inventory. We spent $600 on the books and $185 on 3 booster boxes of Magic. We had some dice on hand and purchased some dice bags for $200 (it was a bulk buy). The main edge we had was a consignment deal to sell t-shirts from a humorous t-shirt vendor with an established local presence.

We also bought some goods, as we had planned. We bought some Games Workshop and Magic at the convention. Some of the bulk books we picked up had some collector value. We pulled those aside before the con to sell later on eBay.

Fixed Expenses
Fictitious Name Registration: $75
Incorporation: $75
Sign: $45
RPG titles: $600
Dice/bags: $400
Magic boosters: $185
Purchases at the event: $55
Cash box: $0
Opening cash: $150
Total: $1585

Event-specific Expenses
Table fees: $130
CoGS: $465
Travel: $0
Food: $0
Parking: $0
Total: $595

Income
Convention sales $800
eBay sales afterward: $425

Total Income: $1225
Total Expenses this con: $595
Positive cash flow this con: $630

So after one event, we’ve recouped nearly half of our total investment and still have plenty of merchandise to sell. In fact, we’ll have more than we started with, because the entire plan revolves around reinvesting our gains into inventory after paying for our fixed costs. That $630 is going to buy more games. We’ll also have those D&D minis I mentioned.

Our next event is coming up in a month. The convention has a completely different flavor. There will be girls there. There will be young people there. Many of them will be cosplayers. There won’t be a bunch of old grognards. However, there will be more people—around 900 attendees, based on recent trends. We’re counting on less sales per person because of the different flavor. Fortunately, it’s also local, so we won’t have any travel expenses.

Our sales goal is $2,000 for this one. I don’t plan to do a report after each event, but I’ll be glad to let you know how it goes in the forum if anybody’s interested.

Don’t stop at one tier of the industry.

It’s important to have vision for how you want your company to develop beyond the opening stages. One goal for later stage growth is vertical integration.

Vertical integration means adding elements from other tiers to your operations. For retailers, that means distribution and game production. Each of these steps involves creating a new business model—and you know how hard that can be. It’s not something to be taken lightly.

Several companies have splashed this concept. Eden Studios, Reaper Miniatures, and Guild of Blades operate retail stores. Many manufacturers operate online stores selling products other than their own. I’ve written very viable plans for others manufacturers who wish to expand into retail.

At least two major distributors have operated chains of retail stores. Games Workshop actively engages in all three tiers. They’re certainly a strong model for any expansion along these lines.

Vertical integration is the secret of the indescribably wealthy. Carnegie, Rockefeller, and others became explosively wealthy by controlling every step of their industries, from pulling raw goods out of the ground to putting them in the customer’s hands. Modern large retailers do this in the form of generic products. Publix, Sam’s Club, and Toys R Us all have extensive production capabilities.

Retail

You’re already doing this part, right?

If you’re a manufacturer or distributor and want to consider adding retail stores to your company, okay. Let’s talk.

Obviously, you gain increased profit by collecting the retail share as well. In fact, if you’re managing all three tiers, you’ll collect everything but the production cost. For $40 retail book that cost you $8 to make, you’ll collect $32. Retailers see the largest share of a product’s sales dollar, so you can see more sales per item sold.

Manufacturer to Retail

Adding physical stores to a manufacturer allows opportunities to promote your products to new customers—something most small publishers need. Small publishers tend to market their products to existing gamers. The storefront allows you a chance to make new gamers out of people who walk in out of curiosity.

Having this second tier provides manufacturers with some even cash flow. You know that cash flow is an awful thing. You pay for all of the development and production costs associated with a product weeks or even months before you start collecting for sales. Having a retail store smooths your cash flow. Games sell every day. Money comes in every day. Cash flow is less awful.

Distributor to Retail

If you’re a distributor wanting to get into retail, you have the advantage of having secure supply lines and a ready inventory already in stock, reducing the amount of capital you need to raise to open the store. That might cut 2/3 of the opening cost for you (or at least defer most of it, since you’ll have to restock those goods to continue selling them). Some distributors have found themselves getting into retail by taking over stores that found themselves deeply in debt. If you have stores in that situation and are thinking about going into retail, forgiving debt in exchange for a transfer of ownership could be an easy in.

Distribution

Buying from publishers at the distribution discount and selling at retail offers a significant improvement in profit margin per item. However, the amount you’d have to buy to get those terms is much higher than you’ll ever see in a single store. Therefore, if you want to buy on those terms, you’ll have to find other customers to whom you can tell.

Retail rent and warehouse rent are very different in cost. You aren’t likely to be able to run even a small warehouse out of your store. You’ll need to find another location, get manufacturer accounts, get retailer accounts, and staff your new operation.

I’d do this part last if I were pursuing all three tiers. By its nature, you can’t dabble. Distribution takes the largest up-front investment. Also, you’ll upset your current distributors once you become their competitor. It might not be worthwhile even if you were to grow very large.

Estimates for the cost of starting a distribution center vary with who you ask. I’ll risk making a declarative statement by estimating the startup cost at $250,000 with a capital reserve of $40,000 to $60,000, exclusive of owner salary. That assumes a pretty cherry-picked selection; you could easily spend ten times that much trying to provide a broader SKU offering.

Production

You don’t have to produce and expensive board game or a collectible card game. You could produce role-playing game adventures, or non-collectible card games, either of which is far less expensive. You could also produce a dizzying array of accessories like generic map packs, cardboard cutouts for use as miniatures, dice, painting stations, t-shirts, or other thematically-related items.

You won’t support a manufacturing division out of the sales potential for a single store, except on a very small scale. Production can be an excellent addition if you have sales channels outside of your store, like an aggressive convention schedule or a big online presence.

Production can be relatively inexpensive. As I mentioned in Link The 1k Company Revisited, you can start a gaming company for cheap. Better yet, you can remove some duplication if you already have a storefront. Putting out some accessories can cost as little as a couple of hundred dollars. Creating a board game based on the Avengers movie might cost up to a million dollars with licensing fees. Here’s a tip: because you’re already faced with a limited customer base, look for something with repeat sales potential.

If you’re a distributor, you have a couple of other options for getting involved with game production. If a game does well for you, but not for other distributors, maybe it wasn’t a failing of the game, but on their promotion. You might make the publisher an offer for rights to the game (exclusive or otherwise). A publisher who goes out of business might be interested in recovering a part of his loss by selling off rights along with remaining inventory. If the game is worthwhile, you might even be able to hire the publisher full-time, to continue developing the lines that interested you and roll out new products for your newly vertically-integrated company.

Buy out your competition with their money.

In December I attended a trade show in another industry. The atmosphere was very positive overall. One speaker mentioned one account who had been with him for 10 years—at the rate of $22 million a year. Another one had bought out 60 competitors. While that person was interesting, I was far more interested in the person I met at a round table discussion. I will call him…Buck. Buck had bought out 7 competitors in the past five years or so. Five of them work for him now. Best of all, he had done it without spending a dime. I want to share how Buck structured his purchases.

The Offer

It’s simple. Offer a percentage of the sales their store generates for a period of time. If your offer is 15% for 3 years, and their store does $200,000 a year, they get $30,000 a year. At the end of 3 years, they’ll have $90,000.

Your Benefits

Your benefit is obvious: you’re not out any cash. You don’t have to worry about your credit rating, applying for a loan, or how you’ll handle the repayments.

You can buy a business of any size this way. If you’re doing $115,000 per year with your Magic-and-Pathfinder shop, you can buy out a full-service retailer down the road who’s doing $400,000 a year. If it’s cash-positive, you can take on anything.

This cash-forward situation allows you to grow at an unlimited pace. As long as you can close the deals, you can buy the stores.

If the business you buy out decreases in productivity, your cost decreases likewise. This reduces your risk if the business slows or tanks. If you had a conventional bank note to pay back and sales dropped by 50%, you’d be in trouble. In this scenario, you reduce your expenses at the same time as you reduce your income.

You still have the benefits of growth by more traditional means: you enjoy the efficiency and purchasing power of increased volume. Because each store naturally has a different sales mix, you can diversify your sales to reduce the risk of manufacturer failure. Most importantly, you should be able to afford a greater personal salary.

Their Benefits

The seller has a passive income that he can rely on. Because your offer doesn’t pinch your cash flow, you’re very likely to be able to make the payments.

The seller can choose to take the income and rest from working. He can go to school for a year or two while you pay his bills. Or, he can continue to work elsewhere and push himself up into a higher tax rate.

The seller can see a greater total sale price with this offer than with a conventional buyout. Also, he stands to benefit if sales increase. If you’re growing through acquisitions, it’s likely that you’re doing something right. You should see sales increases. If you extend an offer of employment, the seller can work to increase sales, thereby directly increasing his personal earnings. I’ve seen somebody ask for $95,000 for the sale of his business and end up earning over $120,000.

Flexibility

Between adjusting the rate and the term of the buyout you can make an offer that works for both of you. Variations include

• offering an additional percentage if the seller works for you managing his former store
• offering a nominal percentage of ownership in your company as an incentive along with the sale
• offering an advance—an up-front payment taken from the expected percentage payment

If the seller insists on getting money up front as a condition of the sale, offer a advance against future payments. If the payments are structured at 10% of gross sales, and gross sales for the first months are expected to be $12,000 each, then you have about $3,600 to play with. Offer $3,000 down, to be deducted at $1,000 a month from the first 3 months. You pay the seller $200/month for those three months, then resume paying him about about $1,200/month—the exact figure dependent on those sales, of course.

You can remove some of the seller’s perceived need for up-front payments by negotiating to take on his debts. If he owes $5,000 to distributors, offer to buy that debt. Pay what you can to the distributors and catch them up as you can. You might be able to pay them an extra amount per statement or per month.

Example

Let’s say that you have a store with decent sales and want to buy a smallish store, expand it into the suite next door and add in-store gaming. Small Game Store is doing $100,000 in annual sales. You’re doing $350,000 at your current store.

Everything goes well and the seller agrees to 12% of his gross sales for 3 years, transfers all of his debt to you, and agrees to manage the store for you (thus being directly responsible for his own future income from the sale). You spend cash on the build out, merchandise, and marketing. Don’t spend it on your purchase.

Bob, your new store manager, gets a salary while working for you, and he also earns 12% of what improves to $200,000 in short order with your improvements. After accounting for the growth period, Bob might earn $62,000 for a store you might have paid $10,000 for if you’d paid cash. You also gain a motivated manager to run your store for you. He earns money when you succeed. Your company’s sales volume increases more than it would if you had looted the store and left the empty shell behind.

And Updated for Technology

Precedent

Way back in the Neolithic Age of 1998, Sandy Antunes wrote one of the iconic article on this site, The 1k Company. Technology has aged the article, though, and it’s time to revisit it. I asked Sandy about it, and he said I’m welcome to contribute what I can.

Just for disclosure, I will note that I have not necessarily done all of these things.

Sandy spent some space discussing motivation. I don’t care about all that. It all still applies equally. Technology hasn’t changed that.

Step One: Get Capital

Marshal your resources. You can use cash on hand, or you can take out a small loan. You can also use a new type of funding: crowdfunding. Sites like offer a medium for you to promote your product to fans and solicit funding. Sandy addressed Kickstarter recently, but here’s a summary.

Create an account and then create a project. Your project is your game. Make a video telling everyone how awesome it is. Offer incentives for donations. For a $20 donation, a donor might get a copy of your game. For $30, they get a dead-tree version and the PDF.

Tip: Prestige incentives work well with the role-playing game crowd. If you have name recognition, a signed copy is a fine incentive. Including the donor as a character in a game appeals to many people, too. It’s worth an hour or two to browse the site and see how others have set up their incentives.

Set a goal for your financing. If you reach your goal, you get the money, minus a small fee. If you fail to reach your goal, the money is returned to the donors. If you exceed your goal, you get all of the money, so it’s a good idea to set your goal low.

Ostensibly, Kickstarter is for creators, not commercial ventures. You can use it to fund a book but not your administration costs.

Indiegogo.com is a crowdsourcing site for commercial ventures. You can use the money for anything, and you can arrange to collect all the donations, regardless of your goal.

Step 2: Look Like A Business

This element has not changed in principle, but one detail is better. The cost of a DBA is about the same, at least locally. Buying pizza in exchange for a logo is certainly still viable. Creating and distributing a cheap flyer—same there, too.

The bennie is that you can get 250 free business cards from vistaprint.com. That knocks $15 off your costs right there (you still have to pay to get them shipped).

Having recently joined the GPA, I’m not certain it’s a no-brainer to join. The main value used to be in its mailing list, but there are lots of places online to communicate now. Publisher membership is now $85, much higher than the $20 Sandy quoted years ago. You can find other ways to network at less cost. The secret “weasel” list, for one. Less mysteriously, you could join the GAMA-sponsored Game Industry Network on Delphi forums at no charge.

I will add these items: create a website, a Facebook page, a Google+ account, and a Twitter account. Securing the domain name for your site costs $10 or less these days. The website costs about $12 per month for a free template and one e-mail address from Godaddy.com or several other hosts (fatcow.com, bluehost.com, ipage.com, etc). The other items are free. Once you have enough traffic, you can get a free message board from Simple Machines Forum or phpBB for your site. You want all of these Internet features because people access company information in different ways. If you tweet something, for example, only about 30% of your Facebook uses will see it.

You can also sync your social media so that you can make one announcement that will reach all of your followers, regardless of how they keep in touch.

Looking Like a Business $156

1. Logo $20
2. Business cards $5
3. DBA Filing $75
4. Flyers $10
5. Internet presence $46 (registration and promoting the game 3 months before its release)

Step Three: Create Your Game

The assumption is that you already have a manuscript. If not, do that first.

We’re assuming a lot of sweat equity and friends’ contributions during this stage. Sandy’s plan calls for donations for skilled trades which can be costly. If you don’t have any friends, it’ll cost a lot more. I will note that there are two free applications out there to help in your writing and design. One is OpenOffice, which is similar to Microsoft’s Word, Excel, Power Point, and something else. As mentioned, it’s free, its files are much smaller than Word docs, and it can export directly to a PDF, which can be very helpful.

The other is Scribus, a layout application. If you write your manuscript in OpenOffice, you can export it into Scribus for your layout. Or you could write the whole work in Scribus.

Print-on-demand shops are more numerous now than when Sandy mentioned them. Here’s a partial list

• Lulu.com
• Guild of Blades Retail
• Createspace.com
• Lightningsource.com
• Publishers Graphics (pubgraphics.com)

Some require a one-time setup fee. You always pay for shipping, unless you live close enough to go pick up your books yourself. Let’s go with Sandy’s assumption of 25 books that you might take to a convention.

You do not have to register your copyright. The main advantage of registration is that, in case of infringement, you can sue for punitive damages in addition to actual damages. Since the byword here is “cheap”, not “smart”, let’s skip it and save on the cash.

Finally, note that printing is entirely optional. If you simply want to sell one at a time online as customers order them, you don’t have to print any books at all. Or you could sell PDFs through your online vendors, as well as a variety of formats for different electronic readers: epub, Kindle, html, BBeB, etc. Obviously, these have no printing costs at all.

Printing $115

1. Writing (DIY)
2. Editing (DIY)
3. Layout (DIY)
4. Printing $100
5. Shipping $15

Step Four: Setting Up Your Sales

Sign up as a publisher with OneBookShelf. The cost is a one-time $40. You’ll be able to sell print and PDF books through DriveThruRPG, RPGNow, and other sites. Although OBS sees the lion’s share of online sales, you can create accounts with other sources, too. Here’s a convenient list:

• Rpgnow.com
• Paizo.com
• e23 (e23.sjgames.com)
• Lightningsource.com
• Indie Press Revolution
• Lulu.com

Your online vendors handle sales through the Internet. You need only worry about direct sales at conventions, local game stores, and whatnot. For handling those sales, you visit Squareup.com. Sign up for a free account, and they’ll send you a cool device (free) that you can use for swiping credit cards via your smartphone. The device plugs right into your audio jack. Swipe the card and the money goes from their account to yours. You can e-mail the customer a receipt when you run the transaction.

Other companies offer similar methods, including Intuit.

Getting Wired $60

1. Internet access
2. Website $10
3. Domain Registration $10
4. Online vendor agreement $40
5. Credit card processing method FREE

Step Five: Marketing

For Internet marketing, you’ll use your free social media. Post daily to Facebook and Google plus. Tweet at least as often. Don’t underestimate its value because it’s free.

Convention presence can be a big boost, especially if you go to one of the big conventions, like GenCon, Origins, or DragonCon. You might meet retailers or distributors who want to carry your game, volunteers who want to promote it, and freelance artists and writers who want to work for you. Go as a guest, not a vendor. Vendor booths at the big cons can be $1,000 or more. Run games to get free or reduced entry. You might also go as a volunteer for another game publisher, but that might not leave enough time to promote your own game.

Although the print market for reviews has dwindled down to almost nothing, there are a couple of magazines still on shelves. Knights of the Dinner Table is one. You can send most reviewers a PDF version of your game for no cost. A good review gives you publicity. A bad review gives you publicity and might not harm sales.

Working the Street: $200

Sandy’s assumptions are still valid.

Conclusion

Innovations—nearly all of them online—have made starting a role-playing game company cheaper than ever. The 1k Company is now a $531 company—and $115 of that is the optional print run for local sales. Through social media you’re better equipped to reach your customers than ever before. The procedure remains largely unchanged, but you have better tools now.

If you’ve already saved up $1,000 after reading Sandy’s previous article, I recommend spending your surplus on promotion. Attend more conventions, or try a banner ad here on rpg.net. You might hand some of it back to those who gave you free art or editing. Or, enjoy your savings and start developing your next title.

You can’t support everything. Which games do you support?

The decision to support a game versus merely stocking a game has a huge impact on that game’s sales. It’s very possible for a well-supported game to earn 5, 10, or 20 times the sales of a stocked game.

A stocked game is one that you put on the shelf. You restock it when it sells. That’s it. For me, a game like that was Amber Diceless Roleplaying. Nobody ever played Amber in the store. I shelved it with the fantasy RPGs. It never got a mention in a newsletter or front-of-store display time. I sold a few, mostly because of its novelty value. I had people come in from a long way away because my store was the only store for hours in any direction that carried it.

You support a game when you run demo games, host tournaments, and otherwise do things to bring attention to it. That includes display space and positioning, but it might also include posting signage, offering specials, giving away promo items, and other things designed to encourage game-related activity.

Which do you choose?

Supporting a game costs about the same regardless of the specific game. It varies more by game category than by title within that category. If you open a booster box to create a singles binder, it costs about the same for different CCGs, varying mostly in the number of boosters in the booster box. It costs pretty much the same to run a demo game of Twilight Imperium as it does to run a session of Axis & Allies. You can run a demo game of Conspiracy X for about the same amount of time and effort as running a Pathfinder scenario.

Fun

The least factor I consider is how much you enjoy a game. The game store owner’s personal choice is a large factor in low-volume stores, but it decreases as store sales increase past the owner’s personal sphere of influence. It can be huge. On the other hand, people can tell when you’re playing a game you hate. Don’t do that. Find somebody who likes it, and let him go crazy with it.

Manufacturer Support

One difference you look for lies in manufacturer support. If a manufacturer has demo teams to help run your events, that’s a point in favor of a game. If the manufacturer offers danglers, posters, candy bars, bags of Hulk miniatures, cardboard cutouts, or t-shirts (all actual promo materials I used), then that company’s games are good candidates. Advertising that directs customers to your store is a perfectly legitimate form of manufacturer support.

Customer Demand

Another major factor is customer demand. If you have two RPGs side-by-side, and one outsells the other, look at the better-selling game for your support time and expense. You want to push that game to reach its critical mass—the point where it becomes a drawing point for customers rather than an add-on sale for your regulars. Games take a life of their own after a certain point. Gamers work harder to recruit their friends. The game’s players spend more money. Getting one game to that point is better than getting two games halfway there.

Don’t guess when you measure customer demand. Check your sales records.

Product Line Size

The last decision-maker in determining which game to support is the value of the product’s “tail.” A product’s tail is the follow-up products that customers can buy after they get into the core game. A core RPG with a half-dozen supplements might have a maximum buy-in of some $150. A game with 3 core rulebooks and 20 supplements can support regular sales of $150 and a few customers will spend $500. Some RPGs encourage miniatures use. That means that gamers of that game tend to spend more in your store than the gamers who play an RPG that doesn’t encourage miniatures use.

The exception is a new game that’s rising in popularity. A game that starts off hot is even better than a game with a long existing tail. You will sell those customers games as they release, but you don’t have to spend big money filling up your store with slower-moving backstock.

The size of the product line is a huge factor. If you spend $20 to create a customer with game support, then it’s far better to gain $50 in initial sales than $25. Likewise, $100 in downstream sales is better than $50 in total sales.

Specific Titles

So which games and manufacturers have those qualities? It depends on your store. Regional variations aside, you should almost certainly support Magic: the Gathering, Pathfinder, D&D, and Warhammer 40k. Warhammer Fantasy Battles, Pokemon, and Warmachine are high on the list, too.

The Balancing Act

If you fully support all of those, that’s 7 games already. And then you see the problem that small manufacturers face. You only have so much time with which to promote games. I already broke down a store owner’s weekly schedule somewhere, so I’m not repeating it here, but it comes down to this: you might have 20-30 hours each week you can spend supporting the products in your store. If you have employees, you can add a fraction of their time to the total. If you’re already spending 24 of those weekly hours in support of the “mandatory” 7 games, you only have a little left with which to support all of the other hundreds of products in your store. Some 400+ manufacturers all want that time. If you divide it equally, each manufacturer gets less than 54 seconds a week.

It gets tougher for the little guys. An extra hour supporting the big games usually pays off better than giving an hour to the smaller product lines. It is more cost-effective for you to spend 20 hours on 40k alone than 20 hours on 20 different smaller lines.

If a manufacturer wants you to spend that time (and those finite dollars, which I haven’t discussed here) on his products, then his products need to offer you more return than the competition. When it comes down to it, you have to spend your optional support in supporting games and manufacturers that support you.

In summary, prioritize your promotional time and money by length of the product’s tail, consumer demand, and manufacturer aid. Build up your sales volume with your easy sales, like Magic. Then look for rising stars with your discretionary time.

A Second Look at a Bad Idea

In The Shoestring Game Store Model , I discussed a business model based on minimal costs and minimal inventory.

I also advocated—firmly—avoiding this business model.

I have not changed my mind that the shoestring model is a good thing. You can technically get started, but ramping up is difficult because you lack the infrastructure to build on. Most often, people who start like this continue at a break-even as long as they can afford their hobby of being a game store owner. When their significant other says they have to get a real job, they close.

However, like many things, there are circumstances in which you can improve the odds. Improve the odds enough, and you have a sustainable business model. Let’s consider some circumstances that could make this bad idea into a better idea.

Recap on Why It’s Bad

A quick reminder on a few of the more important negative points.

• Sales levels. With very low sales levels, a bad week could destroy you. You have no margin of error
• Risk. Hey, we’re talking about operating with no alarm system, minimal or no insurance, and not even a drop safe.
• Exhaustion. There’s a limit to how long you can work every shift every day. The shoestring model doesn’t leave a lot of dollars for employees.
• Inventory levels. It’s not feasible to expect $250,000 in sales from an inventory level of $5,000. However you plan to grow, increasing the amount of stuff you have to sell is a necessity.
• Specialization. If you have very little capital invested in your merchandise, you probably focus on only a very few product lines. If those lines falter, you’re crushed. Security comes from a broader product offering.

Now back to ways to make it less bad.

Itty Bitty Living Space

Low rent was the spark behind the previous article on the shoestring model, so I’m not going to expand much on it.

A tiny storefront simplifies your cost structure and operations. You need fewer fixtures. You can only fit so much inventory in it, which reduces your cost on that front. You can control shoplifting better when you can hit all your shoppers with a stick without leaving your counter. If you don’t have a game space, you avoid the problems that come with that space (you also forgo the benefits that come with that space, and you’ll take that into consideration with your planning).

Who Needs Money?

The first swing in your favor is an outside income. If you don’t have to pay yourself a salary, you remove a very large expense from your spreadsheet. Maybe your other half earns enough to sustain you both. Maybe you work nights. The reason doesn’t matter as much as the math. If you’re paying attention, you know that labor dollars are your most expensive dollars. For each buck you spend on payroll, you pay taxes, payroll fees, and (in most cases), worker’s compensation, etc., to the tune of $1.13 to $1.25 in total spending. Large companies, which provide more benefits and face greater exposure to liability, spend even more on labor.

Taking no pay isn’t something I normally recommend. As I’ve said before, I valid business pays its manager, whether that manager’s an owner-operator or an employee. However, the concept isn’t entirely alien. Working with no or reduced income so that you can reinvest capital back into the business is called sweat equity. It would be the same if you worked another job and then spent that money on the game store (except that, because of the taxes, working the other job would be less efficient).

If you reinvest a $30,000 annual salary into your businesses, and you started with a budget of $10,000 (the amount I estimated you could launch a shoestring on in the previous column), then after that first year, you’ve spent a total of $40,000 on fixtures, inventory, equipment, and other needs. You’re in the right ballpark.

Money Comes Later

It’s hard for start-ups to get financing (or insurance, or anything, really). You cannot get an unsecured loan, and the business won’t have enough assets to get a secured loan. Banks know that businesses who survive for a year or two are beating the curve and are more likely to be able to repay a loan. If your plan involves financing in phases, and Phase III involves a bank loan in two years, you need to both survive two years and be prepared for the loan when you reach that point.

If this is the case, you’d better have a very solid expectation of a loan. As in, you know the bank’s requirements, and making sure you hit all their benchmarks is a top priority in your plan. If your plan relies on outside financing, and you can’t get the outside financing, your business could be threatened. Set very clear, specific goals. For example, you might want to get $30,000 from a bank loan, secured by the $30,000 worth of inventory you plan to accumulate by then.

Planned Growth

Let’s assume that you set your store up so that it breaks even after about $2,500/month and you start seeing positive cash flow soon after opening. Where do you spend this cash?

Spread the money around as you grow. The majority of it should bulk up your inventory, but spend some on marketing & advertising, improving fixtures, developing your brand, etc. At first, spend evenly on administrative needs (insurance, business license if you didn’t start with one, etc.) and inventory. After you’ve taken care of that, you might spend an 80/10/10 mix, with 80% going toward inventory, 10% going toward letting people know about the new product lines as you add them, and about 10% toward fixtures for the new inventory. For an additional $2,000 on inventory, for example, you might need a new bookshelf. Or a new set of pegboard shelves and hooks.

You might spend this mix until your inventory reaches about $15,000, then spend a smaller percentage on merchandise and more on the other factors: technology, brand management, advertising, and maybe hiring a part-timer to give you a break for one or two shifts a week.

Conclusions

As you can see, it’s possible to start with a shoestring model. Your end goal of the shoestring model is to get out of it and into a sustainable plan. If you attempt it, you must have a detailed and realistic plan for that. It’s also extremely important that you have a low-cost method of pre-opening marketing and advertising. Real life and online networking can pay off well in excess of their cost.

Sell, Sell, Sell

What sells?

Different sells. The same old stuff people see every day can sell, but people like to see the unique and different at a con. Clearance goods do well. Cold soft drinks sell, as can candy or other snacks.

Things that people forget sell. Sell 7-die sets to people who forgot their dice or weren’t planning on playing in a role-playing game. Block of d6s sell to Games Workshop players. Tape measures are popular.

My best personal experience from my store was clearance goods. Product leftovers, discontinued items, and crap that didn’t sell when new all did well at aggressive discounts. People like bin prices—-everything in this tub is $1, everything in that box is $2. They enjoy digging for deals.

For new games, check out the game schedule. Look at what people are playing and stock that. If someone tries a new game and wants to get it, be the store who can sell it to him.

The trick-—especially in a crowded room—-is to get attention. Once I saw a great trick. A vendor wore a hat with an exclamation point on it. People saw it, approached, and asked, “Are you a quest-giver?” He replied, “Yes, I am” and handed the gamer a little scroll tied with a ribbon. It had gold-colored paper with a brief quest on it. The person had to bring back some ketchup or salt, or a program book. Sometimes they involved other vendors (with permission).

This move was brilliant for several reasons. First, it encouraged the gamer to initiate conversation instead of the vendor. That’s much more comfortable for striking up a dialogue. Second, after a few solo quests, it “went viral”, and people started bringing their friends. Lastly, the quests required the gamer to return to the table to get their reward. “Second-level” quests encouraged the gamer to come back for more visits.

Review

After the convention, review what sold and what you brought back. Why are you bringing it back? Was there other competition for the same products? Did you not bring enough? Did you not display it well? Were there too many vendors competing for the finite dollars at the con?

Did you sell out of anything? Did customers ask for something that you didn’t have? Did you run out of change?

Integrate your changes into the next show and continue to fine-tune the procedure over time. At my first convention as a retailer, I only earned about $250 in sales. I tried bringing that week’s new releases, some evergreen titles, and some miscellaneous stuff like dice. Only the dice did well. When I started separating my store inventory into “shelf” and “conventions”, my con performance improved. In a year or so, I wouldn’t be happy with less than $1,000—at the same convention and with about the same number of attendees. Plan on a learning curve.

Okay, Show Me the Money

Mini-cons, or one-day events, might draw 50-200 people—usually fewer than 100. Avoid these unless they have virtually no cost. They typically only feature games. They don’t always have dealer tables, but if you have a good relationship with the host, you might get some space. If they have no table fees, no travel fee, and they take place nearby, they might be good for a bit of bonus sales.

Small local cons number their guests in the hundreds and take place over 2 or sometimes 3 days. Table fees tend to be $100 or less. They have games, but they might have another feature or two—-a concert, a party, a costume contest, or a panel or two. They might have a couple of guests.

If you have to throw in $300+ worth of hotel and travel fees to attend one of these conventions, they’re hard to make profitable. If they’re local, saving you that travel time, fuel, hotel, and other costs can make the difference. They usually have up to a dozen dealer tables, maybe a few more at the upper end of the range, and maybe half that for the smallest cons.

Medium-sized cons, or cons with a regional draw, attract 1,000 or more attendees. They can run for 3 or 4 days. They almost always feature guests, a large vendor area, and other attractions. Depending on their focus, they might not have much more gaming than a small con, or the gaming might grow proportionally.

Starting somewhere in this range, the vendor room becomes an attraction rather than a sideline. People will come to the con to check out what’s available. If there are unique vendors, like game publishers, all the better.

Vendor spaces at these cons can be up to about $500 per space. Expect that Wi-fi will not be free if it’s in one of the better hotels. You definitely need extra staff.

Big cons draw tens of thousands. These cons run non-stop for 4 days and fill multiple hotels or convention centers. They have thousands of events of all kinds. Most major gaming publishers are there, as are representatives from overlapping industries like book publishers. The advantage they have is that the vendor space is not open for 16 hours, like some smaller cons. You work hard for 10 hours or so and get a break.

Vendor space can be up $1,000 per booth, and the additional expenses can add up to quite a bit.

Planning and running a space at a big con can be intense. I’ve heard publishers say they take as much effort as putting out a supplement. If you fly there, you have to ship your stuff. If you drive there, it takes longer and can cost just as much as flying.

Cost Worksheet

• Booth fee
• Electricity surcharge
• Porters
• Wi-fi
• Parking
• Program book ad
• Labor
• Fuel
• Hotel rooms
• Meals

Sales Estimates

Making estimates of how much you’ll earn is really stupid of me. They depend on a) con attendance, b) attendee suitability, c) your merchandising skill, d) competition, e) vendor room setup and placement, f) weather, g) date of the convention, h) part of the country, i) how much inventory you bring, j) your personal sales ability, and k) a hundred smaller factors. I cannot account for all of these things.

I can offer wide ranges, though.

Mini-con: Minimum $50. This event has a high minimum because there is some social pressure to support a single retailer who invests time and money on an event that is usually a club activity. Best-guess: $50 to $100. Best-case: $400.

You’ll need a least $400 or $500 worth of inventory, and $1,000 to $2,000 might work under certain circumstances (like for a Magic-based event).

Local con: Minimum $20. Best-guess: $200 – $400. Best-case: $1,500.

Take at least $500 to $1,000 worth of inventory, and ideally $3,000 or more. I’ve seen abysmal failure on the part of one store because a neighboring retailer was selling new inventory at aggressive discounts. The broader the diversity you take, the less damage this strategy does to you.

Regional Con: Minimum $100. The usual reason for failure is a complete misunderstanding about the nature of the con and who’s going to show up. Best-guess: $300 to $1,000. Best-case: $10,000.

You need at least $5,000 worth of merchandise to make this worthwhile.

Big Con: Minimum $1,000. Best-guess: $5,000 to $15,000. Best-case: $50,000?

Plan to bring $20,000 or more in merchandise—presumably much more if you want to hit the winning numbers. Costs alone can easily break $5,000 just counting booth space and travel. These events are not for amateurs or small stores.

These figures are for retailers, of course. A new game publisher might hit GenCon and not see $200 in sales because his product offering is much narrower. It’s hard to miss your target audience completely when you have a broad diversity of product (it’s likewise much harder to sell out completely).