Inventory Management through a Product’s Life Cycle

Most retailers develop skill at selling products on the sales floor. For many, this is part of why they became retailers. They love gaming, and their enthusiasm helps them sell their favorites.

But those popular games represent only a fraction of your sales. If you build them but ignore the rest of the sales cycle, you’re not maximizing your store’s sales potential. You must sell products before they hit the shelves and not stop selling until every last vestige of them has disappeared from the supply chain.

Before the Release

Sell upcoming items by reminding customers in advance of the product’s release date. For a big release, remind them of the release date in shrinking increments of time: three months out, a month out, a week out, and then the day before. For lesser releases, a notice a week or two in advance is sufficient.

Products like Alliance’s Game Trade Magazine are helpful tools for collecting pre-orders. You can have a stack at the counter, lay them out on game tables, or hand them to your best customers. You might create a pre-order sheet and leave it on the counter so that interested parties can sign up. If you use a standardized special-order form, fill it out ahead of time with the name and stock number of an item you want to promote; that way, customers need only put their name on it and turn it in. The easier you make it for them to order, the more pre-orders you’ll get.

New Item Sales

This time is perhaps the most important stage in a product’s life cycle. Generating a huge player base of any given game creates the potential for supplement or add-on products later on the game’s lifetime. If you have 30 players for a new CCG with the first set, then your potential for sales with the second set is excellent. You’ll also have a strong network of players who will continue to play the game. On the other hand, if you only make 5 players, then the game will probably die for you within an expansion or two, leaving you with cash-killing unsold product.

Raise your players’ interest with tournaments. Introduce new players through demos. If the manufacturer doesn’t provide one, you might want to design your own demo deck, oversized game pieces, or RPG scenario.

Stock new items together. Have a “New Releases” shelf or end cap inside the front door. It’s perfectly okay to stock additional copies with the rest of the product line, but you should keep at least one copy visible to everyone who walks in. It’s easy, and it builds sales.

Midlist

The midlist refers to products that are not new enough to justify high visibility but not old enough to clear out. It includes most of the product on your standard shelving or pegs. Your midlist products generate a large portion of your sales. Maintain product visibility. Keep hot merchandise face-out rather than spine out. Keep it in stock. Make sure it’s shelved in the right place.

Department signage helps your customers find this merchandise. Shelf-talkers bring attention to items you wish to promote. Rotate products and displays often so that regular customers see different products.

Backlist

You might not keep backlist items on the shelf. Maybe you removed them so that something better can have that floor space. Maybe you stock Goon the RPG, but you don’t carry the Thug and Bully expansions.

Instead, place a manufacturer catalog on your shelf, next to the Goon core book. If it’s a small publisher and their product offering fits on a single page, you might include it inside the book’s cover. If your customers are interested, they can place a special order with you. A stamp on the catalog with your store name, phone number and URL can help customers remember where they bought the book and who should get their order.

Good special-order practices are key to increasing sales of this category. Have a standard procedure for taking orders, placing them promptly and then making sure the customer knows about them. Follow up as needed so that you can either sell those goods to the customer who ordered them or move them elsewhere quickly.

Some stores refuse to take special orders because of the flakes who place orders and then fail to buy those items. At my store, the greatest amount of product in my hold bin was about $1,100. The average was less than half of that. On the other hand, special orders earned the store $100 to $250 a week in consistent, regular sales. That’s about a 20x turn rate. The rest of your store won’t do nearly that well.

Trade

You might trade unmoving product with another store. One retailer’s trash, as they say, is another’s treasure. Some manufacturers offer stock swaps in which they accept a return on unmoving inventory in exchange for other inventory. Your distributor might, under certain circumstances, offer something similar. You can always ask.

Clearance

With most of your products, you want your price to reflect a happy meeting of sales velocity and revenue. Price too low and you sell faster but you make more. Price too high and sales slow but profit margin rises.

With clearance product, the happy meeting point lies closer to the speed side than the profit margin side. Clearance product won’t create a player base, it won’t generate repeat sales, and it won’t provide a long-term revenue stream of any kind. Your goal is to get it out of your store so that you can use your valuable floor space selling profitable merchandise.

The keys to creating speed lies in awareness and the right price. You create awareness by creating a visible display. A wire floor bin is perfect for many products. It should hold a big sign that says something obvious, like “Clearance” or “Buy me or the terrorists win.” You might also mention product lines you’re blowing out in your weekly e-mails, newsletter, or on your website. If you maintain a bulletin board in your game room, try sticking a note on there announcing the latest addition to the clearance section.

In some cases, a low discount might be enough to generate customer interest. Such products might be the unpopular booster set from a popular game, an overpriced terrain piece that competes against a superior product, or an RPG supplement you over ordered.

Sometimes the discount needs to be higher to get attention. When you’re not sure how much to reduce the goods, offer a climbing discount, increasing the discount by 10% each week or two until it’s gone. Except in unusual cases, I don’t bother with more than 70% or sometimes 80% off. It’s not worth the effort at that point. The dollar or two you get isn’t worth the storage space or sales effort. At some point, you’re financially better of throwing dead product away and using that space to sell items of greater value.

Instead of using your valuable retail floor space, you have at least three other options for getting rid of slow-moving merchandise. EBay is an almost guaranteed sale within a week. You can do an in-store auction very profitably, mixing your own clearance products in with customer sales for a huge sales day or weekend. Blow stuff out at a convention and don’t worry about poisoning your own customer base with deep discounts. If you have off-site storage, you can hold products there until the next sales opportunity.

How it Helps

One problem you’ll notice as you start your store and place your orders is that you always want more stuff than your buying budget allows for. You want to buy all of the new stuff and restock the stuff that sold. The trick, then, becomes knowing what not to restock.

Careful attention to selling your dead games helps remind you which items required a lot of work and time to sell. Don’t restock those things. Selling these games also adds a small amount to your weekly sales total. If you’re using a percentage of one week’s sales to set the next week’s buying budget, you’ll find that you have a few more dollars available for ordering.

Store Planning for Deep Pockets

This column makes certain assumptions about your business model. One of these assumptions concerns the expected sales volume of your store, based on the most common figures cited by store owners. The lower-level sales volumes are easier to reach with the lesser capitalization most people can achieve. Also, the variables vary to a greater range at higher sales volumes, making predictions about those figures less reliable from situation to situation.

Sometimes somebody comes along with a larger capitalization potential than normal. It could be a retired military officer, a well-paid professional who wants to work in the gaming industry, or a fan with an inheritance or other windfall. It could be a brilliant promoter who began with a business plan that called for $90,000 in capital and raised $400,000 from investors. Now he wishes to re-examine his option. More cash opens up more options. If that’s you, you’ll want to know what options those are and what factors affect your decisions.

Inventory Selection

Instead of starting off with the most popular product lines and adding newer lines as your customers express interest, you can stock your store with secondary product lines, offering a wider selection than your competitors offer. Instead of starting with just D&D and 1-2 of the next most popular RPGs, you could stock D&D fully, stock World of Darkness heavily and carry core books and recent titles for nearly every in-print RPG. Instead of just Magic and the current popular anime-based CCG, you could stock boosters, starters and singles for a dozen games. Your board game shelf can become a board game department. Of all of the places I spent discretionary cash, inventory additions almost always made me happy.

This extra inventory gives you a competitive edge that you can leverage in your marketing. Advertise your store as “the best-stocked” or “the most games in town.” People like success, and you’ll see that even dedicated customers who are happy with their current game store will visit your store.
Such inventory addition costs a relatively small amount in the big picture, however. If you have access to greater amounts of cash, you could invest in additional products lines. Comics and anime are just the start. The “entertainment model”, which includes DVDs and consoles games, becomes a possible addition. Toys, collectibles, costumes, hobby supplies, coins, and other potential revenue streams could all become a part of your company’s income.

Employees

While more inventory is mostly a difference of degree, a bigger store might mean that you have employees right from the start—a luxury (and headache) other stores might not enjoy until later. You’ll need to learn to write a cost-effective schedule that also covers your sales needs. You’ll need to make your plans for how many employees to hire, how much to pay them, who will train them, how you’ll manage payroll, and your employment policies, like time off and employee discounts. It’s a lot of up-front homework.

Better Locations

With better funding than the typical business model discussed in this column, you can widen your location net to include busier intersections, freestanding buildings or mall spaces. A higher-grade commercial shopping center requires little change other than scale, but mall stores change the model at fundamental levels. In brief, mall stores attract more visitors, sell a more public-oriented product mix, and have higher labor and higher losses due to theft. On the upside, they typically achieve much higher sales volumes than outdoor shopping centers.

Image

Being big is about more than just having more inventory and floor space. Customers associate certain standards with larger stores. While a shoestring look is fine for a shoestring store, that same look is jarring in an anchor suite. You’ll want your crew to wear uniforms, make sure all the light bulbs are working, and generally keep the place clean and maintained to top-notch standards.

Items considered frivolous at lower sales volume might be a necessity for you: shopping baskets, spot lighting, a video surveillance system, an alarm system, and a POS system. Consider each of these things a gain of percentages. In a low-volume store, increasing sales by 1% might not be worth a large capital investment, but in a busier store, the investment repays itself sooner. The same applies to loss. If your security system reduces shoplifting by 10%, it’s worth twice as much at $500,000 per year as it is for a store doing $250,000.

Buying Property

Many retailers scoff at the idea of purchasing the property in which you’ll run your business, but it can be the right choice in the right circumstances. Buying opens up more financing options, including an additional SBA option. Even if you do have your own money, investing somebody else’s money is still a good idea. Ironically, you might find it easier to obtain financing when you’re seeking a larger amount.

While building equity in a small business can have value, you only realize that value if you manage to sell the business. And 50% of small businesses that go on the market fail to sell. Equity in real property rarely decreases (the current market notwithstanding), and in the long run it almost always gains faster than inflation.

A Bigger Store

Putting your money into a single store can generate a higher profit percentage than if you generate the same sales volume out of multiple outlets. A $600,000/year store is a better money-maker than two stores reaching $300,000 each. The biggest difference lies in the overhead reduction: one rent instead of two, one manager’s salary instead of two, etc.

Building a single store to higher sales volume requires a heavier marketing budget, a higher inventory level, and (usually) a broader selection of inventory. It might require a small amount of additional equipment, like a second register station and multiple phone lines. You need the marketing to bring people to the store. You need deeper inventory to reduce stockouts and offer in-brand selection, and you need more product categories to reach a wider audience.

One Store Thumbnail Sketch

• Catastrophic loss if the store fails
• Limited geographic draw
• Greater control
• Lower costs
• Better performance

More Stores

You might look at the financials for a single store and see that you can afford to open 2, 3, or even more locations. Owning multiple stores has its advantages over a single store, but it also has disadvantages. If you decide to pursue multiple stores, make sure you have the right temperament and skills for the different nature of your business and know what hazards threaten your success.

The advantages of having multiples stores include greater sales potential, the ability to reach a wider geographic area, the option to expand through acquisition, and a little bit of inventory control. You have the option to survive if you fail at one location by attempting to recover your customers at the other stores and redistributing fixtures and inventory (or storing it until the next location opens). Having multiple locations in the same market allows you to divide the cost of certain advertising between the stores, while all locations benefit from the same ads.

The risks of opening multiple stores include reduced performance, a lack of connection with your customers, and a lack of control. Hired employees won’t work as hard as you will, nor as wisely, so your figures will suffer. If you delegate ordering authority to others, be prepared to watch your inventory. Loss increases not only through theft but to diminished diligence.

If you plan to open multiple stores, I recommend that, unless you have managed/owned a retail game store in the past, you open a single store at first and run it as owner/operator for at least a year. You have to learn the job before you can teach the job. During that year, lay down the groundwork for your growth. Have a training program in place for your management. Have supporting paperwork for your employees. Plan out your growth so that you’re not trying to open multiple stores on the same weekend.

Most importantly, I urge you to plan to open at least four stores and to open them all under the umbrella of a single phone book or cable TV service area. Opening stores in multiple markets means that you lose one of the principal benefits of multi-unit ownership. Operating 2-3 stores is a primary “danger area” of growing multi-unit owners because your direct attention is spread too thin and the sales volume often fails to justify an additional tier of management.

Multiple Stores Thumbnail Sketch

• Failing in one location does not automatically ruin the company
• Reach more customers in a wider area
• Less control
• Rely more on management skills and less on technical skills
• Open to growth through acquisitions
• Greater upper sales limit

Next time, look forward to “Thinking Really Big”, a pie-in-the-sky store model that dwarfs all other stores.

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.

Customer Service

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.

Retail Experience

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

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.

Game Categories

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.

Cash

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.

Handyman

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.

Anne

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

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

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.

David

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

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

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.

Owner, Yes. Operator, No.

People often ask me about the concept of opening a game store and keeping their day job. Most often, people in this group have a higher-than-average income and don’t wish to give up that income for the pay cut it would take to justify the store’s finances. They plan to hire someone to run it for them while they continue to earn the big bucks. It’s an opportunity to keep earning reliable income while enjoying the benefits of business ownership. And games at cost.

This article takes a broad look at the pros and cons of that business model.

Owner vs. Manager

A hired manager has a different mindset than the owner has. The two have different priorities and different methods of achieving their goals. In general, the owner looks toward the bottom line and the store’s long-term health. He doesn’t need to please anyone, so he’s free to make tough decisions. He’s more motivated to work another shift if money’s tight.

The manager tends to strive toward employer satisfaction and customer satisfaction. If customers are telling him he’s doing a good job, he’s usually happy, even if profits are down. If his bonus check (if any) is up, or if he’s meeting the carefully-defined goals his owner has in place, he feels he’s doing what the owner wants.

There’s another fundamental difference. The manager’s house doesn’t go up on the auction block if the business fails. He can walk away and use his experience as a resume point. An owner who financed his business with a home equity loan has a fundamental motivation that can’t be matched by an employee who lacks a deep financial tie to the business. Even one who set the business up with less risky financing might still lose a large cash investment.

Risks

Hiring a manager to run your store in your absence brings with it a great many risks. Some of them you’ll face with any employee, but others are heightened because of the situation. Let’s review the largest of these risks.

Theft

The manager could steal from you. In fact, it’s almost a certainty that your employees will steal from you at some time or another. Yes, even in small towns. Yes, even people you know. Yes, even him.

Employee pilferage accounts for up to 46% of all retail loss. Why? Greater access is a main reason. Shoplifters can only take what’s available to them, while employees have the run of the store—including the till and the safe. Shoplifting is more common, but an employee can take off with your Power 9, sticking $4,000 worth of cards in his pocket. The difference in the amount of theft in one case makes up for the frequency of theft on the other.

Employees can also take steps to conceal their loss. At the small scale, they shift blame to another crew member. “Floating” cash or inventory loss onto another person’s shift makes it hard to pinpoint exactly when the loss occurred (and therefore, who is responsible). They might simply steal up to the limits of your cash shortage allowance; if you allow $50 a month, they might just take $12.50 a week from an otherwise even till.

Thus, a manager, who might have both less supervision than an hourly employee, and greater access to assets and paperwork, is a great risk. He can drain substantial profit from your store and can conceal it from a superficial search. Managers might double-enter receipts for cleaning supplies, sell gift cards to friends at a reduced rate, or take product home to sell online while writing it off as an unexplained loss.

Liability

What if your manager interviews an employee who turns out to be a thief? He interviews the person, calls his references and hires him. After a day or so of training, he’s ready to let him fly solo. Six weeks later, your checking account has taken a huge dip. Only after careful research do you discover the extensive product returns the new hire rang up—all of which were fake returns so he could steal your cash. Your manager attributes it to bad luck; you might think that a background check could have revealed that he was wanted for theft from two previous employers not listed as references.

More generally, liability refers to the chance of a lawsuit stemming from the actions or inaction of your employees. If a manager decides on the spur of the moment to inform a customer that you don’t take checks because the customer in question is dressed poorly, unbathed and not one of your regulars, his impromptu choice could lead to a lawsuit for discrimination. If your manager laughs at a sexist joke made by a crew member in front of a female customer, she sues you for sexual harassment. It’s little consolation to know that she might name the manager in the lawsuit, too.
Underneath these worst-case scenarios you have to consider the lesser aspects of increased liability: an improper employee termination might lead to paying unemployment, or carelessness in the workplace might lead to a worker’s compensation claim. A manager might obligate you to a vendor purchase or fall for a scam of some kind.

Lack of Development

The early days of store ownership involve a steep learning curve. You quickly learn the difficult task of inventory management, develop relationships with your vendors and learn how much sales volume a single person can handle alone. If your manager gains that skill instead of you, you’re at a disadvantage. If your store manager leaves and you have to either take over or train a replacement, then you go through that experience again. Learning through experience is costly. It involves making errors and promising to yourself not to repeat them. You want those skills, but it takes much longer to gain them if you’re not in the trenches on a daily basis.

Underperformance

It’s hard to emphasize the importance of this cost, and it’s only partly because the cost is hard to measure.

The difference in attitude between a financially-obligated owner and a salaried or hourly manager means an enormous difference in performance. Look at every area of control your manager has: cash control, product ordering, scheduling, running events, discretionary use of product for promotions, etc. If each of these categories runs more costly than the owner would run it by a percentage point or two, the total amount of loss due to underperformance can easily exceed 10%. Knock 10% off of your bottom line, and you’re probably not showing a profit.

Try this experiment. Open up your financials. Add 3% of your net sales to your labor figure. Add 2% to your COGS. Add another 2% for various fixed cost increases (repair & maintenance, cash shortages, etc.). It’s ugly, isn’t it? Now figure that your sales will probably drop 10% off of your projections. Is the bottom number still black? It might be, but it’s probably a very low figure by now.

There is a maxim in management: only expect what you inspect. If you monitor average ticket prices, your salespeople upsell. If you focus on labor, your management watches labor. If you ask your manager how much he’s planning to spend on inventory, he’ll watch his buying budget. Unfortunately, you can’t watch everything. If you do, you’ll spend more time at the store than at your day job.

Advantages

If you only own one location, there are really only two reasons for it. The first is the main assumption of this article: that you’re doing it to work another job. The main benefit you seek is therefore free time. Another reason for hiring a full-time manager is that you don’t feel comfortable performing the task yourself. If that’s true, then store ownership is probably not a good idea, but we’ll cover the topic of superior talent, too.

Free Time

The main advantage of having somebody else run the store is that you can continue your day job. The income you gain from that job might exceed the loss of productivity caused by your absence.

The “free” time is not all yours, nor is it free. In addition to the salary you pay, you have to deal with the above costs and risk. Also, you can’t hand over all responsibilities to the store manager. Unless you’re insane, you won’t give your manager unrestricted access to your checkbook, for example. That means you have to spend time paying the bills.

You’ll also have to spend some time monitoring the store. Watch for sales trends to make sure nothing’s being neglected. Look for irregularities in your paperwork that might reveal theft. Yes, even for that guy you trust. Make sure your product purchases are within your budget and that your labor cost is running to goal.

Give your manager feedback. You might do this informally, by placing a call as needed. You might have to schedule periodic meetings after leaving your day job. Maybe you stop by for an hour each night before you head home.

Your paperwork isn’t the only source of information about the store. Talk to customers, too. They’ll tell you if your customer service has been falling off lately, or if the store’s been opening late, or if special orders have been handled badly. Besides talking to customers when you visit the store, make it a point to call them on the phone.

If you have a security system in place, spend some time watching videos of the crew at work. Do the employees sit on the counter and surf the web when there aren’t any customers in the store, or do they tackle their chores right away? Do they look up and greet customers right away when the door opens?

If your manager gets sick or injured, you might have to run the store or face closing it for a shift—or longer. Can you skip out on the day job on short notice to run the store? Or can you afford the loss of sales caused by closing? Which is more costly?

Talent

Perhaps you’re not the best person for dealing with customers. Maybe your ideal job is working at a desk in a dark corner, communicating with people only through e-mail. Short e-mails, at that.

If you’re best at the administration and weaker on the execution, it might be to your advantage to hire an outstanding people-oriented manager to take over those duties for you. Develop procedures that minimize the damage the people-person can do to your inventory with his poor math skills. Make the schedule yourself so Miss Congeniality doesn’t forget to have somebody open the store.

Conclusion

Some people reject the idea of hands-off management out of hand. For others, it makes sense if handled correctly. Later, we’ll discuss how to handle it correctly and the additional complications of supervising a store you hardly ever see.

And you thought it was only one

When you work for somebody else, you usually have one job. You might be a salesman or an IT professional. The company employs other people who do other jobs; together, you run the company. When you own your own small business, you have to do or oversee all of the jobs.

A common theme in this column is advance planning. By knowing what to expect and how it fits into your overall business plan, you can adopt a strategy of handling decisions that works for your company as you encounter problems. Being aware of the full range of duties you can expect to fulfill once you open helps you plan out how you’ll spend your time when you open.

You can also decide who’s going to do these jobs. Some you’ll do yourself. Some you’ll assign to an employee, and others you’ll assign to an outside professional. Even in the case of work farmed out, you’re still responsible for finding someone who can do the job the way you want it done.
You and a partner might split duties; in fact, your list of skills might help you decide who you want for a partner or if you want a partner at all. Your prospective partner, for example, might not bring any skills that you need. Maybe he’s better off as a silent partner, contributing money but not labor.

CIO

You’ll need to establish your Internet marketing policies. You’ll plan, implement and maintain your website. You’ll select, install and maintain the applications that drive your company, including financial and sales records and POS system. You’ll develop and institute security methods for protecting your data. If your store offers a LAN, you need to maintain those machines to minimize downtime and maximize your customer appeal.
Some weeks will go by without thinking of these duties, while emergencies might require you to spend all day.

CFO

You’re ultimately responsible for reporting and paying your taxes. Even if you retain an accountant (everyone nod your head now), the accountant only makes recommendations, and he makes them based on how you describe the nature of your business and your overall goals. You might want to change your operations or even corporate structure based on your accountant’s advice. You’re also responsible for making sure the utilities get paid on time, the rent gets paid, and your employees get their checks accurately and on time. You also have to pay sales tax in most states.

These duties might take half an hour to three hours per week. When tax time comes around, expect to spend 5 to 20 hours in organization, communication, visits to the accountant, etc.

Clerk

You’re your company’s best salesperson. Many of your hours will involve counter duty, at a wide disparity in sales volumes. On some shifts, sales volume means little customer involvement. At other times, several impatient people demand your attention simultaneously. Clerical duties also subsume creating or rearranging displays, performing spot inventories, receiving and shelving orders, completing shift-end paperwork, changing out receipt paper and other duties specific to your store.

How much time you spend helping customers is up to you, but I recommend that even a hands-off manager work the floor at least one day per week to stay in touch with the customers and make sure that policies are being followed. More likely, you’ll work 5-7 days a week in this capacity, often from open to close. You’ll perform many other duties during this job’s down-time.

Buyer

Game store owners typically place orders for new releases first, and then spend a discretionary amount on restocks. New products sell much more quickly than new products; when you have $500 to spend, you’d rather spend it on products that will sell in two weeks than in products that might take six months to sell.

You can place new orders in response to sales solicitation by your distributor’s agent on the phone, or you can more actively research new releases on your distributor’s website. You can even place pre-orders ahead of time, which helps the distributor place his initial orders (and increases your chance of getting an item when supplies are limited) and helps the manufacturer more accurately predict demand.

I used to start my restock order-placing process by taking inventory of everything I needed. Then I’d assign each item to a distributor, often checking availability on their website. I’d place a large enough order to meet a minimum, then assign the rest to the next distributor in the priority list. I’d also take into consideration who has the best prices.

When portioning out lists like this, you have to start with exclusives: if only one distributor carries a product line or a specific item, they get that order. Then go with items that they carry cheaper, or for which they’ll break open a case, or whatever is important to you. Lastly, complete the order with miscellaneous items for which all factors are roughly equal.

In addition to your main weekly order with your primary distributor, you might place another order with a secondary distributor, place an order with a large manufacturer (by which I mean Wizards or Games Workshop), and place a second or third restock order throughout the week. You might also be aggressive enough to search out small manufacturers who don’t use distribution and place orders directly with them. You can find some good deals like that, but it would be easy to spend your whole week tracking them down, and the best of them will be picked up by distributors anyway. Your inventory, prep time and time spent placing orders by phone or Internet form could take 2-10 hours per week or more, scaling with sales volume. Networking and searching for new products can take as much time as you care to spend.

Contractor

Handyman skills can save you thousands of dollars during your initial build-out. Just as importantly, the ability to maintain your plumbing, build custom display cases, lay down tile or carpet and perform other common tasks might mean the difference between break-even and profitable long-term operations. If you don’t have these skills, can acquire them, or do you want to contract out each individual job to a professional or trust one of your eager customers with it?

Maintenance duties vary in their demands on your time, but a good rule of thumb is 1-2 hours each week.

Advertising Specialist

You’ll select your media, choose an advertising strategy, write ad copy, price your options and sign the agreements that set it all into motion. You won’t be doing the sales volume necessary to contract out the entirety of this job; nor should you.

Advertising (as distinct from the broader category of marketing, which is a topic for another column) is important, but the fruits of the work usually remain in effect for a long time—longer than, say, sweeping the floor. You might spend several hours on a project but projects don’t come up every day. Figure on a few minutes to an hour a week as an average.

HR Specialist

You’ll decide your company’s hiring policies, starting from when to hire a first employee to training your replacement at the store level. You’ll need to research federal and state laws to make sure you don’t open yourself up to liability. You should establish paperwork procedures to document everything you should keep and dispose of things you don’t need. Make sure your hiring policies are sound and that your procedures are in line with your policies.

With no employees, you’ll spend little or no time in this capacity. However, I recommend that you delegate some time to preparing for the eventuality of hiring help. Write down job duties and descriptions. Find a job application template that you like (and that meets your lawyer’s approval) or design your own. Write down policies you intend to establish for call-outs, vacation time, and other employment issues. List the benefits you offer; start with payment but don’t forget employee discounts, free LAN time, free convention entry, free t-shirts, or anything else you plan to offer your crew when you hire them.

Before you hire anyone, expect to spend several hours in planning and preparation. After you hire them, you’ll spend anywhere from a few minutes to two hours per week in this capacity, depending on the number of people you employ.

Cleaner-upper

Who cleans the bathrooms, sweeps the sidewalk, wipes down the ceiling fixtures, vacuums the floor, and washes the windows? You do—at least until you hire somebody else to do it for you.

Depending on whether or not you have a game room and the activity level in your game room, this job could take anywhere from an hour a week to an hour a day. Periodic large projects might take several hours at a time.

Game Champion

If you have a game room, you might choose one or several games to promote heavily through events. Your duties might include painting miniatures, creating terrain, judging tournaments, running painting clinics, conducting demos, hosting contests, reporting activities to the manufacturer, and advertising events to your customers. You might also organize events run by volunteers.

The time this duty takes depends on your store’s sales volume and the effort you apply. It could be zero. It could be 50 hours per week. I personally recommend that, for most business models, you have a game room and that you run sponsored events to drive sales directly and leverage those events as a competitive edge against Internet retailers, bookstores and other retail outlets.

Store Manager

This catch-all job’s duties include making daily trips to the bank, completing nightly paperwork, making trips to the warehouse club for supplies, writing a weekly schedule, and performing other minor tasks associated with day-to-day activities in the store.

In total, you might spend 1-6 hours per week engaged in these miscellaneous duties.

Summary

As you can see, it’s easy to work as many hours as there are in a week. Fortunately, the higher-end estimates apply mostly to busier stores, and you can assign some of these tasks to other people. For those just starting out, though, it’s a good guide to how you’ll spend your days for the foreseeable future.

Where is your attention focused?

“Should I put the sparkly dice next to the pearly ones?”

The question reveals a microscopic look at one aspect of your store’s operations. It’s one of those decisions that you make all day, every day. Is it a problem? Not by itself, but hold that thought. We’ll get there.

“Where should I put the dice display” indicates a broader thinking. It involves your merchandising decision-making process. If you put the dice next to the RPGs, you might sell more, but you also might lose more due to theft.

“Should I carry RPG accessories like dice?” is a question that indicates a remote, large-scale view of your company’s product offerings and approach to customer service.

Some people worry too much about the sparklies and pearlies too early in the process. At the model-drafting stage, think about the big stuff. As you draft your business plan, zoom in on the detail a level or two. Once you’ve decided that you’ll carry RPG accessories, you can decide how much you’ll spend on them and how and where you’ll display them. Don’t get any closer than that. Don’t worry about which compartment what die goes in until you receive that shipment. Knowing what the big picture looks like helps ensure that you’re ready for the small decisions when you’re actually doing the final setup.

Once you’ve opened, it’s really easy to focus on the stuff that’s close at hand. Handling these small issues is called “putting out small fires.” Covering the store when somebody can’t make it. Playing peacemaker during a tournament. Getting product in when it’s out of stock at your primary distributor. These things require attention now, but they don’t do much to improve your company. The continuous nature of these small fires means that you don’t get a chance to stop and look at the overall state of the store. You might be truckin’ right along, but are you going in the right direction?

It’s important to zoom out once in a while to ask yourself some questions. Let’s look at some topics and assign some zoom levels to different questions.

Marketing

Close: Did I get a good turnout for that last tournament I ran?
Medium: What promotional options besides signs and bag-stuffers do I have for promoting my events?
Top View: What’s my contribution margin on these events, and how much marketing time and dollars can I afford to promote them?

Staffing

Close: Should I give Bob the day off and work until close?
Medium: Does Bob’s evening shift cover the hours I need a second person on staff?
Top View: How do I calculate my labor goal, and how do I write a schedule that’s cost-effective while providing the customer service I need?

Fixtures

Close: Now that this game’s promo is over, can I use this cardboard display for something else, or should I toss it?
Medium: How should I rearrange my shelves to fit this new line of minis?
Top View: Do my fixtures meet my merchandising needs and branding goals? How do I know?

You don’t have to sit down on a schedule and analyze these things on a regular basis, but if that works for you, here’s a suggestion. Make sure you stop to think a little bit bigger than the daily grind at least once a week about a variety of issues. Am I running enough events? Is my focus on CCGs costing me minis players? Is my board game inventory getting out of hand? Am I adjusting my weekly order quantities for the increasing/decreasing sales of the season?

Once per month or so, stop and analyze a major aspect of your business. Location, product mix, fixturing, branding, event management, business format, insurance, vendor accounts and other elements of your company require periodic attention.

The ultimate goal is to regularly zoom in and out between all three levels. As you put out a small fire, zoom out a bit. Most of the time, you’ll find that you’re in good shape. Occasionally, one of these small fires seems a little redundant. Maybe you’ve had to break up one too many fights in the game room. How do you fix that? What’s causing the fights? Is it always one player, is it fuzzy rules, is the competition level of the tournament too high? If so, then a suspension might fix the problem, or including a list of floor rules might help, or offering Best Sportsman prizes might cool things down.

If you’re still in the planning stages, keep your focus broad and don’t get too caught up in the small stuff. Consider these topics

• Where will my business be located, and how will that location help me reach my customers?
• How will I set my marketing budget, and how will I spend it?
• Will I include a game room, and how will I use it?
• How much inventory will I carry, and how does that inventory help me establish the brand I want? How does it meet my customer needs?
• What kind of fixtures will I use, and how will I lay out my floor. What fixtures and layout will help establish the brand I want and create the shopping experience I want?
• What’s my competitive edge, and how do I leverage that to draw in customers?

If you find that you’re in the business planning stage and these aren’t the kinds of questions you’re asking yourself, you should stop and take a larger view. Make sure you build your business in such a way that it meets your larger goals in the first place and avoid either substandard results or having to rebuild it later on.

Opening a Store without Breaking the Bank

Before we even begin, let me point out that I do not recommend this business model for most people who want commercial success. I’m including this model because it’s a perennial topic for discussion. Many people ask if it’s possible. They don’t want to hear that it’s a bad idea or that it’s not very sustainable, or that it carries risks that can cost them everything they own. They just want to know if it can be done.

Assumptions

Usually, the discussion begins when somebody has an unusual opportunity for cheap space. In one case, the individual owned a commercial property and his tenant had moved out. In another, a landlord was willing to lease the space in exchange for upkeep on the property. Sometimes, it’s an adjacent space to an existing business and the owner wants to experiment with games. Other times, an existing business owner is willing to sublet some of his space and allow a friend to experiment. Lastly, the place might simply be a tiny commercial space with very low rental rate.

Whatever the reason, this plan counts on cheap to no rent costs. In fact, the figure used on the spreadsheet is $500. If you don’t have such an opportunity, you’ll find that the cost of rent quickly expands your costs to the point that you have to start looking at a “real” game store model to make things work.

Build-out

You have to do it yourself. You might offer to pay a few friends in games, but you lay the flooring, install the fixture, repair the light fixtures, replace the ballast, paint, fill in holes, add interior walls and doors.

Licenses, Fees & Professional Services

Get a d/b/a according to your local guidelines and operate as a proprietorship. If you already own a corporation, you don’t need to create a new one. Your corporate status allows you to operate any legal business.

You’ll probably need a local business license. On the other hand, you might be able to operate as a club, especially if you’re subletting from a friend. Operating as a club makes it difficult to obtain product, but if you’re sharing space, your friend should be able to open an account and designate you as the person in charge of ordering. Check your local requirements and make sure your business model doesn’t involve anything that would invalidate the club designation.

For a bank account, you can open a separate personal bank account at the bank or credit union you already use. You might have to order checks, but with many expenses being payable electronically these days, you might not.

While we’re being foolish, you’re also operating without commercial insurance. If somebody slips and falls, you pay for it when they sue you. If somebody breaks in and steals all your goods and cash, you’re on your own. Good luck with that.

Signage

The “real” plan calls for spending thousands of dollars on a box or channel can sign, but you can get away with less than $100 for a vinyl banner with grommets that allow you to hang it anywhere. Replace it when it wears out in a year or two, and it’s still cheaper than a wooden sign. Paint your window signage yourself or pay a friend in games (or just get a second vinyl sign when you get the first).

A neon Open sign costs about $100. You can get the old-fashioned kind that says “Open” on one side and “Closed” on the other for a buck or two.

Fixtures & Equipment

You can probably find an old computer around the house, buy one from a friend, or get one from a used computer store for a couple of hundred dollars. When it comes down to it, you don’t need one, but e-mail, looking things up online, and other bonuses make it a great value.

For a potentially lower cost, buy a cash register from your nearest wholesale club for less than $100. Collect some of the loose change in your house and throw it in the drawer for your opening till of about $50.

You can get a soft drink cooler from Coca-Cola or Pepsi for free, as long as you buy your product from them. Because they often require a certain minimum order, you might order only once a month.

Your major cost for this category will be shelving. You can make your own bookshelves while you’re doing your own build-out, but you won’t be able to reduce all your costs. You can’t make your own pegboard pegs and shelves, for example. You probably can’t make your own lit glass display cases. Look for bank auctions, closing businesses in your area, and other opportunities for cheap second-hand fixtures.

Secret: when big-box stores remodel, they sometimes throw away their old fixtures. Make friends with an employee or manager at one of these giant retailers and ask if they’ll give them to you. I’ve seen store owners get several thousand dollars’ worth of fixtures this way.

If you have space for them, install game tables and chairs. They’re cheaper than filling that space with merchandise.

Utilities

Go without the alarm monitoring and pest control. You can probably make do without separate bills for electricity, water and sewage, depending on how you’re getting your free/cheap space.

For utter minimum cost, use your existing cell phone number. You won’t get a phone book listing, but if you have the phone number in your window, it’s worth something.

Labor

You’ll work most or all of the hours yourself. You can do this by reducing your hours of operation so that they coincide with your off-duty hours from your real job. In combination with a partner, you might be able to cover a fuller range of hours, approaching a real store. Otherwise, you might open at 6 PM and keep the store open until 9 or 10 PM. On the weekends, you can work full hours.

Running the store yourself keeps your labor dollars down to zero. Because we’re talking about a shoestring operation and not a real financial bid at success, you don’t take a paycheck. A real business would pay its operator, whether that operator was the owner or a hired employee.

Marketing & Advertising

Word of mouth will be your primary method of new customer acquisition. Free and cheap Internet marketing will help. See the previous columns on Pre-Opening Marketing and Promotion for some discussion on free or low-cost online promotion.

You can get 250 business cards from Vistaprint.com for nothing but the shipping cost.

Local conventions offer another opportunity for letting people know you’re open. Run enough games to get free or minimal-cost entry into the convention as a game master. Talk to the vendors and gamers about your store. Hand out flyers. Sponsor a drawing or give away premium items.

Inventory

Inventory will probably be your largest cost. I recommend going only with the highest-turn items from each category that you want to sell and keeping only one of each in stock. Buy one D&D Player’s Handbook, for example, and one box of the latest Magic boosters. For a store like this, CCGs are one of your best bets; CCGs require a small footprint.

Warhammer 40k or Fantasy Battles is a good bet, too. Although each game requires a lot of space and heavy inventory, customers tend to buy large quantities, and you don’t need to carry every single item. You can carry boxes only (no blisters) to reduce your inventory needs to a minimum.

For collectible miniatures games, I’d start with a case of starters and boosters for a single game. It should require only a tiny section of your wall space and cost less than $150.

To add some diversity to your game selection, concentrate on board and non-collectible card games that are available for less than $25. You can buy enough to fill a section of pegboard for less than $1,000. You can cherry-pick the best titles for $250.

I’d add a selection of accessories to match my investment in each category for every category other than board games. That means sleeves and boxes for CCGs, dice for RPGs and paints and hobby supplies for the Games Workshop games.

You might also want some snacks from the local wholesale club. Keep your selection limited. Offer too many choices and the product will expire before you sell it because you already know that sales volume will be low.

Financials Analysis

My back-of-the-envelope figures for this shoestring store run $10,000 to open. If you have that much in cash, great. If not, adding in the repayment (even if you have to put it on credit cards) costs no more than $400/month. A signature loan, for example, might cost $200/month, based on a 3-year repayment and 8.5% APR. The spreadsheet shows that the store has to sell about $3,000/month, or about $100/day to break even. With the signature loan, it’s $2,500/month. If you have the cash up front, then it drops to $2,000/month.

That figure works fine with the amount of inventory you have on hand. If we spread that sales total out over a more reasonable sales pattern, you can make the bills every month if you do $200 on Friday, $250 on Saturday and $85 each of three other days you’re open. That figure doesn’t even count on the extra 2-3 days in each month.

So in response to the questions, yes, it can be done. I’ve even shopped at stores like this once or twice. However, expecting to bootstrap this type of store into a real financial investment is dangerously alluring. You don’t have a solid infrastructure on which to grow. Your best bet is to expect it to live only as long as you have the free/cheap rent and be ready to let it go when you lose it.