Thursday, April 17, 2014

Game Center Expansion Drawings

The Game Center expansion project is beginning to feel like a business plan. That's a good thing, because I'm generally able to accomplish my projects if I put a lot of effort into a plan. It's also a bad thing, because a business plan in the retail sphere has to account for thin margins, so it's a roller coaster, where each day you're not sure if it can be done. Yesterday I felt it could be done, so my mood is good! Other days? Not so much.

We're now in discussion with the contractor and we have an outline for our Kickstarter project. When will the Kickstarter begin, you eagerly ask? We're looking at the June time frame. Meanwhile, we're starting to reach out to those we'll need for the project, including creators of custom rewards. I won't announce that yet, but I do feel honored to be able to work with people I deeply respect in the publishing field. We're looking for more ideas in that regard, in case you're a publisher and have some.

Kickstarter customer rewards focus on various "gym membership" levels that allow for open play during scheduled event times, removal of nominal event fees, "paladin club" discounts at the higher tiers, and, of course, some extra perks. For example, we're working on an exclusive, Black Diamond Games themed, professionally developed, Pathfinder adventure. Most tiers include public recognition on our Wall of Heroes. This will all be reserved for Kickstarter supporters and not available afterwards, at least for an extended period. The details are being hammered out now, so there's room for change and suggestions.

Publishers will also be invited to participate, with recognition on our Wall of Heroes and possibly a larger focus with a poster or logo presented prominently (that's being researched). We're interested in publisher "sponsorship" in this regard and welcome ideas. Finally, a few retailers may request my consulting services. I will visit your store and write a report or work on a problem you have. It feels awkward and conceited, but I wouldn't offer it if I didn't know there are those I could help. I have spent many hours helping friends and colleagues with their new stores, and if I can do it to get this project off the ground, I'm happy to be that guy.

To whet your appetite further, below are new conceptual drawings from the architects.

Tuesday, April 15, 2014

The Fellowship (Tradecraft)

There was once a conference between Native Americans and Tibetan Buddhists, which many thought was interesting since the two had such obvious similarities.  People were intensely curious and when asked what happened at the meeting, they were essentially told, "It's none of your business." Not, none of your business, you don't need to know, but none of your business, you couldn't possibly understand. There is similar fellowship among small business owners.

It doesn't matter how big your business might be, or what you do, or how long you've been doing it, when you meet a fellow small business owner, there is an instant fellowship, an instant connection. There is so much unspoken in these meetings, so much shared experience despite differences, that nobody else could possibly understand.

You can't talk to your spouse, employees or vendors about your experience, not truly. Nobody knows the trouble I've seen, except that guy. He knows. That guy who also owns his own business. It's a constant struggle without a net, a constant battle against entropy and the need for growth. Grow or die is a pretty common mantra. It's about dodging and weaving against both competitors and the government. It's about the many hands in your pocket, and hopefully the capacity for charity that far exceeds what you could have accomplished as an individual. It's about gathering customers, who constantly fall like sand through your fingers.

This fellowship transcends everything else, including class, race, and especially politics. Although most small business owners who are Republicans will assume you're also a member of the club, that is a conceit on their part, as there's no correlation between politics and small business ownership that I know of. What you do have, however, is a respect and understanding of something deeply American.

I wouldn't call it patriotism, but you're a member of the capitalist club, something deeper than politics, as you are exemplifying the American ideal, whether you acknowledge that or not. You not only do it, but you do it legitimately, unlike the crony capitalism that plagues our country. Nobody gave us tax breaks to move our businesses and we don't have a Washington lobby. You're just trying to make payroll, and somehow float that tax check, while making orders, selling product and planning for the future. You're just doing your thing, your many things, over long hours, while sacrificing time with your loved ones. It's not a 40 hour work week, it's an all the time work week. This fellowship is deeply rooted in the American dream.

You and your fellows will do this while others carefully, painfully step through life in fear of losing their jobs, which they usually hate, but perform so that one day in the future they can find happiness, by not doing something. Or worse, they don't think they can jump ship to do the thing they love because their world will fall apart. Yes, it will fall apart. I recommend a deliberate dismantling. When members of the fellowship shake hands and smile, there is a bit of shared mad glee in the falling apart they've wrought. From chaos comes opportunity.

Saturday, April 12, 2014

Game Center Kickstarter

Part of managing our Game Center expansion is the necessity of putting quite a few carts before their prospective horses. You have to pay architects many thousands of dollars before we can learn if we can actually afford the project. We need to apply for a loan to pay the architects before we know if any of this is viable. We need to begin planning our design and testing things like new chairs before we pull the trigger on buying over a hundred of them. So I can say with some certainty that we're planning to add a Kickstarter component to our Game Center expansion.

The Game Center expansion is actually an ideal Kickstarter project. Unlike asking you to get our store off the ground, adding furniture, fixtures or equipment (known as FFE), or acquiring inventory, the Game Center is not an asset we will own. The expansion of the Game Center is a tenant improvement, so it's adding value to someone else's property, and since we lease our space, it's not ours. It's instead an impermanent addition to Black Diamond Games that will be used by the community for as long as our business is in that location. So it makes sense to attempt to "share the load" on the project. Plus, with Kickstarter, the project can be better.

We're severely cost constrained on this project, since I need to demonstrate it will give us a solid return on investment (ROI) and there's only so much of a loan we can afford to acquire. It's a very expensive project already, with architectural and engineering costs approaching new BMW territory. Believe me, sometimes I wonder if a new BMW would be a better decision. I suppose you should know that with this project, I won't be driving a BMW, and in fact I'm putting up my cars as collateral. I've got quite a bit of skin in this game.

This project will strengthen the community focus of our store. It will allow more events, bigger events, special events. Since we've been thinking about this for years, I can say with certainty that expanding our Game Center is the right decision.

When we add a Kickstarter component to the mix, it does several things. First, it provides a a buffer for unexpected eventualities. I've managed projects before. Heck, I was a project manager. However, problems arise, and under our current budget, fixing problems will cause pain to the store.We can endure a good amount of pain, but it adds risk. Kickstarter allows the project to proceed with a cost buffer, in case of problems.

Second, Kickstarter allows us to take a step back from the ROI. It allows us to shoot for the moon, if people will share the dream with us. For example, we can purchase tables and chairs of a higher caliber, rather than disposable "Lifetime" Costco chairs that are hard to clean. We can integrate electronics to help us manage events. We can introduce "privacy curtains" for member areas (that's a new thing). We can put in better flooring that's both easy to clean and comfortable to stand on. We can generally expand the project planning to be of a more premium caliber. So the Kickstarter both ensures the project happens and makes it significantly better.

This week we were approved for our loan by Opportunity Fund, a California microfinance lender that helps community based small businesses. It turns out banks still turn down the majority of businesses that apply for loans, and this non profit has stepped in to help us.

Next week we hope to have the architects basic deliverable for the contractor. But now? Now we move forward knowing that with a Kickstarter component,  this is going to happen one way or another. There are still many variables. Costs are still being determined. Negotiations with our property manager will need to ensure our lease is extended past our loan date. The city has to approve the final plans, although we're very strongly front loading that with proper project planning with the architects. Kickstarter? Kickstarter can be both a project guarantee, a project enhancement, and a vote of support from our community.

With that vote of support will come perks. We're still working out the details. Besides various forms of acknowledgement, we're planning on implementing a gym membership model for our Kickstarter supporters. Imagine a reserved, "premium" area where you can play the games you want, when you want, and if we can do it, the aforementioned privacy curtains to cut down on noise and distractions. We're also considering commissioning a project or two from the publisher community. Imagine a custom Pathfinder adventure from a well known author with a Black Diamond theme, available only to Kickstarter supporters.

We're also looking for ideas to allow publishers and possibly distributors to participate. Sponsorship of various sorts will be available and a wall of prominently displayed logos or even framed posters is likely going to be part of this.

We're still brainstorming this area, so if you have ideas of your own, please share them below. For the most part though, you get to help us help our community by expanding their space. Also, I want to ask you to please spread the word that this is coming. Let your friends know it's on the way. Kickstarter is all or nothing, and awareness that this is on the horizon would help our cause tremendously. Thanks!

Friday, April 4, 2014

Hello! (Tradecraft)

Why do I say hello when you walk into my store? It's because I'm enthusiastic that you've taken a moment from your busy day to visit me. I'm honestly excited. It's a miracle to me, even after ten years, that people continue to visit. A miracle and a mystery. Think about it, where is it written that I would lease some place for years, a quarter million dollar investment (liability to some) and you would know to come to this place to consider buying my wares? Where is it even written that a store is a thing?

It's custom. It's thousands of years of tradition. You need a thing, and you just know to find a merchant, knowledge handed down through the generations, parent to child. You are visiting my store. I am honored. I wish to know more. I wish you to be comfortable. I say hello.

There are other reasons to say hello, but that was the big one. Other reasons include people who don't belong. It has been shown shoplifters are less likely to steal from you if you engage in this way. "Hello there! (I see you)." After a decade of doing this, I can also tell if you're a bit off by how you respond to that greeting. If you're evasive, perhaps you have ulterior motives. Perhaps you wish to steal, you're casing the joint, or you're just a sociopathic bastard in need of supervision.  Or perhaps you're twelve and you haven't learned to say hello yet. Dammit people, teach your kids to do this once they can walk.

There is the 80-10-10 rule of shoplifting. 10% of the people will never steal, regardless of the circumstances. 10% of people will always attempt to steal, even with cameras and alert staff. 80% of people may steal, under the right conditions. Store security is about discouraging that 80%. That's what the security expert told me.

Besides those with criminal intent, saying hello helps me ferret out the, well, the batshit crazy customer. Here's the thing about retail, eventually every person imaginable will walk through that door. And you will say hello to them. If they are off their meds, they might be dangerous to myself and others, and I would like to know that as soon as possible. They might walk in with a fuming gas can of gasoline  and slam it on the counter, with a glint in their eye (this has happened). They might be selling religion, which, let me tell you, on a slow day, can be a heck of a lot of fun for me.

So what else do we know about hello? Well, you certainly don't say hello when they first walk in the door. The first ten feet inside the store is the Decompression Zone. Paco Underhill, in his must read classic, Why We Buy, describes it. Customers are disoriented from their time in the outside and need to transition to the inside. The sounds, the change in lighting, and a moment to make sure they haven't made some huge mistake and walked into some sort of Pulp Fiction gimp situation. Let them be. They're not here yet, at least consciously.

The Decompression Zone is where I put things that don't matter, because this part of the store is invisible when you enter. It's also where things that aren't that stealable go, like chess boards and Heroclix and dollar junk toys from China, when I had them. Put something important in the Decompression Zone and you will forever be pointing them out to everyone who just passed through it. Everyone who buys a chess set from me, walks into the store past the chess sets, gets greeted, wanders around for a bit, and asks me if we have chess sets. It's alright. I know.

Customer also turn to the right about 75% of the time upon entering a store, another Paco Underhill gem. So we make sure the stuff to the right is muggle friendly, stuff that doesn't trigger so much cognitive dissonance; think Hasbro. On that right side wall is also where we keep our jigsaw puzzles, the crown jewel of muggle gaming, and an area of regular speculation as to what we should put there to replace them. One day I want to make a store in retirement that is a kind of geek anti store, throwing out everything I know about retail. To the right, up front, will be a twelve foot tall statue of Asmodeus surrounded by our Dungeons & Dragons section. No, I could never do that, but the exercise is fun.

So then you say hello, after they stop blinking and looking confused, emerging from the Decompression Zone. You do it every time. You do it for regulars. You take a moment when you're with another customer to say hello upon pain of a severe brow beating by me. If you can't say hello, a wave, a nod (for regulars) or some sort of acknowledgment is acceptable in a pinch. Something must be done to greet them, or they may leave and never come back.

Oh, and get outside the castle, for the love of the gods! Standing behind the counter and saying hello works in a pinch, or when you're crazy busy, but given the opportunity, and really, I wish we had staff to do this for every customer (we do during the holidays), lower the drawbridge and go out there. I'm not the crazy steward sending you out from Minas Tirith to your death against an army of bloodthirsty orcs who just sacked Osgiliath, you need to engage. You will come back. Minas Tirith means "watch tower," so you're watching for customers so you can engage. Alright, I'll stop that now.

What is there after hello? There is the follow up. Seek out the customer in their shopping environment. Ask them a question. And here, I want to say, don't ask them a question with your hello, especially in the Decompression Zone. Let them settle, even if it's for a few seconds. Also make your follow up a question that doesn't have a yes or no answer.

Are you doing alright? Are you finding everything alright? Those are bad, but good efforts. If you're lucky, you'll get a reflexive no, followed by a question. If you're not lucky, they'll turtle and you'll never know what they're looking for. Is there an age you're looking for? Are you looking for a good strategy game or a lighter game? What edition are you playing? I personally find this hard, but it's rewarding.

What else? Be friendly. Smile. Stop talking to your customer-buddy about your army. We have a lot of cusotmer-buddies, but to the uninitiated, they're just our friends, or regulars, and they're an outsider looking in. They find it disconcerting, especially when a customer interaction with a regular, if unimpeded, might last ten minutes. If you're a muggle, that certainly doesn't happen at Target, so you must be good friends. This is the biggest, single complaint customers write about our store, and it's a game trade hazard. Be welcoming.

Finally, thank you! Thank you every time. Thanks for coming. Thanks for buying. Thanks for just looking. Thank you! A friend of mine came in to talk and I thanked him as he left. He came back at me: "I'm your friend. You don't need to say thank you." I apologized of course, and as he went to leave again, I couldn't help thanking him once again. Thank you!

Tuesday, April 1, 2014

MYOB (Tradecraft)

After nearly a decade of owning my own game store, it's tempting to be cynical. The hobby game trade is a perpetual mess. You see new retailers ask the same insightful questions you once did, about why game store owner's can't get organized, how this or that organization has our best interest at heart, and how if we just changed one small variable, the trade would be so much better. Yeah kid, been there, done that. It would be easy to sit back and watch it all burn.

Active cynicism is outrage. We have a culture of outrage, daily button pushing on every topic, carefully tailored to our personal interests. Outrage is a lazy emotion that lacks the ability for change. It's cynicism with the volume up to eleven. Why would you point out a problem to a business owner when you could just be clever on Yelp? Outrage has nothing to do with fixing problems.

In the game trade, I could be outraged that my trust was abused by a supplier. I could be outraged because a publisher called us names, or a publisher did the usual approach of using small retailers as a spring board for big retailers, which means once we make something successful, it's taken away. As if it were ever ours to begin with. The unfair reviews and literally crazy customers can cause outrage. There's just so much outrage potential, and sometimes it feels like the alternative is being cynical, not caring at all. Snickering and talking about cat piss game stores and buggy whip salesmen, usually with people who have no idea how retail actually works.

The middle ground, what I've learned from the veterans who've been at it longer than me, is to simply mind my own business, in a very literal sense. When it comes to product, Jim Crocker of Modern Myths describes it as catching waves. We catch a wave, ride it as long as we can, then paddle back out again. That's the specialty retail model. It sounds exhausting, doesn't it? It is. It's the desire for things to be solid and unchanging that causes us to suffer in these ways, our energy sapped when our expectations aren't met.

When minding your own business, the amount of stuff you can ignore and be successful is staggering. The three things you must pay attention to are: your customers, your customers and your customers. Everything else, for the most part, is none of your business. Who are your customers? What do they need? How do you serve them? That's all.

Strategically, you've got to have your eye on the next wave. You've got to gauge the wave you're on. You've got to do all the little surfing related tasks before and after to make sure you're prepared for that wave. Your equipment needs to be up to the task and you have to be in good condition and warmed up. Research is so very important in picking your location and checking the weather forecast. You might even seek some guidance. You do the thing, then you do the next thing. The waves may come. They may not. That's the nature of the waves. No need for either outrage or cynicism when you're minding your own business, focusing on what's in front of you.

Friday, March 21, 2014

At Risk Stores (Tradecraft)

If you've got a game store that's less than four years old, with Magic sales exceeding 30% of your revenue, you're quite frankly, at risk. The game trade goes through boom and bust cycles, with those slow, drawn out bust cycles comprising "baseline normal." Right now we're in a boom, which is characterized by what other businesses would consider normal patterns of business. 

Having come from other, more successful business models, I recognize what we're in right now. It's a wonderful thing to feel appreciated and have resources to make things happen. We sell things, people readily buy our stuff, we make money, we hire staff and add product, expand our space or add stores, and the cycle repeats until we retire young.

This success is not for us. It's not a normal game trade trait. The game trade is usually about guerrilla marketing, a lot of hand selling, demos of products, having to decide which of the ten broken things gets fixed this month and a lot of diversification. It's running on pure passion most of the time. Problem solving is usually about triage, rather than expansion. Margins are thin, and it's not uncommon to have both profitable and unprofitable months. 

If you are in the at-risk category I described, chances are you haven't had to go through this. Your skill set is not the same as those who have come before. These are hard earned skills, often derived from desperate times. You are likely making decisions based on the "new normal" rather than "baseline normal." I feel the new normal attempting to infiltrate my thought processes every day. Resist. We are geniuses and gods when we're making money and it lulls us into a false sense of security.

You can't help it really, what else do you know? I realized a while back that my understanding of the housing market, my complete adult life understanding, was based on an illusion, a bubble that started 25 years ago. What it required me to do was to think entirely differently about real estate, that it wasn't in a virtuous inflationary rise, but more of a long game, boom and bust cycle. It was less investment and more place to keep my stuff.

That's what we need to keep in mind in the game trade. Magic doubled in sales for us. Then it doubled again. Then it doubled again. It went from our best game, with around 7-10% of our sales, to twenty, to well over thirty percent. Scary. Exciting! Magic makes our role-playing department look like a rounding error, and we sell a respectable amount of that stuff. Our upcoming expansion, to be completely honest, will be built with Magic money, to hold bigger Magic events. Nobody else really needs the space, or at least nobody else can pay for it.

If you're considering a new store because you think hobby games are trending upwards, don't do it right now. Just stop and wait. The opportunity you think is there is already in the rear view mirror. Like any trend or investment, if it's plain there's money to be made and everyone is doing it, it's probably already played out. When it does begin to falter, you don't want to be in that 18 month initial period trying to survive while everyone seeks the exits. 

We are not on the way up, we are teetering at the top. At least that's my impression. If you think you've got a solid, diversified business plan and you're not trying to grab the tiger by the tail on the way up, here's the hard part: you should still stop and wait. The fallout could be messy and the longer we go, the messier it will become, because "new normal" has a tendency to reach its tendrils far and wide, into distribution and publishing. Looking around, there are publishers and manufacturers teetering on the verge of bankruptcy now, and times are good!

If you already have a store and you're in the at-risk pool, consider what would happen if Magic suddenly dropped to 7-10% of your sales. Is your business model still sustainable? Are your competitors diversified while you're not? Will there be something else to sell? Do you have savings to get you through these rough times or are you at the edge with expansion and projects (I know I am). Most importantly, do you have the very basic, in the trenches, business skills to survive during "baseline normal?" If not, start acquiring them. And as I've said before, if you don't know what to do, hold onto your money.

Here's where I would sell you something if I could put business experience in booster pack form.

Tuesday, March 18, 2014

Leveraging Inventory (Tradecraft)

This post is a riff on using Open to Buy to leverage your inventory. I'm working on fit or my ACD Games Day presentation. It may or may not go into that presentation, but it's been rattling around in my mind for a few days. It might be a bit too esoteric for the presentation. It might even be dangerous for beginners. It's certainly powerful.

If you are interested in this topic, but unfamiliar with the area, here are some links to read first:
If you know this area, skip down to Leveraging Open to Buy.

Open to Buy Basics
When you use Open to Buy, you are taking your powerful inventory budget and separating it from the rest of your expenses. This is difficult if you're not profitable or you don't have the cash flow. If you only order stock when circumstances permit, you're not ready for Open to Buy. My suggestion, before embarking on OTB, is to build up a cash buffer so you have room for an inventory budget. If you're coming off a good period, rather than spending on something, keep it in reserve so you have the flexibility to use this tool.

Open to Buy allows you to purchase what you need, when you need it, regardless of what's going on in your business. Just as regularly paying yourself a salary allows you to firewall business finance from personal finance, OTB allows you to firewall purchasing, the lifeblood of your business, from day to day business finance. This gets you into the Success Cycle with your inventory:
  1. Knowing what customers want
  2. Having the budget
  3. Receiving on time
  4. Satisfying demand
Leveraging Open to Buy
On its face, inventory seems a bit dismal and mechanical. You've got X amount of inventory and through diligence you can fine tune it to increase turn rates. Your inventory performance tends to improve in a relatively narrow band only after years of hard work. However, once you get the basics down, it's far more dynamic than this. An advanced technique, you can leverage this resource for your financial needs. Better yet, the stronger your inventory, the stronger the leverage.

Why would you want to do this? There are a couple reasons you would leverage your inventory, involving both drawing it up and drawing it down. First, through Open to Buy, you can draw up your inventory far beyond normal levels to take advantage of seasonal sales. Without OTB, this would be dangerous, as you wouldn't know where to stop or how to reverse the trend once it started. It's still a bit dangerous, but with good data, it's the usual risk management we do every day.

To give an example, during the holidays last year, my inventory peaked at $15,000 over my budget in mid December, to take advantage of holiday sales. By December 31st, two weeks later, I had a balanced budget, important since my excess inventory is subject to taxes. That $15,000 was leverage that allowed me to double sales in December from a normal month. Because I use Open to Buy and have sales data from previous years, I could forecast demand, budget inventory, and most importantly, draw it down in a condensed period. That's powerful leverage.

Inside Leverage joke
Drawing down inventory is usually an affliction, something that happens to people who don't track using Open to Buy. The dreaded Inventory Death Spiral is when a store is having trouble paying their bills, they use their purchasing money for expenses, which then results in poor sales because they have nothing to sell, which again starves their inventory budget, until they're standing in an empty store. Not spending your Open to Buy money is just as dangerous as overspending, but also just as powerful.

Through Open to Buy, you can carefully draw down your inventory budget during an off season, or perhaps for upcoming expenses where you would like to avoid a costly loan. That's something I did recently to pay taxes. Drawing down inventory over a longer period to pay temporary expenses, and then drawing inventory back up, again over a longer period. This leverage works far better with established stores with bigger inventories. That's because of how sales and inventory is structured, following the Pareto Principle

Pareto Principle
The Pareto Princple, also known as the 80/20 rule, applied to inventory says that 80% of your sales will come from 20% of your inventory. It's not an exact thing, but it mostly works. When you're a new or small store, inventory is relatively flat. You're an inch deep and a mile wide, with 80% of your inventory usually having just one item on the shelf. As your store and inventory grows, that begins to change. Sure, you add some inventory breadth, but the majority of your sales are still that 80% from before. Now you just have more safety stock, deeper amounts of those items in which you expect higher variation in demand or supply. That's opposed to current demand stock, items you have for right now, which is the other variable.

Safety stock is where you can find that draw down cash, which in a new or small store applies to only 20% of your inventory, but in a larger store, it's up to 80% of your inventory. A bigger budget means more leverage to draw down. The key is to only draw down safety stock so you can lean out your store, without adversely affecting sales.

You can draw up and draw down provided you've established your Open to Buy budget and provided you've got the financial leverage to make this happen, meaning terms or credit cards to pay for your inventory. Leveraging inventory  is a bit advanced, so I don't recommend it for everyone, but it's a tool in your toolbox.