No Costs Are Fixed

My first year in business was bewildering. The various services necessary to run a business took some effort to figure out and pull off at the right time. Insurance, credit card processors, telephone and Internet, payroll and accounting, and even the almighty lease all had to be properly budgeted and planned. The following year, when I went to a seminar at the GAMA Trade Show given by Dave Wallace, I learned that these expenses should be reviewed annually and carefully scrutinized. I had a sinking feeling that maybe running a store wasn't right for me, or maybe this guy was insane. He had all these crazy numbers he kept throwing at us, as if he had the magic formula for running a game store. In fact, he kinda did.

He was not insane, it turns out, and my vision of what it meant to run a business back then was still in fairy tale land. There's really only two things you need to do: sell more stuff, and spend less money. Everything else flows from those two things. In the beginning of a business, with double digit sales increases, the first part seems like a no brainer. The second part, saving money, seems irrelevant when the cash is pouring in. In fact, I realize now that it took me about two years to come to the important realization that the money I was spending on all these various expenses, was mine.

As an IT employee, especially one running a "cost center" like an IT department, money was this dirty stuff that the finance guys handled. A smart company has IT report to finance because techies are like kids in a candy store. It didn't help that I did IT during the dot-com days, when we would be judged on our burn rate, our level of spending regardless of results. The finance guys would make us do a budget every year, but then they would ignore it. They wouldn't require budget discipline on my part, and there was never an upside to creating a budget, such as a surplus that I could use to buy some fancy router.

Money was always abstracted. If they had no money, they would just deny a purchase order, like momma saying no to a candy bar, without much explanation. It took me two years running my own business to unlearn this bad behavior, and then, suddenly, overnight, saving money became fun. This was my money, money that I used to feed my child and fill my car with gas. Everyone suddenly had their hand in my pocket and I didn't like it. I nearly became a Republican on the spot! Really what happened is it became a big game. THE game.

So now I kind of enjoy the annual task of going over expenses and seeing what I can squeeze, just a little more. Last year I cut payroll expenses in half and stopped buying custom printed bags. The year before I met a customer in the store who became my insurance agent, saving me a bundle on insurace and thousands of dollars a week later when the store was broken into (the agency still wonders if I did it). Today I cut my phone bill in half by dropping voice mail, a phone line that wasn't getting used, and changing my DSL service. AT&T even gave me the equivalent of three months worth of free service, since I showed I wasn't fully using my plan. That's the equivalent of five days net profit from store sales. It pretty much takes ten dollars in sales to cover one dollar in expenses, so any savings you can make are enormous!

I'm not entirely ruthless. I will often try to give business to customers or people I know. I'm switching credit card processors to a friend from high school. My aunt does my personal insurance, while a friend from the store does the business insurance. My accountant is a networking associate of one of my business partners. The guy who represented me to the landlord plays Magic with his son. I even bought janitorial supplies from a guy who frequented the shop, even though it took two years to go through the minimum order of hand soap. It's not just a tit for tat trading of services. When you have a relationship with people, they usually provide you better service.