The tendency in January, the one time a year most hobby game retailers are sitting on a barrel of cash, is to find new product to buy for the store. Before you order in the full range of The Hobbit models from Games Workshop, consider a few options:
- Taxes. Have you been profitable before? If you're new at this, you might get sticker shock at your tax bill. The most dangerous expense in my business right now is my income tax bill. Wait and see what you owe before you spend all your money. When you do find what you owe, begin saving for next year. You could do quarterly pre-payments or you could just save that money with discipline (you should probably do the pre-payments).
- Marketing. Do you have a marketing budget? How about a marketing plan? With a cash cushion, this is a great time to make a plan and try some new mediums. Ask what other retailers are doing. Facebook is still the core for us, but in smaller markets, retailers have good success with cable TV and radio. Consider local options, like school newspapers. Budget for going to local conventions, making sure they're profitable and not a "marketing expense."
- Education. Have you been to a trade show recently? Ever? Toy Fair NY is February 14th. The Gama Trade Show is in March and everyone should go at least once. I would ideally go every couple of years. Other regional options include ACD Games Day (May 6th), Gencon (July 30th), and The Alliance Open House (September 12th). Plan now while you can justify the expense. Are you one of those store owners paying $400 a month to have someone else do your books? How about taking a basic bookkeeping class and buying yourself a new car as a reward when you're done? That's some incentive, no? Backfill your education with some business classes or seminars. Or budget for some solid business books.
- FFE. Furniture, Fixtures and Equipment. Last year we bought a new POS system and cash wrap fixtures. This year we bought a new camera system, new book cases and phone system. Entropy is your enemy and you need to keep up on this stuff. I'm sure you have a list.
- Buy New Stock. But wait. The game trade is "front list" driven, meaning most sales come from new items. New items for 2015 don't exist yet. Why spend your money on slow things? If you want to expand an area, it would be better to expand with new product rather than back fill. Where should you put those inventory dollars? Well, check out turn rates for each department. If your Games Workshop product turns at a dismal 2 turns, move on. If your board games are turning at 5 a year, that's a bit fast. Find the departments that have the high turns, because you're either losing sales from stock outages or the category is hot and the risk is lower. Just don't buy a lot of old junk (things that exist now).
I agree about the taxes. I've prepared taxes in the past for small businesses and that is the biggest pain point for new business owners.
ReplyDeleteWhat needs to happen for the bookkeeping? Make sure you are not in the shoebox level of bookkeeping. Tracking your inventory and all that other stuff is a bit hard without knowing what and where you are selling. I've seen quite a few new retail stores post Total Sales without recording WHAT and HOW much they are selling each product for. Egads. A recipe for disaster when you are running retail.
It looks like you are well aware of those pitfalls. I'm just mentioning it because some new people aren't even tracking their inventory at all; much less their inventory turns. :)
End of year requirements from my accountant:
ReplyDelete* Inventory value at cost (used to compare to last years total. Anything over that is taxable income). Make sure to include Magic singles. I think most stores probably don't know that number.
* Gift certificate total. In California, these never go away and they're a liability (a good thing). Any increase or decrease effects taxes.
* Sales tax for Q4. This gets added back into the previous year as a liability.
* Any changes of ownership
* A Quickbooks backup copy.
Exactly that.
ReplyDeleteHowever, the inventory may vary because of theft and shrinkage, not just sales. It's easier to spot if you have a POS and robust inventory system. So there is usually a delta between the purchased inventory, the sales and the remaining inventory.
Sounds like you have a great accountant.
Ten years ago, I would say less than half the game stores had point of sale machines. Now it's probably around 75%, and those that don't have one, know they need one. It's easier now because there are hosted solutions that take a lot of the complexity off the merchant. You can get a Square Register setup for $500, get a hosted solution for $100/month plus a computer, or spend $10K on a full featured POS.
ReplyDelete