Beach Fallacy

This month we celebrate our store's 15th anniversary. I am happy to report in year 15 I learned from failure. Failure means I'm still trying to innovate and change things up. This particular failure was one I recently realized while speaking with a friend who just sold his business. It comes down to this: The idea you can remotely manage your business with an installed manager is temporary at best. The 4-Hour Work Week may work for a turn key business, but most businesses are not even remotely turn key.

You may have a great manager, but they won't be there forever, and the process of getting a new one trained up, will be time consuming and not conducive to lying on a beach. So even if you have the skills to train them, how fast can they reasonably achieve mastery? In general, the concept of remote management for me has gone from something I might be able to do full time to something that may be possible half the time, that half determined by chaos in my business.

So I may be able to live in Mexico, for example, six months out of the year, a random six months at that, but I better have a place to stay when it all falls apart and I have to retrain staff for six months back home. The idea you can do this all remotely, living elsewhere, is a myth.

Here are the three areas that I see, that if I were a better owner or had magic powers, I would be able to solve to extend my six month theory. If you think you have skills in how to quickly train up candidates in these areas, this is where I would pay for a consultant:

• Gross versus Net. A bad manager will spend your business into the ground with no apparent benefit. An alright manager will spend your money on long term investments that pay off later, but still leave you in the poor house right now, as they usually don't understand cash flow. A great manager will always spend cautiously and be conscious of the bottom line and the cash needs of the business.

I was not a "great manager" of cash until I had distributions from the net profit. I became incentivized to focus on net. Unless you can incentivize someone with bonuses for producing net profit, you'll always be watching your back (which you will always do regardless). Or you may train someone to be so overly cautious with your money, they take no chances at all.

• Tight Employee Management. A good manager sets employee expectations via an accurate job description and solid training. The manager manages those expectations through the employees tenure by means of additional training and corrective action. Then they reward or penalize employee performance based on how those results are achieved. 

Most managers, most people, can't do this. They simply can't without some very good training, and even then it's not within most peoples personality range. I can tell you from the corporate world that most managers are untrained and awful. Training a manager to master this process will ensure you always have good people, but good luck finding someone skilled at this for what you can afford and good luck developing the skills in yourself when you've probably only had bad managers.

• Inventory Accuracy. Does anyone other than you really care if your POS system is only 90% accurate? Inventory accuracy results in better buying practices, higher sales, lower taxes, and happier customers. Yet, it is very difficult to have a manager who cares about this accuracy as much as you. It is very much tied to net profit. If you find someone outraged at inaccuracy, and they have skill in the other two areas, find a way to groom that employee for manager. 

So those are the three areas that require an owner to be involved in a store on a near daily basis. This does not mean your store sucks if this is the case. In fact, there's no reason this should harm the value of your business if, say, you wanted to sell it. Someone with these three concerns will always need to have their hand on the wheel, but it's unlikely to be an employee for very long.

The End of Familiarity (Tradecraft)

When you walk into my store and look to the right, the designated direction Americans gaze when entering a store, you'll find a plethora of familiar game titles. Monopoly, Yahtzee, Scrabble, all the usual suspects. This is what is known as a "merchandising expense," games I stock that I would rather not, that indicate to the uninitiated that I am a safe place with things they are familiar with. This is a game store with games, you know, game games, as one customer recently described it. This practice is now coming to an end.

Here's how that works. First, hobby games have penetrated the mass market and they've been there now for a good, long time. Unless you're living under a rock, if you've been to Target and WalMart in the last decade and care even an inkling about games, enough to roll your red or blue cart past them, you've seen Settlers of Catan, Ticket to Ride, Carcassonne and other former hobby game store exclusive titles.

These titles have declined for us significantly since their introduction in mass market, with the promise they are gateways to good times for us later. Perhaps this is true, perhaps not, but board games are booming. These titles are now familiar to consumers. They've become evergreens on the shelf of mass market stores. This means hobby game stores don't need to work as hard with our garbage merchandising expenses to show familiarity. Chess sets and Hasborg products can be dropped, if you feel your community have these touchstones in their lives. And what community doesn't?

Second, even if I don't have this market penetration that breeds familiarity, there are now enough regular folks who play hobby games to where I need the space taken up by oversized merchandising inventory. I may lose the completely out of touch customer, but my overall base is so much larger than a decade ago, I can afford it. What I can't afford to do is stock quaint product for muggles when I've got educated consumers flocking to my business and demanding games now. They will just as easily, and without a moment of regret, buy it online, so it better be there now.

In general, if you don't know or are frightened by products like Dungeons & Dragons, Ticket to Ride, Pokemon and Magic: The Gathering, you are simply not worth any of my time whatsoever. Through mass market stores and the Internet, the public has been converted from suspects to prospects. In fact, it has turned many from prospects to customers, bypassing hobby game stores completely. I am at the tail end of this equation, taking in what I can of a cultural shift, in which a hurricane of customers have been created and I'm trying to fill up a thimble, arm outstretched into the clouds, while dying of thirst. As with all revolutions, you never know exactly your place in it until shots are fired.

Games in my parents guest room. One of these things is not like the other.

Two Types of Game Stores

Hobby game stores are the tip of the iceberg. They were once the whole iceberg, introducing new customers, catering to veteran customers, and acting as taste makers. They did it all. The store owner decided which game you would play, and publishers would do their best to place ads in magazines or show things at conventions to convince customers otherwise. The stores were never powerful, but they were strong influencers and with little competition, they grew lazy. Epically so.

Right now, hobby game stores are as numerous and prosperous as they've ever been. However, the hobby has grown so huge in the last decade, and the Internet such a powerful force, they struggle to remain relevant. I struggle to just keep up with customer demands, and only occasionally flex my muscles as taste maker.

This is not to say brick and mortar stores are dying or having problems, which is their natural state, it just means they're trying to find their position in the changing marketplace, where Amazon has steadily gobbled up game trade market share and now owns, what 80%? Who really knows. Many game stores are selling on Amazon with a, "if you can't beat them, join them" strategy. So stores struggle with how to approach this perilous new world, where the Internet dominates as a sales channel, with Amazon and direct to consumer sales being the primary means of commerce. It's such a powerful force, it not only drives customers to us, but they arrive with a different idea of how the games are played.

There are two primary strategies to stay relevant as a hobby game store, serve the lowest common denominator or serve the highest common denominator. When I say highest, I refer to the intense amount of retail work required to bring in new customers, expose them to a broad variety of games, and later watch them wander off to Internet sales once educated. It's game store ownership as parenting. It's time consuming, expensive, and only works because nobody big is dumb enough to try. It's the full spectrum, high capitalization approach.

Deciding on being the highest common denominator requires a serious capital budget, strong sales training, and a local market where this is possible. Most scorched earth regions, characterized by close to free real estate and a customer based trained to pick apart newcomers, need not apply. There is a strength to this model, but there's also the eternal question of, if you have enough money to do this right, why would you do it at all? When I mention the scorched earth issue with scorched earth store owners, they have no idea what I'm talking about. Scorched earth is the game trade in many regions. It would be like asking a convention of ice cream store owners to consider a world without refrigeration. Sucky stores exist to serve a sucky market.

The lowest common denominator is serving the most profitable customers right now. It's a supremely logical business model, unlike the high store. You identify the lowest hanging fruit, the maximum value for the least effort, and you serve that. You serve it all the time in every way possible. You don't invest in fancy fixtures or worry too much about Kickstarter or Dungeons & Dragons table acreage. Every D&D table of players is worth one Magic player, and you make no bones about it. You serve the beast that feeds you. I should mention a good LCD store is just as well capitalized and the owners just as smart and clever as the HCD store. They just satisfy different needs in the marketplace.

The lowest common denominator store serves Magic to Magic players in every Magic configuration imaginable. You have events for every format, you sell tons of singles and have a war chest of cash reserves for buying cards from customers that would make a marijuana dispensary nervous. Where the high road store spent a small fortune on fixtures, trained staff and diverse inventory, the low road store has a shockingly large collection of used cardboard. That other expensive stuff? It's just not necessary. That means lots of singles sold in store and online and deep discount pricing on sealed product because you're essentially selling a commodity item, like soy beans. If you could buy stock in Lifetime Products, Inc., you would. You are not concerned with margin, only the market price.

Both models work. However, imagine if you were trying to grow your market as a publisher. Do you want the image of where your game is played to be that of a dirty den of dudes or a professional enterprise that welcomes all new people? Do you want to be associated with a pawn shop or Neiman Marcus? You created the marketplace where the dirty dude model worked best, but you no longer need them to sell things, just act as an onramp to your hobby game. Your own child is a delinquent and now that they've grown up, you're tired of them hanging out at your house, eating your food.

The game trade is headed in a direction that rewards the highest common denominator store because publishers are primarily interested in image, not sales volume from this increasingly insignificant sales channel. The ability of a store to sell lots of a product is literally none of a publishers business, other than knowing people come to buy it there. Supporting stores is just a marketing expense now, not a requirement for economic survival, and nobody wants to spend money on representing a poor image. It does not mean the high stores will get any sort of real sales benefit, any guarantee of meat on the bone, but when there are bones thrown, they'll get them first.

We are at the point where there is a push to transform the lowest common denominator stores into something more presentable, while rewarding highest common denominator stores with perks to help showcase publisher brands in these locations. Again, sales are irrelevant other than a marketing indicator. Is it financially feasible to transform your store? Even a very good store might spend thousands of dollars to attain what's considered great, but will it result in stronger sales? Not necessarily, and although that might be the store owners goal, it's not the goal of the publisher.

Will customers appreciate the change. It turns out the answer is sometimes. The stores that catered to the hardcore Magic crowd most effectively are not usually the stores being rewarded in this new paradigm. Some hardcore customers, catered to by the lowest common denominator stores, are angry and resentful that these "Magic light" stores are getting bones. Sure, the casual players at the high road stores enjoy tablecloths and shiny trash cans, but they're not buying more because of it.

There's two points I want to make about this mismatch between hardcore players and high road stores. First, when someone is truly angry about a business, it means they need them. They want it one way, but it's the other. When a grognardy Magic player is resentful a product or event is being held by the high road store, that's a sign that stores strategy is working. They are needed and it rankles the mercenary customer. This was once reserved for pre releases, where I would see the once a quarter customer scowl at me for existing. How dare you offer something exclusive I need, you sell out.

Second, if you're playing a game from a publisher who doesn't seem to align with your interests, maybe it's because you no longer align with theirs. Maybe your mercenary nature means you'll find your way in the marketplace regardless and you no longer need to be served to such a high degree. Perhaps you've graduated. Perhaps the penalizing of the low road store and reward of the high road is a signal to the customer base that it's time to grow up.

Book Errata

I may have mentioned this before, but there's an error in the Open to Buy table on page 143 of Friendly Local Game Store. The calculations are wonky starting on the second line. Here's what it should look like, based on the data in that table:

The important calculation on each day is the Balance column.

2-27, is $1,000 (starting balance), plus COGS on 2/27, minus Purchases on 2/27.
2-28 is the Balance from 2/27, plus COGS on 2/28, minus Purchases on 2/28.
2-29 and on, just copy the formula from the Balance on 2/28.

Zen and Small Retail Management

I don't throw the term "Zen" around too often, as I've been a Zen Buddhist practitioner for a long while. However, there are some parallels with specialty retail management and I wanted to share them. When you're running a specialty retail business, there is a lot of confusion. I get questions all the time from new store owners about the minutiae of running a store, which is endless, idiosyncratic and practically unknowable. There are stores that have predictable sales patterns, but for the most part every month has been an adventure for me, without a lot of obvious patterns to help plan through the chaos. 

The same is true with Zen meditation, with a lot of working through chaos with no idea if there will be positive results. The faith in Buddhism is the faith there will be results to the work. The tree will bear fruit, one of an infinite number of agrarian metaphors. Sometimes you have a breakthrough and learn it was indicative but not important. One of my teachers referred to that as "walking by the garden." You're not in the garden, but you're garden adjacent. Good effort. Business can be the same way. You think you have success, but then the next month the whole thing falls apart. In Zen that's pretty typical, in business it makes you want to cry, especially when you see friends and families, employees, have a simple, predictable lifestyle. Life will never be simple or predictable again.

Eventually you have a legitimate breakthrough in business as in meditation, and how are you rewarded? That's right, with more work. You struggle again, thinking you'll never make it, you've hit your peak. You know what? You might be right. There's no guarantee you'll get anywhere, and it's a combination of effort and wisdom that gets you to the next level. If you have effort and no wisdom? You'll be there a long time, languishing. The good news is pain can provide wisdom, so there's always hope. I remember several years where I wished my business would just fail already, since it couldn't seem to plateau to the next level. But eventually it did, through persistent effort and continuing to try different things until I found success (wisdom).

If you are struggling now, more than likely you're working your way to that next plateau. If you think the work will be over soon, you're mistaken. You can certainly decide not to continue the climb, but everyone, at every level, is working to get a little further up that mountain. Even multi million dollar businesses are faced with plateaus and what to do next. The higher up you climb, the more costly the mistakes too.

The "beach house in Maui" is the example a Harvard Business School report described that final ascent. You have three options as you approach the summit: you can plug away, content in your success, you can risk it all on that final ascent, or you can distract yourself because you're clearly not one to be content. You plan to build a beach house in Maui. Or build a Jeep to travel the world. Or whatever else smart people with money do to distract themselves. The beach house in Maui is true at every level, although you might decide to stop because you finally bought a house or finally have a steady income for retirement savings.  It's up to you to decide when you've had enough. You could work until the day you die, and increasingly I know those folks. Much of what's written about meditation practice is getting you to break through that complacent plateau. In business, you can always decide you're at a comfortable altitude.

Age is a big factor, as you spend ten, twenty, thirty years climbing that business peak, do you really have time to fix a mistake if it all crumbles? You're probably unemployable, either because you have no marketable skills or you're incapable of working for someone else. You have a mortgage and kids and college funds and retirement plans. You can do this until you've had enough. When is enough? Age and income is the answer. Do you have time to start another climb? Does it sound appealing? Without money, you gotta do something. Maybe just visit Maui and see if there are any lots for sale. I'm sure it won't lead to anything.

Finally, the "how do I know?" question, of whether you're in the garden or garden adjacent. A teacher as guide is helpful with a meditation practice. In business it's much easier to see the results. It's not hard. It's money in the bank. If you're sitting on a pile of money and wondering where you're at, you've probably plateaued. If you don't have a big pile of money, you're probably walking by the garden.

From https://www.internationalyoga.com

Cleaning Up the Books (Tradecraft)

I am not an accountant. I can barely keep up during my annual conversation with my accountant. I had a year of accounting in high school, probably to avoid some nastier math requirement. I know just enough to understand double entry and the difference between receivables and payables. From talking with my accountant and a business broker, there are a few areas I'm now a bit more cognizant about, things that show value or indicate problems that are often about something simple, like categorization of expenses in your accounting software. That's the exciting topic for today. Let's clean up your books.

Cost of Goods used to be my dump stat. If you have a high cost of goods, it shows your business is not very efficient. It indicates maybe you don't have a handle on shrink, or you haven't negotiated good terms with your suppliers. It might mean you're a bad buyer. A high cost of goods may indicate an industry problem, which is bad if you're trying to sell your hobby game store to someone uninitiated as a kind of toy store thingy with tables.

I actually track my cost of goods daily, so when I saw the difference between my real, spreadsheet cost of goods, and my fake, Quickbooks cost of goods, I had to figure this out (also Quickbooks is always realler). When I presented my income statement, my business broker gave me a disapproving look with my high COGS. What happened? What happened was I was dumping miscellaneous charges into cost of goods, which is a major no no. Be extra careful about what goes in this category, since it indicates so many possible problems with your business. If you have to dump something into a category, do it into a discretionary one like office supplies.

Office Supplies are pretty discretionary. Everyone thinks they could come in as a new owner and reduce waste of office supplies. My accountant encourages me to put anything consumable, anything not clearly durable, into office supplies. Office supplies also gets depreciated immediately, unlike durable goods, which are depreciated over years. so if it's in a gray area, it's office supplies. Not sure what it is? Office supply. Never use miscellaneous. Miscellaneous is a question mark. You don't want questions in your books. Answer the question!

Payroll should be broken into multiple categories. Payroll expense, taxes, payroll processing and insurance. Each of these have different tax consequences. Each expense can be attacked to drive them down in a different way. Speaking of payroll, have you given yourself a raise recently? Your pay is a discretionary expense so brokers don't care. It reduces your end of year tax burden and saves for your retirement with social security payments. It forces your business to compensate you first, unlike profit distributions which happen last, when it's convenient. You deserve a raise. You're welcome.

Rent is one category that should only ever include rent expenses. Your business value is backstopped or dragged down by your lease. No successful business can predict continued success if it has to make a costly and unpredictable move, and if your rent expense is dragging you down, there's likely nothing to be done about it. Personally, I can't imagine any business would sell with a month to month lease. I would insist on a lease as long as your earnings multiple from the valuation. If your business is valued at 3x your earnings, I would want to see at least three years left on the years. I wouldn't invest in a business until I saw a copy of the lease. Someone believed in you to be around for years. I want to see that. Heck, I want to at least see your name on that contract, especially if I have to approach the landlord to assume it.

The main take aways here are be meticulous with your books. Make sure fixed expenses and discretionary expenses are not mixed. It's easy to get sloppy. My credit card bill averages around $15,000 a month and it's painstaking to make sure every line item is categorized properly. I download reports, try to figure out each charge, and I'm especially careful with those cost of goods, since they can look like other things. It doesn't really matter if it's just you in the business, if you ever want to sell or bring on partners, you'll want to be meticulous and you'll wish you had done it years before.

Tumultuous with a T

My store has had a tumultuous year so far. Our sales are up 23%, with net income up 230%, which is easy to do when we were at a negative net income a year ago at this time. The San Francisco Bay Area is on fire, thankfully only figuratively. The Bay Area would be the world’s 19th largest economy, if it were tracked that way. I just want to crow about how well we’re doing, how well everyone here is doing, so this post doesn’t sound like a pity party.

We have transitioned nearly our entire staff this year, a staff that averages a turnover every three years. It has been a huge hit to our institutional knowledge, which means training has been a huge expense. Training means overlapping, unproductive shifts, and it’s is our single largest expense this year, when you also include the tremendous wage inflation we've got here in California (at the bottom tier of employment). Starting wages for part timers are going up a dollar a year, but it’s not fast enough for many, who criticize us for not having every job starting at a living wage (likely in the $20+ range). We’ll get there Felicia, just give it a minute. Enthusiastic new staff are a strong reason for that 23% growth, most of it really, so you get what you pay for.

I will refer to 2019 as my Year of Entropy, assuming my store makes it out alive. Besides expensive staff transitions, our drink cooler died ($2,000). One of our two, multi ton air conditioning units gave up the ghost a couple weeks ago, requiring a new compressor ($3,000). By the end of the year, we’ll need two new computers, including a replacement of our six year old POS system which will need the POS software and hardware reinstalled ($5,000). Overall, add these expenses to the usual entropy of plumbing problems and CAM increase and it’s about $20,000 out of pocket.

We’re still a profitable business. About half that profit goes towards construction loans, so I feel we’re investing in the business each month when those checks get processed, even if nothing new arrives. I’m thankful to have windfall profits in a year with crazy high expenses. Imagine having flat sales and all these expenses start beating you down. It’s why the threat of failure never goes away for small businesses, never reduces the chance of closing no matter how many years you’ve been in business. 

Are new expenses hitting us while we’re on an upward trajectory or downward? It becomes a simple calculation. Should we cut bait or cast out again? Some of our competitors disappeared this year after doing that calculation. This has added a lot of unexpected energy to our store as the displaced seek new homes. Thankfully there’s light at the end of the tunnel. We haven’t really been walking in darkness, since it's a profitable business. Having debt while encountering the usual entropy is like walking through a dim tunnel while bats fly overhead and muss your hair. You’ll make it, it’s just disconcerting.

Meanwhile we’ll enjoy a little money thrown at re-branding and selling our updated image. We’ve had enthusiasm for our new logo, sold some stickers, and talked with people who were unaware of our previous brand identity, which is currently limited to our website and business cards.

Logo

When a company changes their logo, it's generally a group exercise in self pleasuring. It's rarely necessary. If you look at the Starbucks logo, the 1987 or 1992 logo is in color, a big transformation, but I personally wouldn't change my coffee drinking decisions based on any of their logos. As for 1971, I'm not sure what's more offensive nowadays, bare mermaid breasts or a black and white logo. And what in the hell is she holding? Are those her mermaid legs? What exactly does this imply?  Is this a coffee shop or a brothel? Sick bastards. Logos are ridiculous and nobody cares.

When I was told we needed to change our logo, my first concern was the circle jerk of pointless design and then cost. Clearly there's no financial benefit to the exercise. We've had the same logo for 15 years. Is it a good logo? It looks good. I like the colors. I like the knight. As for the design itself, I have to admit, it's a giant pain in the ass. Our original logo is terrible, practically speaking. It's an impediment to its very purpose.

The use of black means it looks great on screen with a white background, but it's problematic with other forms of media, which require a very light background. It's so difficult to use, we tend either not to use it at all, making the brand identity somewhat weak, or we reverse the colors to put it on a black background with the logo in white. We mutilate the logo to make it work. It's a problem. But is it worth fixing? Enter the business case.

When it came to staff shirts, we resorted to white embroidery on black shirts. originally I had white shirts with a full color logo, but those were loathed by everyone, and they were hard to keep clean. You may not know this but everything we sell sits in a dirty warehouse before getting to us and gets even dirtier as it sits on our shelves. Keeping a retail store clean is a major feat, as it starts dirty and only gets worse. White shirts were always getting stained and looking bad.

The black, embroidered shirts we currently use, with a boring plain white stitched logo, turned out to be incredibly expensive. Each shirt costs $70 with embroidery. They also need to be made in batches in various sizes, so we're almost always buying more than we need, in sizes we hope will be useful. Invariably, those sizes don't match our diverse staff. So over time, we've been stuck with a box of very expensive shirts in the wrong sizes. The cost of bad design turns out to be very high.

Our new shirt design features a full color patch that can be sewn onto a variety of shirts. We choose the shirt from the Work Wear store next door, grab a patch, and sew it on. No big batches of variable sized, expensive, embroidered, logo perverting shirts. Also, if I want one of my robust, tactical shirts from 5.11, I buy it in the right color and sew on the patch, something not available before. Total cost per shirt for employees will be $25 or so, with no waste.

Then there's the increased merchandising we tend to avoid with the old logo. We've already ordered new patches, pins, stickers, and more. We'll have hats and t-shirts eventually. These were difficult to design with the old logo requirements and they sold poorly.

Now let's get onto the minor controversy of our design choices. We spent about a month defining the needs of the new logo with half a dozen designers. We identified core requirements. It should maintain the design elements of the old logo: the knight, the horse, the lance, the direction it's all headed (very symbolic) and of course, a diamond. The logo needed to remain fairly simple. The name needed an updated font that was compact with the design. The previous font used long, horizontal text and has been nothing but trouble for 15 years. The color black is problematic. It goes with nothing but white. Those who use black in their logos hamstring themselves design wise, so we omitted that. In fact, I would probably pick a different store name without a color in the title if I were to do it over. I have few regrets, but "black" is one. Let's take a look at the new design:

I think it pops. Rather than black, we have a dark blue, which works much better and represents one of our colors. It's a darker blue than our original logo (which some say was purple, a color I love). The diamond color, away from black, represents a shift in store colors that came about with our big construction project, three years ago.

This orangish yellow is called Curry in Sherwin Williams colors, which is the color we painted our staircase. It's a color that matches our birch fixtures. It provides a pleasing blue and gold ambience, the colors of the local university, UC Berkeley. 

This shift in store colors came in a moment of crisis. The Curry color came from a decision I made with the architects when it was clear our paint color choices weren't working in practice. I was distracting myself at the time with another project, a used Jeep I was about to buy in Utah, because Utah was the closest location of a Jeep in this exact color I was smitten with. I had to have not only the features I was looking for, but it had to be in that color. It was clearly on my mind. Originally the Curry color was white, but when we painted it on on the staircase, it looked terrible.

So the color of the staircase and thus the logo got their color from a Jeep. The Jeep is in a Chrysler color called Amp'd. And thus our staircase became Amp'd, and our logo became Amp'd. And for the foreseeable future, we shall be Amp'd. Most people like the new logo, once they've accepted (or more often overlooked) the diamond isn't black. It's a tough ask, but if people can accept the Starbucks mermaid isn't holding up her legs suggestively any longer, I think this can be overlooked. Personally I love the direction of the logo. I especially love I won't be paying $70 each for a box of useless shirts. 

Model for the Good Store

"And here is where we thought about putting in a cafe."

This business is one of constant brainstorming for the successful. For most stores, which I will maintain are not very good (fight me), the answer to all questions is often doing the thing you're doing now, but better. More inventory, better trained staff, better events, an improvement process and an upgraded look. Most stores don't need a cafe to be relevant.

They should know by looking around where they could spend the time or money. You could expand and upgrade for quite some time, really, but most stores struggle on a daily basis and never get the chance. It's the curse of under capitalization in a low barrier to entry market. Often it's not even about money.

Visit enough stores and there are simple improvements that just take elbow grease. For many it's as simple as picking up the trash you can see when you look in the window, or re-arranging the product on the damn shelves. Basic retail. Problems I saw throughout Pennsylvania and New York this month. One or two of those stores ran a super tight operation on what you could tell was a low budget operation. One was scrappy and organized and had family and part time staff stocking shelves on a Sunday. That made me happy.

The idea we need to diversify into some new business model is compelling, mostly because successful business owners look for trouble. We want new problems to solve, not the same old problems. I preach how a Unique Value Proposition, over time, eventually becomes only a Useful Value Proposition and then No Value Proposition.

The next thing is a real struggle. But I'm also thinking now that running a really, really good retail model that focuses on serving the community can be Unique. I'm loathe to say this, really, because most of my peers think very highly of themselves. Most store owners think their stores are much better than they actually are. This is often because we don't know how to measure. We don't know how to look at our stores with clear eyes. Most store owners often don't get outside of their local bubble (why I like to visit stores). We also can't even decide what good is.

Get a dozen game store owners together (if you can decide what that means) and they'll argue, Clintonesque style, about the meaning of the word good. Good for one is the most profitable, while other owners will argue that stores aesthetic hold it back from that desired profitability. Some will claim they only meant to serve a small market when they made their polarizing choices. Good to you may just mean a steady paycheck.

The debate about Wizards of the Coast Premium stores elucidated much of this. Other people, not even store owners, are telling you what they believe is good, with rewards attached. Store owners hate this. Try to help one of these store owners with their problems and they will quickly produce reasons for why they do a thing badly. Alright, alright. Maybe you need a cafe after all. I should mention Premium rewards a type of existing store and there are plenty of good stores that don't meet that criteria. It doesn't make them less good.  All Premium stores should be good (a debate in itself), but not all good stores are Premium.

This leads up to my visit with Millennium Games in Rochester New York this week. It's an example of doing the standard model, for a long time, really, really, well. It's notable to me because it's a large store that clearly engages in best practices and a constant improvement process, rather than some unique, large store model. Also, when I say standard model, I'm talking about a basket of game retail best practices, since baseline game stores, as I've postulated, kind of suck.

Millennium is unique as a large store because most large stores appear to have teleported from the past, their inventory, and unique practices, not particularly replicable intact. Other stores appear to have been built from whole cloth with buckets full of money. Millennium is a best practices store, only much, much bigger. As I can't time travel and I don't have buckets of money, this is compelling as a model.

As you walk in, it looks brand new, because they have a process and budget for constant improvement. The retail space is vast and the game space comfortable. There are about 100 photos on my Facebook author page (please subscribe). If I sound like I'm heaping on praise, it's because it's a model for the future, unlike other big stores which are great, but mostly as interesting anomalies. Millennium got there by doing the thing, year after year, only better each time. It's the same thing I do at a smaller scale, and you might be doing. That gives me hope both for myself and for retailers in this trade.

Suck Less

Independence

I saw this today. I can't authenticate if this actually exists or if it's just a clever meme, but it struck me as important for a couple reasons.

As a lesser reason, I'm running a D&D campaign where the characters seek independence from a powerful empire. The stone reminded me there is a price to pay for such a lofty goal, and being a role playing gaming, that price needs be paid to accentuate the degree of risk and reward. Empires don't go softly into the night.

The main reason  is this struck me as something understood by small business owners. Declaring your independence from working for others is a glorious thing. However, the price to be paid for such a decision can be high. I know many who lost homes, spouses, or eventually declared bankruptcy. Many forgo higher income levels, shifting down in socioeconomic class, often at the expense of their family. Education for your kids will suffer if you live in a highly unequal state like California, where you home value is dramatically linked to education opportunities. An early death is not unlikely, if you look around, as the hours and the gamer lifestyle is not exactly healthy. We lose them young all the time.

Going back to the stone, I wonder how many founding fathers owned small businesses? It seemed like the kind of risk a small business owner would undertake, and of course be criticized later for being an elite who owned a business. That data is thankfully available. Merchant comes right after lawyer if you look at the list, with 30% of the 56 signers being sellers of stuff. These were men accustomed to taking risks. Some eventually paid the ultimate price, but as a small business owner, I understand the rather unique live free or die mindset. I'm thankful for these 56 who gave me the opportunity.

Board Game Support Group

Carl: Hello everyone, please welcome Gary to the group. He could use our support.

Group: Hi Gary!

Gary: Like all of you, I buy too many board games. They’re sitting in shrink wrap on shelves.

Group: Nodding approval.

Gary: But I’m mostly trying to sell them to you folks, as a retailer.

Group: Disapproving grumbling.

Gary: But often at a discount, because they sell like crap.

Group: Murmuring with approval.

Gary: You see, as someone whose mostly a role player, I tend to buy board games that interest me. Really complex stuff that makes my brain tingle. But I don’t play them. As my friend Jay says, a good day board gaming is still not as good as a bad day role playing. You know, like the sex and pizza metaphor.

Group: Angry grumbling. Several female hands go up.

Vijay: They can’t all sell badly, what about Terraforming Mars with its eight point four on bee gee gee?

Gary: Yes, Vijay, even Terraforming Mars with its eight point four. Where did you buy your copy Vijay?

Vijay? (Sheepish) Amazon.

Gary: Yes, Amazon. You don’t need me and I shouldn’t be catering to you.

Carl: I bought my Terraforming Mars at your store!

Gary: Oh, when was that Carl?

Carl: At your Black Friday Sale.

Gary: Right, on clearance. *cough* vulture *cough*

Carl: What was that?

Gary: Anyway, this is my first day vowing to order games only for our casual customers, the ones who actually buy from us. People who allow us to sell them games through our demos and our enthusiasm.

Carl: So no more high concept bee gee gee picks?

Gary: No Carl, no more complex board games. Which even at their best, aren’t as good as a bad night of D&D. Or you know, sex and pizza.

The Talk

If I had to give a presentation to a class about my job, my profession, my possibly foolish choice of becoming a small business owner, my main concern is this: I really don't want to sound like an asshole. I say this because I didn't use to be a small business owner, so I know how I sound when I talk about state mandated wage inflation, reckless politicians in Sacramento, and our incoming tariffs from our learning disabled president. I've got enough opinions about politics and policy to really sound like an asshole, to everyone! It crosses political boundaries. I'm that good.

Maybe I am an asshole. It's always a consideration. Maybe I should consider the advice of Raylan Givens: If you meet an asshole in the morning, you've met an asshole. But if you meet assholes all day, you're the asshole.

Or maybe Master Zhuangzi. To paraphrase:

Once upon a time, I, Chuang Chou, dreamt I was an asshole, pontificating hither and thither, to all intents and purposes an asshole. I was conscious only of my irritation as an asshole, unaware that I was Chou. Soon I awaked, and there I was, veritably myself again. Now I do not know whether I was then a man dreaming I was an asshole, or whether I am now an asshole, dreaming I am a man. 

The distant memory of the man I once was, before I became an asshole, sometimes haunts me. Spending Other Peoples Money (amusingly referred to as OPM), flitting from job to job, voting based on lofty principles with no consideration of financial responsibility. Oh to be a man again.

To really be an asshole is to be seen as being somewhat greedy of spirit. This is a problem for small business owners. I regularly spend half a million dollars a year on games, and another half a million on labor, utilities, rent and other garbage. I am a rich man by individual standards, while a poor man by business standards. Surely I can be squeezed for a few more dollars, why so much complaining? When I think of putting The Man up against The Wall, I envision a legion of like minded people behind me. What I don't realize, is I am The Man. I will be put against The Wall. Chuang Chou never dreamt of that!

So class, to understand my plight, to understand whether I'm a man or an asshole, I think perhaps you need to grasp the duality of the situation, that both states are potentially true. That my survival depends on stability, that society is increasingly in a state of flux, and that my ability to flit around like a butterfly, hither and thither, is increasingly dependent on the whims of an indifferent populace and their feckless leaders. Also, STEM fields. Business is a good safety.

Goodbye to Chess

Chess was important growing up. When I finally got my own room as a kid, it was the former den, filled with my father's chess trophies and books from his time on the Penn State chess team. I wasn't terribly into chess, but I read all the books in the den, mostly sports novels (ugh), chess strategy and how-to books. For a while in high school, I brought my chess set and played in science class, where the game was socially acceptable. My player's handbook stayed at home. I was a solid, thinking several moves ahead kinda kid, so the chess books were mostly aspirational. I felt like I wasn't quite smart enough to go full chess, like a wannabe wizard with an eight intelligence. Magic missile was just out of my grasp.

When I opened the store in 2004, I had a very respectable collection of chess sets, amazing really, for a 940 square foot store (amazing equals dumb for non retailers). These were all on full display, and about once a week, I would remove the pieces of each set, dust the board, and put them back on. My father was impressed when he visited. When it came to chess, I knew how to represent. This was all incredibly time consuming and eventually I lost several boxes, making selling them pretty difficult. Oh, and then there were the missing pieces. Realizing the queen is missing from a $250 Egyptian chess set will make you seek out boxed chess sets pretty fast.

As the display sets sold, their replacements tended not to get re-opened, and eventually not re-ordered as the plain white box did nothing to help move them. Chess sets sold poorly. They have always sold poorly. They sell poorly now. Stores in the region who do much better with chess, who dominate with chess? They sell poorly there too. It's a legacy item, an item that says "games" to the general public. It's a touchstone for me and my father. But chess, to be honest, is a complete waste of space.

That's not true everywhere. There are stores in the Midwest that do gangbusters with chess. But here? The serious players buy their sets online, often through chess organizations or just Amazon. In the store, I think it's enough to have a tournament size Staunton set and a roll up travel set, but beyond that there are hundreds of themed chess sets that will make you crazy as customer seek them out. Civil War? Simpsons? Harry Potter? You could stock an entire store with what's out there ... and promptly go out of business.

I used to special order sets and it was time consuming and unrewarding, unlike the work with other types of games. Help a board game customer and you may have created a regular board game customer and maybe even a board game hobbyist. Help someone with a chess set and you've sold them a chess set and you'll never seem them again.

I've watched my classic games numbers stagnate, even when I double or triple my selection. I've tried more and less and different and boxes with pictures and on display and nope, none of it works. It's dead here. I've been foolish not to drop it sooner. I would look at the corner where our "classic" games reside and fantasize about what I would put there. Frisbee golf. A coffee kiosk. Anything but chess.

With 25% Chinese tariffs, I'm extremely concerned about board games. But then there's chess. All those classic games come from China, really. I had forgotten. It's not even on my radar anymore. We just didn't re-order classic games after the holidays and nobody seemed to mind, except the occasional random customer who has clearly never been here before. We send them to the regional store that has a better selection and also doesn't make money selling them. Then that classic game space got taken up with profitable stuff. So with tariffs on the way, a better use of that space, and performance numbers that I use an example at trade shows of what you should drop, I think it's time to say goodbye to chess. Sorry dad.

Tariffs and the Sixty Dollar Board Game

With 25% Chinese tariffs taking effect this month, I'm already seeing solicitations for board games with significantly higher prices. The $60+ board game is likely to be the norm, up from an average of $45-50. I wrote on my Facebook author page I thought my board game sales were likely to drop by 40%. That's a really high number and it's complete speculation, but let's take a look at what we know.

We know very little. If we try to read the tea leaves of market forecasts, they're concerned with publicly traded companies, most of whom can absorb some or all of a 25% tariff. Best Buy sources enough Chinese products with high margins, they may not even raise prices, just take the hit. For us small retailers, sellers of speciality goods without enough margin to absorb tariffs and no cushion to absorb higher costs, they just predict doom and gloom. A 25% tariff is a necessary 25% price increase.

One example of how price increases directly affect sales from comes from the auto industry. When vehicles rise in price, for every dollar of price increase, demand drops by .87%. With a 25% increase in price, we should expect a 22% decrease in sales using the auto industry numbers. That's our baseline though, a starting point. Buying a vehicle is different than a board game.

If you don't like Chevy dealer A, Chevy dealer B isn't going to have a significantly different price. That's because vehicles are sold through a closed dealer network and gross margin on board games is about 45% compared to 8-10% on vehicles. There's no wiggle room to sell you a Chevy Colorado for 25% off, even if dealer B wanted to. And there's no online clearinghouse for a third party to devalue a new Colorado. If you don't want to spend $60 for a board game at my store, there will always be someone selling that game for 20-30% off online, even in the age of MAP price protection. There is someone selling that same game with an MSRP of $45, right now for $30-35, which is probably half the regional sales of that game. It's more complicated than that though.

As the price of an item increases over psychological thresholds, the pressure to buy it online increases dramatically. Most store owners will tell you once a game hits a certain price plateau, sales drop off considerably as customers seek better value. It's why many of us sell so many little card games and so few $100 board games. The impulse purchase, in which calculations don't play much of a role, is probably around $30-40 nowadays. At $40-50, there's some thinking and we lose a lot of sales to discounters, and at over $50, there's a lot of thought into how to acquire that item most efficiently.  We are certainly earning that business in some fashion. And that's where board games will go, breaking that price ceiling (the one I artificially created for this example).

If you think this will be business as usual, we're going from a strong economy to where, "Markets are pricing in rate cuts in September and December." Markets are already signaling they expect pain in the second half of the year with interest rate increases up a quarter percent. My store sales for 2019 are up a staggering 20%, due to a number of factors. I'm predicting I end the year up 4% due to tariffs. It's a complicated bit of bistro math, but I'm expecting a lot of pain. I know I'll be doing a lot of dancing, I just don't know the tune.

The Experience

I once spent nine days as a guest at a Taiwanese Buddhist nunnery. Their hospitality was incredible and what stuck in my mind was the most amazing food I've ever eaten. They made Chinese meat dishes out of plant protein, most likely because the nuns were brought up on a traditional, Chinese omnivorous diet, and this food met their vegetarian religious restrictions without compromise. It was so good, I questioned it's meatlessness, being a vegetarian at the time.

After a week of this amazing food, I mentioned on the way back from our conference, that I could really go for a pizza, especially because there was a Pizza Hut next to the nunnery in busy downtown Taipei. No matter how good something is, you often long for the tastes of home. You know you'll get that consistent experience, even if it's not great. Consistent beats great sometimes. An older scholar overheard me and slammed me for being so disrespectful as to want pizza when our hosts had been so gracious with their amazing food. When we returned to the nunnery for dinner, awaiting us was glorious Pizza Hut pizza. The heart wants what it wants.

When it comes to hobby game stores, consistency of experience is wickedly hard. You can train your staff to greet customers, provide stellar customer service, create intricate systems to maintain product and service, but in the back room it's another story. In our Game Center, your consistency of experience is kind of in your own hands.

I could pay employees to run games of a particular style and quality, but the games they run would be limited to the customer desire to pay for that experience. Other than convention fees, which they seem to have no problem with, nobody wants to pay $10 cash money for me to run Dungeons & Dragons. $10, times six players, is $60 for a 4-hour session paying someone $15/hour. That's just their labor, not profit or materials, or prep time. This is a traditionally free experience that can cross over into "nominal" fee territory, but a real fee will never really capture the value being provided.  That may change with the mainstreamization of gaming, and someone will certainly point out the "professional" dungeon masters, but it's rare.

So we run the Event Center a bit like a concert hall in which we attempt to host high quality concerts, but with no guarantee the experience will be great. We are concert hall people, not the performers. I've been to great concerts and I've been to concerts where the performers were drunk off their asses, but in neither case did I credit or blame the venue. But in the game trade that's exactly what happens. Sexist comment? Bad DM? Poor hygiene? It will all be a black mark against the store, even though there's not a whole lot we can do about it, other than craft policies, brief organizers, and strictly enforce rules. We are facilitators. We use volunteers. The only other option is the thing doesn't happen.

This chaos is also our strength, our protective armor. The inability to provide a consistent experience, but to only provide a neutral venue is unacceptable to anyone with deep pockets who wants in on this. What happens if something really terrible (actionable by law) occurs? How do we make sure the D&D session doesn't have something inappropriate? How do we actually monetize this space that costs us $6,000 a month? Really, that's what we pay. About $50 a seat per month.

The reality of most D&D sessions is there are a lot of slightly boring ones and then one amazing one, which you tend to remember without remembering the boring ones. D&D especially is a constant playtest, as most people don't run the same adventure twice. Imagine sitting through a bunch of boring movies to get to the great one. That's how it tended to be before the Internet, but people want blockbusters every time nowadays, and they can get them by picking and choosing. All of this inconsistency is why there are no national chains of game stores. Managing the managers and the organizers would be like herding cats. You would have to have a whole department called Program Development to plan and test event structures. Publishers can't even pull this off well with their one game. Plus, as mentioned, the customers would never pay, at least not so far.

Anyway, this is something that keeps me up at night. Labor, as minimum wage here approaches $15 an hour, can no longer be the solution to bespoke experiences. We are fast approaching hard limits that are testing the demands of customers with the reality of what is possible in small business. It may just be the little store, with the passionate owner working for close to zero dollars, will be the one providing the consistently amazing experiences that big stores could only dream of. The rest of us are wondering if we should get a liquor license or hire some circus performers.

Insurance (Tradecraft)

A nuts and bolts post? Sure, why not.

A business requires insurance. At the minimum, you need liability insurance. There are other types of insurance though. I've got liability insurance, workers comp insurance, key man life insurance, and for years we had vehicle insurance on our van. Insurance is one of those things new store owners don't always think about.

My second year in business I went to a seminar where a store owner had someone drive through their front window into their store. Twice. He was the likely guy to give a presentation on business insurance and for many, needing such a thing was an eye opener. When I started I had a home and assets and made sure the store was incorporated and insured and far away from my personal life. For most young people without a pot to relieve themselves, that might not be a consideration. 

So how do you get insurance? Find a human. I'm not sure if you can get business liability insurance online, but if so, it's a bad idea. You want to talk to a human about your particular business needs and exactly what you do and where you do it. For example, my store went from a regular retail environment to an improved, two story monstrosity in need of rebuilding if it burned down. It probably wouldn't be rebuilt there, but they'll pay to rebuild it somewhere.  If I had just gotten regular liability insurance, I would be left with no protection and a ton of outstanding loans for a burnt out shell. 

Other considerations include insuring Magic singles. My policy has a "fine art" clause that includes those. What you don't want are surprises. Insurance companies are all about taking as much money from you as they can and paying out as little as possible. It's better to be up front, find angles to cover everything necessary, and avoid surprises. Look at your lease and see what you're responsible for.  Plate glass insurance is often inexpensive, but if someone breaks all your windows, you could be out thousands of dollars. Over time, revisit your policy and up your limits when you add inventory or fixtures.

Who is that human? I have a customer who jumps from job to job, and one of his latest was insurance agent. He was an agent for about four months before he moved on. Do not use a green agent. Find someone experienced. I had a new agent misclassify my company for my workers comp policy, thinking I didn't need to be covered as an owner, when in fact it was necessary. A company audit revealed the mistake, and rather than admitting their agent error, they charged me $3,500 in back premiums. Insurance companies exist to do two things: take as much money as possible while denying your claims. 

Personal insurance agents tend not to handle commercial insurance, so you probably won't be able to use your Aunt Kathy's agency to handle your commercial needs (my Aunt K does my personal insurance). Attempt to find a well regarded commercial agent who has been doing this for a while and lay all your cards on the table.

Classification is tricky as there is no "game store" category for liability insurance. You might be classified as a toy store, a book store, a hobby store, whatever is close, and the cost between agencies and within each agency could be enormous. As long as you don't get cute, something reasonable should be fine.

Avoid buying a policy based entirely on price. Ask what's not covered in your case. Have a good heart to heart with the agent. These policies are really cheap compared to what could happen. I once transitioned between agencies and in a 30 day overlap period, someone broke into my store, doing a lot of damage and stealing a lot of cash (foolish me).  I talked to my new agent who walked me through my old coverage, which sucked, and my new coverage, which was great. I filed a claim with the better coverage, and yeah, they canceled me exactly a year later, but I saved $900. 

Make sure you have extensive business interruption insurance, which is usually standard. Knowing that my store could burn down and I have months to find a new place while paying employees allows me to sleep at night. When you get bigger, losing all your employees can destroy your business as easily as fire. 

What's a Good Company? I don't know! They're all terrible! I can't even remember who I have now. Let me check: Travelers for liability, State Farm for key man life insurance, and AP Intego for workers compensation insurance (pay as you go). Farmers burned me on that workers comp policy I mentioned, so maybe avoid them. 

100 Item Challenge (Tradecraft)

I recently read the ebook Smarter Inventory Drives Sales. It was a standard inventory approach with a lot of complex terminology to describe simple things, but one thing stood out. Inventory accuracy reality and perception were vastly different. The article quoted an Auburn University study in which back in 2005, before many retailers had an online presence, most thought their inventory accuracy was far higher than it actually was:

Nearly all retailers truly believed that they were at 95% plus Inventory Accuracy, and why wouldn't they? Online customer visibility was in its infancy and the term omnichannel was barely invented.

Why mention online sales? It's a painful process to sell online only to give back money because a product doesn't exist on the shelf. Stores upped their inventory game tremendously when they began selling online. My store is in that situation a little bit with our Magic singles, Our singles inventory is weak, because we have weak tools and weak processes. The metrics associated with failure are hard. We regularly bribe customers when our inventory is off. Although we're at 99.4% positive feedback, we were told we couldn't sell internationally because the standard is 99.5%. Rather than the soft metrics of back peddling with a brick and mortar customer, when you're out online, it results in bad feedback and less sales in a more direct manner.

For those of us, like me, who don't do significant online sales, we're back in that pre 2005 study territory, thinking we have a high degree of accuracy (95%+) when in reality, the study finds, accuracy is much lower:

Accuracy is somewhere in the 65-75% range. A few still cling to the decade old belief that they have 85% or higher exact match Inventory Accuracy.

This means the value of a retail store should be considered lower by at least a third. If you were to buy a store or put yours up for sale, the assumption of inventory value would immediately start at 65% of whatever you think is there. I think adding even a modest online component may increase the value of the business, if for no other reason than it denotes a higher inventory accuracy of around a third. This assumes this is all understood by a buyer or broker. In any case, if I were buying a business, I would assume 35% of the stores stated inventory is smoke and mirrors.

Rather than claim high accuracy, test this yourself. Do an actual inventory with no excuses. Don't do a regular inventory, do a random check. There are a lot of excuses when you get down to business on why things are wrong. You may have known they were wrong in the back of your mind, like many things in a store that are out of place. It's just a database after all, why sweat accuracy? But remember, you pay taxes based on the accuracy of that data and customer satisfaction is tied to product availability.

Inventory 100 random items. Do a spot inventory. The way I did this was dumping my inventory from my POS to an Excel spreadsheet. In the column next to each item, generate a random number and copy that cell down through your entire inventory. This is the only way to really check, as a standard inventory process is too subjective. Here's an article on how to generate that random number. Now sort your inventory based on the random number column and inventory the first 100 items.

What did I get? Well, how do we measure? If we measure missing items, it's one number. If we measure incorrect entries, it's another. Both were pretty close for me at 85%. I was certainly in the camp claiming 95%+ accuracy before doing this. I already had what I thought was a robust inventory process in place, but I reiterated the need to get this work done to managers and staff and put a monthly 100 random item check reminder on my personal calendar.

This measurement of progress should help improve performance. Doing a regular inventory is clearly not good enough. Give it a try and let us know what you found. There's no shame in admitting you have a problem if you're going to fix it.

The Nocturnal Financier

I may be a lot of things, but I'm essentially a Capitalist. A Capitalist believes in nocturnal finance. The way you retire is to have your money work for you while you sleep. For many, that's a 401K, but for the small business owner, it's the exploitation of labor, to quote Marx. Most small business owners have little in savings, and I'm ashamed to say, I'm not an exception.

To be a Capitalist is to put your eggs in the nest of others, hoping they'll warm and nurture them in exchange for payment. It's also to accept the rightness of your willingness to work for others back in your day as a nest warmer. That's the main difference between my nest egg and the nest egg of an employee. Rather than relying on the numerical supremacy of an index fund, I let some kid in their 20's, with little nest sitting experience, sit on my valuable eggs. Hopefully you discover the cracks early enough.

This Capitalist egg sitting may seem to fly in the face of the general social welfare, but I believe we can work towards a more equitable society while insisting people take the initiative to improve their individual situation. Only a cretin truly believes there's a level playing field. The game is rigged. Sometimes it's rigged in my favor but most of the time, not so much. I like the game, but it is a system designed by the winners to keep them winning. I know we can fix the game with a well thought out expansion (with a lot more players), rather than tossing the game (an egg toss).

I vacuumed my million square feet to get to my exalted seat known as "the middle." If I can keep the balls in the air long enough, I may slowly recede from my business while others do the heavy lifting. Because I have a bad back from that heavy lifting and no workers comp insurance. If I can raise up, mentor, or at least pay well my employees along the way, I consider that a double victory. One manages a game store now. Another is head buyer at a major distributor. I am a stepping stone, so I can't take credit for their victories, but I hope we came together to build something wonderful that positively impacted their future.

All of this could come crashing down with a couple bad months. Perhaps I injure myself. I have key man business insurance if I die, but a good maiming? Not covered. Perhaps a national tragedy keeps people at home. A major Bay Area earthquake, long overdue, could eliminate my entire community in a moment. There is no backup plan, no unemployment, no explaining the situation to the boss. The vast majority of my nocturnal capital is tied up in worthless cardboard. Does this instability and painful chance of failure make the true socialist feel any better about my exploitation? Doubtful, but there it is.

The restless sleep of the nocturnal financier means you're never quite rested. I taught my young nephew the phrase, "I'll sleep when I'm dead!" It angered his mother, but it should be the mantra of the small business owner. No safety net. No rest. No real time away. The boss is a jerk. The customers are unreasonable. The employees are stealing. Your partners carry knives for the inevitable stab to the back. I can't imagine life any other way, and if I had to have my labor exploited again, if I had to mind someone else's eggs, I would be longing for the sleepless nights of the nocturnal financier.

Game Store Tech

When I started in 2004, I was coming off an  IT career, so I wanted to be up to speed on retail tech. It was really the only useful skill I brought to the new business, that and the ability to research any project. 

I bought a new PC clone point of sale machine, custom made to handle the various peripherals. It was so complex, consultants were hired to work their black magic to get it all working. Could I have figured it out? Sure, but I respect expertise in IT and wanted to start out right. 

Setting up the POS required the consultants go through complex processes, hand written in notebooks. They were like a cabal of wizards, summoning profit into existence. While on vacation in France a year later (frequent flyer miles), the consultants came and fixed it when it corrupted itself during a power outage. I was troubleshooting the best I could from an Internet cafe in Paris. IT was inescapable.

In the back office, I had a Windows server running tape backups. I used a complex, Grandfather-Father-Son (GFS) tape rotation and took tapes home each night in a briefcase like some sort of spy. My laptop was a bulletproof IBM Thinkpad T30 from my days in IT. In the new store, I learned a lesson in security when a gold toothed homeless man walked into our Game Center and immediately went into the unlocked door to my office. I caught up with him as he was zipping up his jacket to leave, with my Thinkpad hidden within. I already had a new laptop on order that week, but it was still a painful lesson.

I should mention that before I started the business, I was running multiple Red Hat Linux servers at home. When the store opening became inevitable, I wiped them clean and installed Windows servers. Nobody has time for that crap.

15 years later, and a lot of things have changed, but a lot has stayed the same. Our POS is an iMac, not that different from my first computer, although most of my peers are moving to the cloud. I can’t imagine changing POS systems now and not moving to something cloud based. The innovation is happening with cloud based services, plus I can sleep at night knowing it’s all backed up offsite. The backup server in the office has been replaced by a (terrible) dinky Apple time capsule backup device and cloud streaming.

On the sales floor are four iPads. One iPad plays music through our Sonos system. Two iPads play board game demos which drives sales. The fourth iPad is locked down to allow customers to sign up for WPN events (a weird Premium store requirement). Nine staff members use smartphones capable of running transactions using either a plug in card reader or a new Bluetooth unit we just got in. I’m a bit uncomfortable expecting staff to use their personal phones to ring up sales in an emergency, but there’s always the junky iPad nearby as an alternative.

My goal is safe and ubiquitous computing. The thought of spending time fixing or upgrading a machine is irritating. We have a Windows laptop for events that reminds me of my old life, with its constant updates and problems finding printers. I'm not quite an Apple fan boy, but I appreciate the strong, Unix based underpinnings of their hardware and the extremely long product life cycle. My first laptop went six years before I replaced it, and we just resurrected it for my new manager. 

I can’t imagine spending time with some clunky tape rotation scheme. Still, when I go on vacation, I wonder if the consultants will come if the POS goes down in a power outage. They tend not to answer their phones. We spend a lot of time preparing for the reality the POS could fail at any moment. The cloud is definitely my future and I certainly don’t miss the chilly server rooms of IT.

The Shiny Trashcan Effect

Greetings from debt purgatory!

We are half way through paying off our construction debt for our expansion project started in 2014. Do you remember 2014? Fantasy Flight Games was still an independent company, Magic was going strong and the big news story was the outbreak of Ebola. Good times. Our Kickstarter did fund successfully that year. We did complete the project, albeit two years late. We did send out all the rewards, and one refund to that jackass who likes to leave me (hidden) blog comments. That saga is a whole other story (it's in the book).

Customers occasionally come in, tell us how they're great supporters of ours, how they buy all their games from us and ... holy hell, you built a second floor!!! Yes, thank you, thank you. Mmm hmmm. I stopped mentioning it was years ago. Snark is not appreciated and we need all the customers we can get. Got debt to pay down.

So how are we doing? It's a bit of a struggle making loan payments and trying to grow during a period of industry transition. There are projects I would like to do. There's a white board in my office with $20,000 worth of stuff. Yet, we just improved the store in our bid to obtain Wizards of the Coast "premium" status, and we somehow came up with the thousands to do that.

Yes, thousands of dollars for a nebulous status. However, this is exactly what I had been asking for. Recognition of hard work and capital spent to improve a venue rather than shoeboxes of cardboard (even though the cardboard is more in line with success with the WOTC model). How could I not pursue this? When motivated, we can make things happen. In the future we shall refer to this as the Shiny Trashcan Effect.

Our sales necessary for growth, the needed engine to pay off our debt, have exceeded expectations. We saw a large jump when the space was complete, but it was a one time thing (about three times bigger than projected). We immediately went back to the grind. It brought home the fact that the space is really important to a small subset of customers (20%). That money spent on doubling inventory would have seen growth over years, but probably slower growth, rather than all at once. There's also the question of whether doing nothing at all would have led to the same growth rate, considering we struggled to focus the business in the Kickstarter and construction year. No, no, this will have longer term benefits, if we can leverage them.

Anyway, we're up 25% this year, due to a number of factors, so I'll continue to fantasize about that white board and work on projects that don't require intensive capital. And maybe we'll hit Premium status with WOTC and see some benefit there.