Wednesday, August 8, 2012

The Money Question

Say you own a game store and you come into some money. It's possible. We're in boom times with CCG money. It won't last, but maybe it's there for you now. What would you do with it? Here's what I wouldn't do. These might sound counter-intuitive:

Diversify. Yes, absolutely deepen your stock of well selling games. Cautiously bring in new games your customers show interest in. However, a good use of capital would not be diversifying too far afield in hopes of broadening your customer base. People you don't know, don't matter in this case. I spent a ton of money on toys in our new store when we opened, and spent the subsequent years getting rid of the stuff. I can say the same about comics, but that's close enough that it just might work. However, the "build it and they will come attitude" does not work for diversified inventory, in general. 

Pay off Debt. Yes, you should absolutely put yourself into a better financial position, but you have an opportunity now. How do you see the future? If you think the game trade good times are about to fizzle, sure, put a cork in it. Send a check to the bank. However, if you see it continuing for the next year or so (I do), how can you capture that in a bottle? Do you need more inventory, chairs, a point-of-sale machine with hard drive space (my current problem), or staff to make you money (another one of mine)? Consider building a bigger economic engine to make even more money to pay off the bank.

Buy New Fixtures. If your store looks like a gamer den, if it smells of cat piss, if mothers feel uncomfortable leaving their children with you, definitely upgrade. Fix problems. Put yourself in a higher class of store. But my tendency is to let the money get in my head, and suddenly I have delusions of grandeur. Things that work pretty well could be replaced with things that work great! I have a ratty chair that I keep around just to remind me of this. It's the obvious thing to replace, so it's an obvious reminder. Sure, replace the cinder blocks and milk crates, but don't fix what's not broken.

Add More Space. Absolutely re-organize for more game space. If you can build up or out without paying rent, it's worth considering. We're planning a second floor where we pay the build-out, but we don't pay more rent. I know of another store that has a storage area they're knocking down to make more game space. However, if there's added costs, like additional rent, it's probably too dangerous. If I look at my sales and subtract gains in cards, I see a very slow rate of growth for the last few years. So this is definitely a temporary boom for us. That said, this is an excellent opportunity to renegotiate a lease, especially if you want that extra space. The landlord will see you as an angel, coming to his rescue to take up that space (not really, but act as if you are, it's more fun that way).

Pay Yourself. You have a great opportunity here to leverage your success, to supercharge your operation. Unless you're in dire need personally, is it a good time to cash out? I do take additional draws when things are good, but to treat the business like a cash cow in the middle of milk production season (I know nothing about cows) is probably not a good idea. Don't miss the opportunity.

Hire New Employees. But Obama!? Be careful. Here's why I'm cautious about hiring employees (I currently have six, not including myself): I really, absolutely, worst thing in the world, hate letting them go. This is especially true if I brought them on for something in mind, and now must say I was wrong. Try to give your current people more hours. Try to find replacements for those who aren't working out. But be careful if you think your boom is temporary. Also avoid excessive raises, as you'll be inexplicably squeezed when the money runs out and unable to reduce rates. If they're doing a great job and want to reward them, give them a one time bonus.

So what am I doing with money? I'm getting my marketing straight with a big sign related project and a website upgrade (I haven't changed it in 8 years). I'm hoping to lessen my reliance on Facebook, since they seem on a downward trajectory. I'm building out our rent-free game space upstairs, hopefully by the end of the year. I will pay down debt, but not as a priority. I could easily absorb $5k, $10k or even $25k in just inventory increases in existing lines. My inventory budget is like a hungry animal. "Feed me!" Then there will be debt payoff.  I dream of college funds, but better positioning for the future is my first goal.

As usual, one guys opinion.

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