Friday, September 30, 2016

American Religion and the Shepherd (Tradecraft)

I was searching for a dead chick in my chicken coop yesterday, not a pleasant task, and was thinking about the religion of America. It's Capitalism of course, but I was thinking about its brutality and how that brutality is whole heartedly accepted by its worshippers, the American people, both conservatives and liberals.

After being pecked to death, the chick ended up flattened under foot by the flock, intentionally buried in debris and forgotten, a victim of the literal pecking order. Survival of the Fittest is the core doctrine of American capitalism, and it's believed those trampled under foot are deserving of their failure.

Conservatives want unfettered capitalism, while liberals are happy to fetter away for the good of the people, but both groups agree that if you can't cut it under the Capitalist system, your business deserves to die. How you survive is part of the Mystery of the system, but how you die is all on you and your personal shortcomings. There is forgiveness, in the form of a liberal bankruptcy system, but they don't have compassion for failure. What can you do to become successful in such an inherently violent system?

Be the shepherd. Be the shepherd for these very people who will show no remorse if you fail to lead them. You can't win fighting fire with fire. It's difficult to be the shepherd when consumers are so mercenary, but it's essential for breaking down barriers between you and them. A shepherd doesn't scold the flock with "no" signs and needless restrictions, they instead guide the flock.

Far too many small businesses think they can bully customers into behaving in a beneficial way. There are the obvious ones who pick fights with the Internet. There are soup nazi comic book stores that restrict customer access to serious collectors. My big competitor when I was a small shop was known for telling customers their game was stupid, because it didn't align with the clerks interests. The consumer universe is vast and the choices are many. You cannot win through force.

Customers want to get past the violence inherent in the system (to paraphrase Monty Python). They seek connection. They want to believe. Knowledgeable staff should shepherd them through the valley of economic darkness. It's not as hard as it sounds. Being shepherded is the role customers want to play, but they have to be given the opportunity.

I'm not calling customers sheep, I'm addressing consumer psychology. There is a small, but sizable percentage of consumers that are highly analytical and dread human connection, mostly shopping online for optimal benefit and minimal contact. Those are not the customers I'm talking about.

The base for a game store is the casual gamer, the person just starting out who needs assistance in understanding why the hell you need both the 5-6 player expansion for the base game and the 5-6 player expansion for the base game expansion. How can this madness have continued through four editions? These are the existential questions only a shepherd can answer. You must guide them them through this darkness.

It's easy to get caught up in your business model, to work on your core competencies, especially when most of business success is about the decisions you don't make. But when it comes to customers, take a step back and listen. I know a lot of the listening involves a staggering amount of dumb. It's something inherent in the human condition nobody can possibly comprehend until they work retail. We are ground zero for the human condition, where desire meets stupidity. However, most customers have legitimate needs that we're not addressing. Flatten the pecking order. Get out from behind the counter and come down to their level. Be the shepherd.

Thursday, September 8, 2016

The Problem With The Game Trade (Tradecraft)

Retailers buy product from a handful of game distributors. Game distributors sell to retailers based on a discount model. This model starts low, as low as 45%, and moves upwards based on volume, tapping out at around 50%. There are some secret discount tiers over 50%, but nobody talks about that.

Each distributor calculates your discount separately, so you may have a 50% discount with your primary but only a 45% with your secondary. Retailers try to play a balancing game, since sometimes you need core product from your secondary and you don't want that garbage discount.

As you move more volume, your discount tier rises, reducing your cost of goods. This is great! We're in an industry with a net margin of 5-10%, so a percent off your discount could be as much as a 20% increase in your take home net. Few retailers actually understand this math, they just know it's a good thing. This also assumes you have profits, as you may seek out a better margin just to survive! The difference between negative one and zero is the biggest bridge a retailer will ever cross.

Most stores gradually grow into their discount, usually with sticking with a primary distributor long enough to hit the top tier. Some get close. It may take years. It may never happen at all. I recall being stuck at 49% for a number of years. There's an obvious way you can boost your discount and thus your net margin: buy more!

If you buy more, you'll always have stock on hand. You will always make the sale. Of course, you'll always have overstock on hand too. However, the Internet is there to help. Some retailers over buy, get the security of never losing that sale, and then conveniently dump the rest at cost online. The logic is they're peeing in someone else's pool.

This dumping activity, as we now understand, is bad. It devalues the market and makes it harder for brick and mortar retailers to sell at a sustainable price, including the retailer doing the dumping! It's thought most discount games out there now are from brick and mortar dumpers. The argument then is that not all discounting is bad, that some discounting is normal and sustainable as a model, but that the vast amount of brick and mortar dumping is causing the alkaline level in the pool to rise to dangerous levels.

As games become devalued, game stores stop selling unprotected games, those created by publishers that do nothing to protect their brand value. As publishers protect their brands, dumpers move to less protected brands, accelerating the process. Now this is all new for publishers. They haven't had to deal with this in the past. The difference here is the game trade is booming. Despite the doom and gloom from the Internet crowd, brick and mortar stores are killing it. When boom times come, an interesting thing happens. All the perversions in the system become glaringly manifest.

The response from publishers is to absolutely protect their brand value, as happens all the time in other industries. This game trade brand value protection is not new, unique or otherwise special. The publisher solution is various price protection schemes. The cost of these schemes are then passed on to the retailer, who is expected to not only silently absorb the cost, an issue that nobody even mentions in discussions, but retailers are asked to be thankful for these actions. Wow.

Of course, the real problem here are the perverse incentives. The problem is the distribution tier and their discount model, exacerbated by jointly embracing MSRP. It's hard for me to point the finger at the middle man and claim they're the root of all evil, since I am a middle man and there are people pointing their finger at me claiming I'm the root. Nobody wants to talk about this, since retailers have a tendency to grab torches and pitch forks and ruin conversations. They grab these implements of destruction out of frustration, as they have no power in this model.

This whole situation reminds me of the Ptolemaic model of the solar system in which the Sun revolves around the Earth. Through the most twisted yet accurate mathematics imaginable, theoretical spheres of epicycles and deferents allow the planets to revolve around the Earth. It's the art of coming up with elaborate schemes to support your hypothesis, when the simpler answer is unpalatable. The mass the game trade revolves around is publishers, not distributors.

I'm not suggesting a solution. I'm not grabbing a torch or pitchfork. I am saying admitting you have a problem is the first step towards recovery.

Tuesday, September 6, 2016

Starting a New Game Store: Getting Edumacated

If you found the previous articles about starting a new retail game store overwhelming, or you need to find a way to reduce costs, but lack skills, please allow me to suggest some coursework.

I've taken some business courses, but I do not have a business degree or a business background. I'm mostly self taught, with enormous holes in my education. I have employed people who have a business education and I'm regularly directing staff to take coursework that benefits both them and my business. I've gone as far as offering cash rewards for coursework in skills we need.

Here's a listing of some coursework I recommend from our local community college, Diablo Valley College. This is a years worth of credits (28) that should prepare you for the rigors of opening a small business like we've described. I wish I could take a year off and focus on something like this. You still can.

This coursework includes both critical skill sets required to succeed as well as convenient things to know, like WordPress and PhotoShop. There should be similar courses available at your community college.

If you're desperately looking to quit your job and start this thing, one way or another, as I was, this might give you some needed breathing room to get your plan together. You may even decide you like this stuff and go for more education.

If you've taken coursework that you draw upon heavily in your small business, share with us what was useful. I personally found business law invaluable and I can't imagine not having some basic accounting and Excel.

Course Units
BUS-018 - Microsoft Excel for Windows
Are you new to MS Excel or have you been using the software for awhile but want to learn more about the program? Do you want to learn how to use MS Excel as a business tool? This class will teach you beginning to intermediate level MS Excel features and functions, will help you to develop MS Windows file management skills, and increase your business problem-solving proficiency. Based on various business scenarios, you will learn to use Microsoft Excel to produce professional worksheets that contain appropriate formatting and correct formulas.
BUS-027 - Small Business Management
This is an introductory course in small business management, combining theory with application. Class stresses case work analysis, mastery of basic issues and the importance of the business plan.
BUS-096 - Time Management and Goal Setting 0.5
Does it seem that you never have enough hours in the day? This class will help you develop the skills necessary to manage your personal and professional lives. Learn how to manage your time using proven time management methods including identifying and setting goals, establishing priorities, getting organized, overcoming procrastination, planning and scheduling.
BUS-294 - Business Law
This course presents fundamental legal principles surrounding business activities and transactions. The legal process is also reviewed. Legal topics include ethics, contracts, torts, agency, criminal law, business organizations, and judicial and administrative processes. BUS 294 may be applied towards the educational requirement of the real estate broker's examination.
BUSAC-181 - Applied Accounting
A beginning accounting course that involves a practical approach emphasizing small business applications. This course covers the accounting cycle for a sole proprietorship. Includes journals and ledgers; financial statements; adjusting, correcting, and closing entries; bank reconciliation; payroll; calculations for interest, discounts, sales, and payroll taxes. Also includes an introduction to the use of an accounting software program. 
BUSAC-185 - QuickBooks Accounting for Business I
This is an introductory course in the application of basic accounting knowledge and theory in QuickBooks software. The course content includes sales, invoicing and receivables, payables and purchases, general accounting, financial statements, and end-of-period procedures for a service business. This course builds upon knowledge of bookkeeping principles. 
BUSMG-167 - Writing and Presenting a Business Plan
In this course students will explore their proposed business, core competencies, competitors, and customers through designing a business plan. Survival tactics will be presented to increase the chances of success in fluctuating business environments.
BUSMG-168 - Customer Service
This course presents the competencies needed to develop a joint purpose, show compassion, and be generous and trustworthy with customers, co-workers, and external stakeholders. The relationship of customer service skills to career success will be examined.
BUSMK-255 - Advertising
A study of the historical, social, ethical, economic, and regulatory aspects of advertising. The subject evaluates advertising, media, and creative strategies for traditional and electronic markets. Topics include effects of consumer behavior patterns, the client-agency relationship, and the development and evaluation of advertising campaigns.
CIS-108 - Introduction to WordPress
This course introduces students to WordPress. This easy to use software is used to create, organize, and maintain web sites. Emphasis is placed on installation, configuration, navigation, organization, presentation, and maintenance of web sites. No previous web design experience is required.
CIS-130 - Adobe Photoshop Elements
This course helps students to develop proficiency in Adobe Photoshop Elements; it covers acquiring, organizing, fixing, enhancing, and sharing images.
ECON-221 - Introduction to Microeconomic Principles
This course is about the study of how societies provide and distribute the material requisites for well-being. In microeconomics, the focus is on individual markets-the economic interactions between buyers and sellers of a particular product. Markets are studied in order to understand the factors that influence price and to determine if the material requisites are efficiently and equitably provided. The supply and demand model is used to study market interactions and will be thoroughly covered in this class. This includes investigating a variety of factors that can influence the decisions of buyers and sellers; identifying special characteristics of the market or the product; and determining whether or not producing or using the product causes others to suffer or benefit. In cases in which the market fails to be efficient or equitable, governments frequently intervene. Actions the government can take and the arguments for and against government intervention are also covered. All topics in the course are discussed in terms of the fundamental microeconomic theories and models with references to current and historic examples.
MANGT-050 - Introduction to Supervision
Are you currently a supervisor or want to become one? Would you like to strengthen your supervisory skills to better motivate your employees? Or, would you like to know how to make the transition into supervision? This course will help you learn and apply supervisory skills to motivate and effectively lead your employees. You will also learn how to comply with state and federal labor laws.
Total 28

Starting a New Game Store: Return on Investment (Part 10)

In part 9, we did a break even analysis. It showed we'll be spending the first 18 months losing money before we finally become profitable. In this section, we'll ask the question, how long will it take to pay back your initial investment? We will be calling this a Return on Investment (ROI), which has different meanings in business, but for us it's just getting our seed money back.

The starting investment was determined to be $140,958. Here's the table from that calculation:

We need to project how long it will take to make back this money, which will come to us in the form of net profit (ignoring taxes). There are several factors I'm using to calculate this estimate. First, we have a time period.

We want our money back in a reasonable amount of time. In this case, we're going to give ourselves five years. If this were a more professional investment, I would want a shorter period, like three years. Because this is something you really want to do and it somewhat defies conventional logic, we're giving you five years. That's my reasoning if I were one of your investors (you don't have investors in this model).

Second, we're going to calculate this number based on a reasonable net profit margin. There are many changes that will go into this business once it's off the ground. Over the first five years, expenses will rise as the needs of the business are recognized. Labor will definitely increase, rent will go up, and inflation will take its toll. I'm not going to calculate all those expenses, I'm just going to assume you work through them and absorb them as sales rise into the sky. So we'll use a percent of net profit as our driver.

An efficient hobby game store is going to have a net profit percentage in the 5-10% range. 10% is really high. My own store hit an 11% net profit last year and that's because it's under staffed; so like turn rates, it can be too high. You could also be working with high margin items that tweak this number, like used merchandise or cash events, but we'll assume you're running a conventional store for now.

Third, we're looking at turn rates, not as a driver of sales, but as an after the fact, reality check. Remember when we spent $70K on inventory? This is our economic engine that will allow our sales to perform. Like a net profit percentage, there's a range of what's reasonable for turn rates. Your inventory should be turning in the 3-6 range (gross sales divided by MSRP of inventory). If you're projecting significantly above this range, your projections are likely too high and you need to plan for more inventory investment. That's a vicious circle of calculations I don't wish on you.

Let's look at our five year return on investment:

The first thing to notice is we did it! We hit $141,000 in net profit after five years. We paid back our seed money. How we did this is a bit aggressive. Our first year we lost money, so that's ignored in the calculations, and year two is likewise kind of rough, since we lost money in the first half, eeking out a small profit at the end. Year three has us dialed in with an 8% net profit and a 3.3 turn rate. This is really strong, perhaps too strong. We quickly build off year three, becoming more efficient in years four and five, with a reasonably strong turn rate and a very strong net profit percentage. The model is sound. It could happen.

The question you have to ask is if this is reasonable or not. We've been conservative up until now. Are we ditching that to shoehorn in an ROI? Does your proposed store location have the potential to hit $600K in sales in five years?

If this is clearly not going to work, you have a few options. Consider putting your store somewhere else. You're going to invest $140K of hard cash into this thing, more than most people put down for a new house. Maybe you need to move. I can make this store work, but only in a high population area with the right demographic and a market that's not severely devalued. This isn't every store; it's now one type of store.

If you can't move or don't want to move, how can we make this situation more reasonable? The obvious answer is reduce your startup costs. Reduce your startup costs and you reduce your need to project a $600K five year ROI with a 10% net profit margin. Maybe play with these numbers and assume some slower net profit percentages. Or assume lower gross sales. Why not both?

What I really don't think you should do is ignore the ROI. It's easy to see this as your dream, rather than a business venture. You could just let it ride, right? You're still making money, just not as much as would be optimal. So what if we have a seven year or eight year ROI?  You say that now, but what does the eight year older you think of this brilliant plan? What's the value of three years of your income at your current job? Maybe take some time before doing this. Maybe take some community college classes to help you cut your startup costs (my next post).

By the way, if you pull this off, you're personally making $91,000 a year when you consider your salary and profit in year five. Don't act so incredulous, it could happen. What do you want to do now? Second store? Expansion? Save up for the next big idea?

Monday, September 5, 2016

Starting a New Game Store: Break Even Analysis (Part 9)

In part 8 we finished up with our start up assets with professional services.

Our last expense category is start up losses. This is the amount of money you are going to lose on the way to profitability. You will need this cash in reserve before you begin. To calculate the amount of start up cash we'll be throwing on the fire, we'll need to create a break even analysis.

A break even analysis predicts when your sales levels will get you to a point where you'll stop hemorrhaging cash.  How do we know when we'll get there? We make it up! Sales projections and all business plans are just a bunch of made up numbers. Now, this made up number should feel right. It should be backed up by a bunch of factors that bolster your crazy claim of how you'll go from nothing to break even.

The magic number for break even in our model is $19,500 a month in gross sales. You're not going to get there in a small town of 6,000 people. You're not going to get there in a tiny store with no sign. It took me 8 months in the suburbs of the SF Bay Area, looking back at my sales patterns. We're going to look at a couple projections based on 12 and 18 months.

An 18 month break even is conservative, while a 12 month is aggressive but possible. If you own a store, please post how many months it took you to break even in the comments. Pick the 12 month path if you've got retail or game store experience and the 18 if you don't. Note that no sales patterns are as smooth and easy as what I'm presenting. I spent many years dipping below my break even on occasion. It took my perhaps six years before every month was always profitable.

Let's look at the table. The sales level is projected out to when we think we'll break even. Fixed costs are your rent, salary and other. Other is a giant category you'll need to work out, but it should be relatively stable each month. Variable costs are based on your sales multiplied by .6 for your cost of goods.

12 month break even analysis

18 month break even analysis

With an $8,000 difference between an aggressive and conservative break even analysis and a project already in six figures, just go with the conservative value and sleep better at night.  With our start up losses calculated, we now know the seed capital we need to start this business:

So basically, $141K to get this puppy started. Despite what you might be thinking this is not an insane number. There are those who have done it with far less and succeeded and they're exceptional. There are those who have thrown way more at it than this and still failed. The goal here is to have a solid plan that will give you a shot at a real life.

Also, to give you an idea of what an experienced store owner could pull off, here's the lower inventory and start up loss model. An experienced store owner would also likely cut their other costs significantly as well, for example, collecting used furniture, fixture and equipment as they anticipate the opportunity to start a new store. They know what they need.

With anyone and everyone starting a game store, we don't talk about the value inherent in experience. That value starts at around $50K for a new store. You could do worse than find an experienced store owner foolish enough to take on your project for a year.

In the next exciting episode of Starting a New Game Store, we'll look at your Return on Investment (ROI). How are we going to get all this money back? This is another wild ass guess at your sales numbers. We're going to attempt to project how long it takes to get your money back.

Sunday, September 4, 2016

Starting a New Game Store: Professional Services (Part 8)

In part 7 we went over equipment. Now lets look at the professional services you need to get started:

You don't need a lot of professional services on a regular basis with your game store, but you should spend a little money up front so they can help set you up. Here are the ones you want to consider:

Accountant: You should do your daily book keeping, which includes entering deposits, writing checks, and categorizing expenses. It's really as simple as that. You should consult with an accountant to set up your books (Chart of Accounts) and help you choose your accounting software and version. I recommend you use them later to do your annual taxes, which is why choosing the right software is important.

I think it's a waste of money to hire a book keeper. Part of owning a small business is keeping your finger on its pulse. You need to know every nickel going in and out. That's not something I think you should delegate. If you look at a program like Quickbooks and just can't figure it out, you should take pause. If you have trouble with your personal finances? This will be ten times more complex. Stop and think about if this is for you. Maybe one of the things you do to prepare for this endeavor is take an accounting class. One semester of accounting should make you a Quickbooks wizard.

Startup Costs: $300 + $200 for QuickBooks

Attorney: You don't need an attorney, but you do need to be your own attorney by incorporating your business as an LLC or a corporation. Each state has pros and cons of each. The IRS sees them as the same. I started an LLC in California and converted to a corporation to save on taxes. Nothing but trouble. Some states have the opposite problem. Research which is best for you and your state. Especially look at fees and taxes on gross versus net income. Nolo has a "how to form an LLC in any state" book for around $50. Incorporation fees vary dramatically by state. We're going to say this costs $250, but it could be as high as $520.

This is another area that I think you should work through on your own, so you understand what's required to run an LLC or corporation. You could pay an attorney to draft this for you, but unless it's perplexing, do it yourself. If you have partners or investors, I strongly recommend you write or hire an attorney to write a shareholder agreement. Your incorporation documents are the bare bone requirements for the government. Your shareholder agreement describes the structure of the organization and how shareholders interact with each other under various (often trying) circumstances. I had one done last year and wish I had known about it in beginning.

Startup costs: $50, $1000 or more for a custom shareholder agreement, LLC or corporation filing fee: $250

Banker: Once you have your EIN number from the IRS and permission from the organization (there's probably a form for that), open a business checking and savings accountant. Find a convenient location that's easy to make daily deposits, preferably a community bank who will be more open to working with a small business. I don't believe credit unions allow business accounts, but let me know if I'm wrong. Many community banks are surprisingly willing to work with a small business, so if you can introduce yourself and what you do and begin that introductory process, you may have good success in the future when it comes time for loans or if you have a problem or issue.

Startup costs: -

Payroll Service: You will need your EIN for payroll as well. Set yourself up as employee number one and begin the process of getting paid and paying proper taxes. Talk to your accountant about this if you've chosen an LLC, as some states don't want you on payroll as an LLC owner working in the business (I did it anyway). Most payroll services are the same. Try to find one that guarantees proper payment of taxes, meaning they pay the penalties if they get it wrong.

Startup costs: -

Graphic Designer: Find a graphic designer to work up your store logo and provide you a set of graphics for various purposes. You also need a website. If you have the skills, do this yourself. At the very least, you need a landing page with your domain name with store hours, directions, contact information, a pointer to your store Facebook page and basic information about what you do.

The tendency is to run everything through Facebook, but I think that's a mistake. At the very least have this bare bones website. If you're more ambitious, design your site to have regular updates on new products, a blog, a calendar and other useful content that drives people to visit. I last updated my website in 2010. It's a terribly old HTML only design, but it has all the basics and a dynamic calendar, so it's still useful.

Along with your new website, you should have a new email account set up with your domain name as well. I use Yahoo for hosting my business account, but I'm sure there are better options.

Startup costs: Logo work: $300, Website design: $3,500

Professional Membership: Is there a game store retailer professional organization to join that offers a welcome package and helpful tips for starting out? Sadly no. I do highly recommend you spend the money and go to a GAMA Trade Show before you open. Many retailers will credit going to one of these shows for saving their business or getting it off on the right foot. If you have to choose between a new website or better computer or going to this show, go to the show. Pack your mornings with educational seminars and spend your afternoons roaming the halls looking at the product you intend to bring in.

Startup costs: $1,500 for 4 days at the GAMA Trade Show

IT Professionals: Hopefully you can set up your new network and manage your computers on your own. Make sure to include a wired connection to your POS system for PCI compliance. Everything else can be wireless. That cable run is our startup costs.

Startup costs: $150

Advertising Push: You've got your website up. Your store Facebook page is configured. Inventory is on the shelves. Spend some money to get people into your store for a grand opening celebration. Target your market on Facebook. Have a local radio station pimp your store. Hand out flyers. You'll want a monthly ad budget equal to 2-3% of your gross sales, but you should do a huge push when you're ready.

Startup costs: $3,000+

I think we've covered all our initial costs at this point. If I've missed anything, please let me know. Figuring out all the costs is the toughest part of building your plan, but being prepared is crucial for your success. I also expect you'll try to cut these costs, find cheaper ways, or do without some of these starting out. That's a good sign.

Next time we'll need to pull all this stuff together for our total costs and come up with some sales projections. We need to project a break even point, our return on investment, and then speculate on where and how this will be possible.

In Part 9 we look at our break even analysis, coming up with the last expense: start up losses.

Saturday, September 3, 2016

Starting a New Game Store: Equipment (Part 7)

In Part 6 we looked at furniture and fixtures but I kept equipment for this post.

The biggest piece of game store equipment is the point of sale system or POS. The thing you need to understand about the POS: They're all terrible. All of them. Just bad. Worse, they've realized there's no money in selling software packages, so they have required service contracts that cost you hundreds of dollars, year over year. I have to renew mine next week: $599. Some have moved to hosted systems, with monthly fees and regularly introduced innovations. In the past, you bought a system and didn't see feature upgrades, sometimes ever.

There are several less bad systems out there, with the top ones being Microsoft Retail Dynamics,  Lightspeed, and Quickbooks POS. If you're heavily into Magic singles, there's also Crystal Commerce. It does this one thing well. Again, they're all terrible, all with pros and cons. I used Microsoft for nine years and Lightspeed Pro for three years and I don't recommend either. I tried Crystal Commerce for a year and couldn't make it work like I wanted. My advice is avoid traditional systems and go with a hosted system, like the cloud based offering from Lightspeed.

A hosted system saves you money up front, but requires a monthly subscription fee. Lightspeed charges $169 a month for two licenses (your POS and a license you'll need for remote access). You'll also need a computer, a barcode scanner, a receipt printer, perhaps a label maker, and a credit card terminal, which will be provided by your credit card processor. You'll also want a laser printer for signs and general office work.

A hosted system not only avoids the headaches of installation, but avoids the issue of backups and off site storage. When I started I had an elaborate tape backup system with G-F-S rotation and offsite tapes that went home every night in a briefcase, like some kind of spy. Ridiculous. Avoid this.

A hosted system also isn't going to require a $185/hour IT consultant to install and maintain it, which will easily cut $1,000 off your start up costs. A hosted system assumes you've got stable broadband in your store location, which you really won't know until you're there. Talk to the neighbors and see what they're doing. It took us seven years to get decent broadband in our current location. Commercial spaces are woefully behind homes when it comes to broadband.

Next, go get yourself a sweet laptop. When you're not working on your POS, which will be be nearly all your waking hours, you'll be crunching numbers and talking to game trade professionals on your laptop. This is going to be your constant companion for the next few years. Get something that won't annoy you. Get the best PC or Macbook Pro. I was in IT for a decade working on Microsoft products. The best decision I made for my sanity was moving to Apple.

There are other things you'll want in the category of equipment. I'll just list everything below:

You're going to be spending upwards of 60 hours a week your first year in this place. You want it to be comfortable. You'll be eating many meals here, alone, by yourself, usually standing, so we've got you a mini fridge, microwave and coffee maker.

You'll want security cameras to figure out whose been shoplifting and possibly to record break ins. A streaming music system creates ambiance in your store, a requirement for retail. Make sure you're streaming something that's royalty free or with a commercial option (Sonos has this ability). I debated the shrink wrap machine, but its ability to replace damaged shrink wrap and bundle items you want to clearance puts it high on the list for me starting out. You could get it later, I suppose, but it's useful right away.

Am I missing anything important? Next time we'll go over some professional services you'll want to engage up front: Website designer, accountant, lawyer. You'll want their help setting you up and then only engage them occasionally.

Our FFE (Furniture, Fixtures and Equipment) costs exceeded $20,000.

Check out Part 8 for professional services.

EDIT: Just a note that you could easily choose to save some money by going with PCs instead of Macs. I do believe your Macs will last at least twice as long as the PCs, but if money is tight, it doesn't matter with a hosted POS solution. I tend to destroy a PC laptop within about 18 months through regular use, so I wanted something that lasted longer.

Thursday, September 1, 2016

Starting a New Game Store: Furniture, Fixtures and Equipment (Part 6)

I came from the Information Technology trade and I'm really good at spending other peoples money. In the corporate world, IT is called a cost center by the finance people for a reason. When I started the business, this OPM (Other Peoples Money) mentality skewed a lot of my decision making, mostly because it hadn't sunk in that it was my money, which might have effected my spending habits.

I had no idea what I was doing, but I was intent on building the best game store ever. It turned out to be a beautiful thing. Too beautiful. It was ridiculously expensive with an unrealistic ROI. ROI was never part of the discussion. I was overly proud of myself until I learned about ROI, and how my return was in the distant future. Having an amazing store with a painfully distant ROI is like being proud of the Porsche your parents bought you. Settle down, junior. I spent too much, but you don't have to.

Lets look at FFE, Furniture, Fixtures and Equipment in detail:

Furniture: You'll need a couple chairs, a desk and your game center furniture. A 1,000 square foot game center can seat a max of about 66 people (I'm using multiples of 6 since our tables will fit 6). So figure 66 chairs and 11 tables that fit 6 people each.

Your office will house the desk and desk chair. You will hopefully spend very little time here, usually when the store is closed. The drafting chair is for the work you'll be doing at the register. There is a stupid amount of data entry in this field.

You can skimp on chairs, but I suggest you go with commercial grade chairs used in schools or churches. Those Lifetime chairs? They're certainly not good for a lifetime. We throw away several each month, at least until they're gone and we order in more school chairs. I hate Lifetime tables, since they get permanently grunged up over time, but they're undeniably the best choice. We're experimenting with some Ikea tables with our mezzanine build out, but I can already tell you they aren't as durable.

Fixtures: Figure out your initial product mix and then figure out the fixtures you need. Lay out your store with software or with graph paper. Read about cash wrap layout and figure out what goes against each wall. If you're miniature heavy, you'll want miniatures on the wall. Games Workshop will provide free racks for your GW stuff.  There aren't any book shelves on the plan below, but you may end up substituting book shelves for gondolas. This is going to be highly variable, but I believe the costs will be roughly the same.

You need commercial grade fixtures to hold your product. There are cheap ways to do this (milk crates, gridwall, pegboard) and there are more sophisticated ways (slatwall and such). Like an inexpensive destination location, cheap fixtures signal that you're not interested in attracting the general public and you are focused on hobbyists. You might personally be focused on hobbyists, but we need the money in the pockets of the general public to get to your desired income level with this model. If you're not willing to sell what the general public wants, you're probably in the wrong business.

I'm going to assume you class up the joint a bit with slatwall and avoid cheap fixtures, milk crates, or shelves you bought at Ikea (which are bad, but not always). If you're talented and enterprising, by all means build your own fixtures. I have no such skills. Also, there's usually no great discount in ordering your fixtures all at once, so be sure you don't overbuy. If you know when you're going to open, you can also hunt for used fixtures from stores that are closing. Several game retailers are pilfering their local Hastings as I write this.

If you're new to retail, you probably don't understand traffic patterns. I recall realizing my dead ends were impeding sales. I had too many fixtures (new fixtures are expensive but used fixtures are worth close to nothing). I also bought twice as much slatwall as I needed, paneling the place from about two feet from the floor to the ceiling.

These are estimates from a while back, so prices may vary:

Equipment I'm going to leave for part 7.  The big equipment question nowadays? Should you buy a full blown POS system with the database stored locally or should you use a hosted solution? Also, should you invest in a website with the advent of social media? Does it still play an important role? Let me know your thoughts on this stuff.

We've easily broke $100,000 at this point....