Sunday, September 11, 2022

Game Store Investing

The feeling of long term store ownership might be described as failing upwards. There are regular setbacks, characterized by the phrase, two steps forward, one step back. The saddest thing ever, I think, would be to look up after ten or twenty years, and see things exactly the same. You are the same. The store is the same. The money is the same. You are the victim of a Buy-A-Job. Top stores, those failing upwards, are run by owners who believe they are heading in a positive direction and they work towards that progress. How do you work towards progress?

First, invest in yourself. Besides paying yourself from day one, which means having a larger startup budget, you want to invest a percentage of your income for retirement. This might seem extravagant, but honestly, when else will you do it? Retirement savings can also be used for buying a home, college, or a number of other investments in yourself. Starting younger means you won't have to scramble when you've finally "made it" in this trade.

Investing in yourself also means learning new skills. This is going to happen anyway when you first start a business, but regular personal development of your skillset is harder over time. I'm currently paying someone for graphic design work and I'm about to hand over my website to an employee. This is mostly because I've lost interest. I'm instead working on learning Spanish and RV repair. My eye is not on the ball.

Second, invest in your store. Avoid purchases that don't add value. My investors describe this as "pimp value," or what today we might call flexing. Buying a van and wrapping it as a billboard, a vintage pinball machine, or yet another rubber statue is pimp value. Now that we've tripled our inventory and seen what true investment can do for us, pimp value is clearly seen as net profit deferral. Avoid pimp value. Flex with profit.

The most solid store investment you can make is more inventory. Even bad inventory that underperforms is better than pimp value. Avoid spending money on Other Peoples Property. We spent $160K expanding our game space to a second floor, just in time for the Magic boom to end. We paid it off during COVID, and event attendance may never fully recover. When we one day move out of our space, our landlord will likely tear down our second floor. It's that idiosyncratic to our operation. 

Third, use systems to invest. Give yourself a salary based on a dynamic number. My salary is based on the low end of the average range of a retail store manager. This lets me increase it over time without feeling like I'm taking too much. This is not all of my take home pay, but it's the baseline I can take, even during hard times. After you have a salary, take a percentage of your income and invest it in a 401K or IRA. The ideal number is supposedly 15-20%. If you can't possibly imagine doing that right now, try 1%. Then increase it slowly. Anything is good.

After you've paid yourself, repeat this process with your business. Take another percentage for operational improvements and inventory increases. This is easy to do during your windfall months, like the summer or after the holidays. A 10% inventory increase has been my guideline for a while. I'm always progressing if my inventory is increasing. This also lets me play with inventory performance metrics as a means to increase profit. It's not just more stuff, it's an engine for profitability and a way to keep me engaged.

Pro Tip: Take 10% of your net profit and put it aside for improvements and repairs. Early on when profits are thin, it might seem all your profit goes to improvements and repairs. Eventually you'll get a handle on entropy. The goal is to find yourself sitting around a table with staff and scratching your heads because you don't know how to improve the store further. You've done all the projects on your white board so you'll need to get creative. This is where you want to be! Watch your store become a leader in the field, rather than worrying about a broken toilet.

These might seem like small things, but that's the point. You sacrifice a small amount here and there for big results later. Finally, don't be afraid to take home your net profit. Remember that the R in ROI is Return. If you aren't taking money out in the form of profit, I think you're doing it wrong. Enjoy your life. Develop hobbies outside of gaming. Take care of your health. Plan a vacation that's not to a trade show. You don't need to take pride in your success, but you certainly don't owe anyone an explanation.

Wednesday, September 7, 2022

The Best of Times

After 18 years of running a small business, there hasn't been one "best" time, but instead a series of them. Of course, my best of times, might be hell for you. My wife used to take math classes for fun, case in point. So what are my best of times?

Figuring It Out. Learning the trade from scratch was a glorious time, breaking the code of my trade. I'm still doing it. In retrospect, I paid about as much for that education as my parents paid for my college education. My startup loss budget, AKA my informal education, was over $50,000. Figuring out the trade also included understanding customers. Some of those early customers are still with me. Some have loaned me large sums of money. One is a long time investor. Learning games was also part of figuring it out. I learned about 100 board games, several miniature games, and half a dozen role playing games. I don't do that anymore, nor do I want to, but I look back fondly on this time.

Survival. Squeaking by with a few days of cash flow made me feel lean and mean. Extra money tended to be more liability than opportunity. I remember being on vacation in Mexico and essentially bouncing a Friday payroll, rolling it over until Monday. Business as usual. We had super thin labor. We relied on December to get us out of debt nearly every year. I did this for so long, I would have told you "this" is what owning a small business is about. It is for most. It taught me discipline, but if I analyze it clearly, there's also some psychological trauma. There was a baseline of constant pressure to perform. It can be addictive.

Just a Taste. I overbuilt, over-invested, and there was a potential energy built into my business, like a large rubber band being slowly twisted. In year eight it unwound and after years of just getting by, we finally cracked the expense nut and saw net profit soar. It continued to soar for years to come. Scraping by for eight years and finally having some extra cash was glorious. It didn't feel like a reward for hard work though, it felt unearned. I did enjoy the vacations and outside hobbies this provided. It was a nice distraction from imposter syndrome. 

Break Out. COVID saw my return as the sole proprietor for several months, building a new POS on my dining room table, delivering games to customers, creating an online store, and re-hiring staff to take it all over. Imposter syndrome was cured when it was just me again and I didn't fall on my face after a lot of years away from the counter. I can still do this! It gave me the confidence to work from home, plan my long term working road trips, and believe that what I built had a strong foundation. We had strong policies and an equally strong business culture embodied by wonderful employees.

The Last Day. One day I will sell the business, hand it off to my son, leave it to employees, or liquidate at a tremendous profit. They say the two happiest days of owning a boat is the day you buy it, and the day you sell it. I imagine a small business is no different. I'm another 18 years away from that day, if I'm lucky, but I imagine it will feel like victory.