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.

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