The Great Widget Machine.

Early on, I could never understand how success could cause my business so much stress. Sports cards exploded on me. Sales grew exponentially for 3 or 4 years straight. I had to buy more and more inventory, hire employees, work harder and harder and yet I was making no profits. When the dust settled, I realized I had been like the poker player who kept winning hands and putting the winnings back into the pot and then managed to lose it all on the last hand.

Simply put, if Cost of Goods is 60%, and you're doubling sales every buying period, you actually go backward in gross profit by keeping up with demand. Meanwhile, overhead is going up trying to keep up service, and eventually begins to depend on employees and systems that simply aren't up to the task. So the success eventually breeds failure. Strange notion.

I finally came up with the Great Widget Machine thought experiment. I sell 95 widgets a day, and my Great Widget Machine, my GWM, makes 100 widgets a day comfortably. The widget machine costs 60 widgets a day to run. What happens when your sales of widgets goes to 110 or 135 or 150 a day? If you buy a new widget machine, it will add 60 widgets in cost, for a total of 120 widgets, which means you have to sell 155 widgets to get the same number of widgets left over.

But if you try to hold to one widget machine, you are regularly disappointing up to half your customers by not having enough?

I'm very close to that point right now. I probably need more employee hours to keep up the service. I'm finding that ordering one graphic novel is often not enough anymore, as it has been for years, but getting two of every graphic novel doubles my cost of goods, without the guarantee that they will both sell right away. But the one sells out often enough that I risk disappointing my customers. So far, I've depended on quick reorders. That has worked as widgets have gone past the 100 mark, and on to 110, 135, 150 but now we are approaching the magic 155 widget mark. Do I go ahead and reinvest? Hold out a little longer?

Sidelines are a little easier to deal with, because people don't really expect me to carry everything. But the problem of spot shortages is developing across the board. At the same time, I'm trying to guage the economic climate, take sudden shocks into account, and gird for possible competition, and so on.

I suppose it's a nice problem to have. And I have 27 years of experience in how the finesse the situation. But risk is always there; whether you are having success or not having success. In fact, success can just set you up for a bigger fall.

In case you think I'm not doing a good job, I really think I'm much more inventoried than 95% of the comic shops in American, relative to demand. I've just set such high standards, that I hate to see any customer walking away without the book they wanted. And yet, my store could be 10 times bigger than it is, a 100 times bigger than it is, and I'd still not have every comic or graphic novel anyone could ever want, not to mention toy, book, games, card, etc.

I think I can hold off on the new widget machine a while longer. I've got a stockpile of widgets I can sell for awhile.

Pretty wonky post, but that's how my mind works.