Thursday, March 27, 2008

We've made enough money to pay back the credit charges for this current month, plus the credit charges I didn't pay last month. (When I saw how bad January was, I made partial payments so I would have some cash. Fortunately, February was much better.) And it looks as though, with spring break this week, I might have a little beyond that.

But even more importantly to me, I've already made the first half of next month much more manageable, and hopefully set a precedent I can follow the rest of the spring.

I can now safely say that I've gone 3 weeks without reorders, except for special orders. This was hard for me, and I can't remember the last time I did it. It's in line with quitting smoking, or going on a strict diet.

My usual strategy in the spring is to allow myself to fall behind, to keep the flow of product even, to use the off season to establish new product lines. Then I spend most of summer catching back up. Ditto fall and Christmas.

I've decided that it is time, once and for all, to turn that around. To get a cushion ahead in Summer and Christmas, instead of catching up. Which requires that I spend the 'off' season not falling behind.

It's actually easier to do when there is a slowdown. When business is steadily increasing, risk is covered, mistakes are ameliorated. I tend to spend every dime, because at worse, I seem to break even. But when business is slowing, risk suddenly comes out of the bottom line, and mistakes sit there like big stinking turds. Therefore, I'm much more disciplined, and often actually make a little money.

I've never found a real plateau situation, where I could just maintain. It seems that my business at least is either growing, or ebbing, like the tides. Macro events, like recessions, and micros events like 'hot' product. I have to go with the flow. Trying to grow business in ebbing situations , is pushing the wet noodle.

It's not like I haven't done this strategy before. Those seven years I keep talking about while I was paying off my debt, I had zero backup funds and zero credit and could take zero risk. I more or less didn't reorder anything for those whole seven years. I got my fresh material every week, like a fresh white layer of snow, and would sell it off before it got dark and crusty, and then get the next layer.

Not an optimal way to grow business, but when every product you carry is having systemic problems, there isn't much else you can do. For instance, I might have a title that would sell 8 copies if I ordered 10. I would order 7 copies, and sell out 100% of the time. Zero risk -- but also zero chance that title can grow. But if I sell the 8th copy, and then just one more, my bet is covered.

I'm more than willing to take that bet when I perceive interest to be growing.

But I think I've gotten a bit spoiled over the last 5 years, indulgent even. I was not only ordering a bunch of material upfront, but was reordering just about everything that sold. I ordered stuff that caught my whim. I ordered stuff off of sale lists. I added new product lines, and then made sure that every product line was fully stocked all the time.

In a sense, I revved up every single category to the highest level I could. Over the last year I've been trying to gauge the cruising speed.

Around this time last year, I stopped adding new product lines. This wasn't so much discipline as facing the fact that I didn't have another inch to spare. Adding new books and board games required a lot of ingenuity to fit them in, but I managed.

Then early in the summer, I tried to disengage from my strategy of reordering just about everything that sold -- not entirely successfully, because I still wasn't all that worried, despite all my talk of housing busts and such.

Then, around August of last year, it seemed that the psychology began to change. In hindsight, I can see that I was due a small sales drop because I simply wasn't adding new product lines all the time, and then the credit crunch came along.

So, slowly, against my will, I've been trying to get leaner and meaner without subtracting from the store's appeal.

It's very hard for me to shift my thinking, like establishing a new habit. But once I do, it's equally hard the shift back. I've always thought the trick is to weather the downturns without losing money, indeed, using it as an opportunity to get cash ahead since more inventory isn't as useful, and then be primed and ready for the next upsurge; cash would be king, cash would be multiples of leverage.

It's really about the timing. It is better to be a little too early on the downside, and a little too late on the upside, when it comes to risk management.

4 comments:

Anonymous said...

I assume you're using personal credit cards for your credit. Couldn't you get a better rate of interest from a bank loan?

Pedro Hemes Valdes Ortega said...

Brooks Resources is the actual owner of the Bulletin, which explains the reason for the cozy everyones a winners in the real estate town.

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If you look at the Deschutes County DIAL Page- property ownership information- you will see the bulletin was given the land for their new building, from brooks resource, for free. The estimated value was $2,000,000- I think that may explain a thing or two

Bitchslap said...

You're right Pedro, it does explain a lot. It tells me that you are a fucking idiot. Buh-bye!

Duncan McGeary said...

Jeff, this is an area where I'm not sure I'm always the smartest.

I have a small line of credit at one bank, that I use for overdraft protection.

I also have a Heloc which I'm more interested in paying off.

The credit card is a payment mechanism as much as anything.
Pay several of my suppliers that way to avoid billing, and if I'm clever with my timing, I can give myself up to six weeks to pay. Even the most generous of suppliers gives me only 4 weeks.

I have two cards; one I use very rarely, in fact, I think mostly for my lipitor prescription and for my haircut. Not sure why those two things.

And I transfer balances off one credit card to the other if they are offering the six months no interest thing. The danger is letting myself fall behind.

I have used the card for one major expense -- dental bills. And that is the one lump of cash I haven't made much headway against.

What I probably should do, though, if I'm going to use a card for payment, is have a 'rewards' card of some kind.