Monday, November 29, 2010

Banking the fires.

I think I just enjoy the challenge of trying to do the same job with less money. It's possible to do, if I use a little ingenuity and savvy. It's a matter of timing, a matter of making every dollar count.

For instance, it might be possible to sell 8 of an item by ordering 12. A couple of the 12 are more or less wasted through lack of attention, or inability to display, or using them as samplers or...any number of reasons. Maybe I have a customer I'm courting, or a customer I want to keep coming in and I give them a copy for cost. A couple more, I might sell for an extreme discount, or as an add-on to a large sale, just to get the numbers down. So I end up really only making good money on the 8.

However --

I might be able to sell 6 of the same item by ordering 6, and getting the full margin for each and every one.

Now, if business is booming, I don't mind the first technique. A little extra flow of material isn't a bad thing, even when I don't make money on every item. The occasional sampling, the occasional discounting can prime the pump. Because I'm busy, it just give me the chance to go on the next thing and the next without over-thinking it.

If sales are on the increase, I don't even worry about it -- I just figure that it will all even out in the end, which -- because I can count on increased future sales picking up the slack, is pretty much true.

But when I can't be sure about the future -- it's better to order exactly what I think I can sell. So, I can make nearly as much money with 6 items, by ordering 6 without the risk, as I used to make ordering the 12 items and selling 8. But it requires being completely on top of it. Making sure that I don't run out too quickly, making sure that I have complete sell-through. Making sure that there isn't a disappointed 7th or 8th customer out there, and if there is, trying to get the other 2 items without it costing too much.

So the second technique is more work, not quite as loose and generous and easy-going. But it can end up doing the same job, and making the same money. And I sort of enjoy the efficiency of it,
when the challenge presents itself.

The one thing I wish I could do is keep up this level of efficiency when times are flush. But I don't know if that's possible. And I'm not completely sure that would be desirable.

I've made the case here more than once, that a growth strategy is different than what I call a 'maintenance' strategy. There is a built in inefficiency to growth, because I want to be sure that I don't run out of material. As I mentioned above, I spend more time cultivating customers, trying new things (which may or may not work out), and so on.

When the store is in a growth stage, I'm stoking the fires, throwing more wood than absolutely necessary, and letting the sparks fly.

When I'm trying to maintain the store, I'm banking the fires, making them last, keeping them going, conserving them until I can stoke them again.

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