This may seem like one of those self-absorbed, wonky business posts that I so like...but, actually, this is more the story of my journey to having a stable and profitable store.
In about 2002, I set a daily sales goal that I thought would accomplish everything I needed for the store: pay the overhead, get the proper inventory, pay myself a living wage, and a bit extra for retirement.
I had just finished paying off a rather massive debt, that I'd been carrying for ten years or so.
So I had, in a sense, a fresh start. (We'll ignore the first 18 years, which were a roller coaster of lows and highs and mistakes and discoveries, and -- well, let's just call it a learning experience.)
The daily sales goal I set was about 1/3rd higher than I was actually doing in 2002 and seemed like a very hard total to reach.
For the sake of discussion, I'm not going to tell you what our actual sales were and are, but I'm going to use a 10 point scale. (You could translate that into $1000.00, if it makes it easier -- but I assure you, I don't earn anywhere near that much per day...)
So on that 10 point scale, we were doing 6.5 in 2002.
As it happened, the big Bend boom started around the same time. Sales shot up, and I plowed all the money back into the store. I realized early on that it was a bubble, and knew from past bubbles that sales could easily drop in half. So my goal was to push sales as high as I could get them, and at the same time keep fixed expenses level, so that when the inevitable bust happened, I'd still be viable.
So most of the extra earnings went into inventory, instead of profits. (Inventory, IS, profits, if you want to get technical.) I probably tripled my inventory during that time.
Meanwhile, I hit my sales goal and shot well beyond it. Let's say, 13 on the 10 point scale.
The inevitable happened, and sales started dropping, and we are back to 8 on the 10 point scale.
Which is better than 6.5, but not as good a 13.
But an interesting thing had happened in the meantime.
The new inventory was in new product lines -- new books, boardgames, used books, etc.
It turned out, the mix of product lines allowed me to push the profit MARGIN to a higher level.
I'd been doing about 40% profit margins for the proceeding 18 years, sometimes a little lower (with higher sales.)
By being much more picky and choosey with the lower margin products -- anime, toys, and cards -- I was able to let them decline to a smaller piece of the overall pie, and at the same time, I was able to boost their usual 35% margins a bit higher.
I was able to find discount wholesalers for new books, and from Linda's store, I have an endless supply of free used books. (Can't have a better margin than 100%, right?)
Meanwhile, the comic industry also started offering regular deals; at first with seasonal blowout sales, and eventually weekly liquidations, and or special offers.
I found that if I consistently took up these special offers, I could save at least 10% on very viable, evergreen product -- and save much more on the mid-list product. If I do this just about every time they are offered, I start pushing my profit margin higher.
Eventually, the stuff I was buying at a higher discount, was reflected in the stuff I was selling.
So, my margins have more or less settled in at a good, solid 50%.
Which means, that doing an 8 on a 10 point scale with 50% margins, is exactly equal in profits to doing a 10 on a 10 point scale with 40% margins.
So, in a sense, I've reached my goal, and I've been able to maintain it during the worst recession since the 1930's.
It may be a temporary resting point -- indeed, it most probably is with all the massive changes that are taking place in the retail world -- but it's still a nice place to land.
3 days ago