Monday, March 26, 2012

The Golden Mean.

About 10 years ago, I figured out a daily sales target that would optimal for the store.
By this, I mean, a sales goal that would pay the overhead, buy new material, buy old material, give me a little time off, and so on.

A self-sustaining figure. The Golden Mean.

At the time I made this guess, Pegasus was probably doing about 40% less than that.
But I'd just paid off my debts after years of struggle, and I could sense that downtown was about to get busier.

During the next 6 years, I not only hit that optimal level, but far exceeded it. It was the time of the boom.

Yet, it wasn't self-sustaining, because I spent all the extra money buying more and more inventory. I realized early on, the more good inventory I had, the better the sales. (Duh, huh?)

The question became, with the room I had, could I pack enough material in the store so that when the inevitable bust happened (and I give myself credit for recognizing the bubble pretty early on), could I still sell enough product to survive? (Much less be self-sustainable?)

Sure enough, sales dropped below the optimal level again. Nevertheless, I kept adding inventory even during the Great Recession.

Now it became a question of how much could I viably cram into the store? I made a conscious decision, for instance, to continue to carry sports cards even though sales weren't that great simply because the boxes were stackable and made a small footprint. I took the leap into boardgames for the same reason -- stackable vertically. And books are are also fairly condensed in space.

Toys, on the other hand, take up a lot of room for the return on the buck, and sure enough I started to neglect them a little. I've spent the last quarter trying to revive them, and am starting to see the results.

The optimal sales level is still the same level -- but with some major caveats. At the time I first made the estimate, I was thinking a daily average over the course of the year, which would mean I'd do less in the slow months, and more in the busy months.

Now I think I need that optimal level to be the baseline in the slow months.

The figure I had in mind also wouldn't be enough if I hadn't figured out ways to increase my profit margins, here and there. Volume discounts, sales, used books, and so on.

(I think the optimal daily average under the old rules would probably be another 15% minimum.)

Anyway, the point of all this is, we hit the optimal level exactly in February, traditionally one of my slowest months. But we fell short in January by about 15%.

So March and April are going to tell me if the January total is more likely, or a an average of the two, or whether I've finally hit the Golden Mean.

So far, we seem to be hitting the Golden Mean in about 2 out of 3 of the slow months, so we're almost there.

1 comment:

Anonymous said...

Perhaps it would be a good time to have a sale on those obscure figures in the yellowed plastic that have been hanging on your walls for the last 20 years. Might clear up some space for product that actually moves.
But then the term "sale" to you is like kryptonite to Superman.