First, a little pop quiz.

How many times do I have to buy a 10.00 item, with a 40% profit margin, to make a 10.00 profit, and also keep the item in stock?

The average customer probably believes I make 10.00 when I sell that item, a more knowledgeable customer may think 2 or 3 times.

The answer is 5 times. (5xcog's6.00=30.00;4xsrp10.00=40.00;4000-30.00=10.00;+1xinventory)And not very many products sell 5 times in my store, at least not in the short run.

It is humoungously expensive to add a new product line; either you invest your money and recoup over the long run, or you add one or two items to your weekly orders and pay for it through your profit margin and take forever to get there.

I've done both. I actually prefer to do it over the long run, but by doing it slowly, I miss sales during the run-up. On the other hand, investing is lost income through interest, either because you spend money you have, or more likely, you borrow money and pay interest.

Anyway, this Fall I've been adding new books to my store at a rapid rate. New novels, lots of art and pop-culture books, whimsical and gothic books, pop-up books, lots of cartoon books, just neat stuff. As the bills have come due, and sales have been stagnant, I've been kicking myself.

Until yesterday. Yesterday I had average sales, which 6 days before Christmas, isn't what I was hoping for. But at the end of the day, an interesting pattern developed, sales in my main product line, 00.00. Sales in sidelines, 25%. Sales in my new product lines, 75%. In other words, if I hadn't added the new product over the last few months, my sales overall would've been down 75%. If I was so specialized that I only carried my main product line, sales would've been zero 6 days before Christmas! (Of course, people tend to buy what you Have, but you get the point.) Through no fault of my own, the publishers of my main product line (comics) have fumbled the ball. My new products have taken up the slack, just as I hoped they would.

I'm a great believer in diversity. I carry 8 product lines in my store, all of them with significant inventory. Yet, 6 of those product lines are sidelines, which account, on an average, to less than 8% of sales (each). They take up lots of room, energy and time as well as money.

Not only that, but I'm constantly shifting my focus, hopefully ahead of where I think my customers will be in a year or two. I think this is the biggest reason why we've been in business for 26 years, because I'm constantly trying to adapt to new realities, thinking for myself, and most importantly, getting ahead of the customer. My goal is to have an established product line at about the same time as new customers discover them. (My wife commented, "You've reinvented the store so many times, I've lost count.)

Here's the problem. When you constantly change your inventory, it is almost impossible to make an extra profit. The irony to me is that by trying to have a vibrant, relevant store, I probably make LESS money that I would if I stayed static. (At least in the short run.) I've always told myself that eventually I'd reached a point where I wouldn't have to change all the time.

Yet I've always made that choice, because this is the Best Minimum Wage Job a Middle Aged guy Ever Had.

Speaking of competition. I go shopping about once a year. Just not something I do. I will get a 200.00 gift cert. from Fred Meyer, buy a year's worth of wardrobe, and I'm done.

Went to Fred Meyer yesterday, and couldn 't find a thing I wanted to buy. Ended up using my gift cert. for groceries. All I can say is, thank god other people aren't like me, or I'd have no business.

Anyway, I can't even go into one of these places unless I go with my calm and collected wife. I feel completely overwhelmed, I can barely orient myself, and its seems to exhaust me. I could barely make it from the couch to bed last night, and an hour earlier than usual.

I probably need to go out more often.

Competition? There's no competition. The chainstores have won, and we little guys are being left with slim pickings. While at Costgo I saw 3 new bestsellers I wanted for my store, the latest Tony Hillerman mystery, THE SHAPE SHIFTER ; the latest Micheal Crichton, NEXT; and the latest Hiassen mystery, NATURE GIRL. The prices at Costgo were EXACTLY what I will have to pay my distributer, plus wait a few days. I almost bought them, then put them back. I have to put my money where my mouth is.

I've never spent a dime in Walmart or Target, and I never will. But my political thoughts were already developed before they came to town. Meanwhile, though, I have pretty much given up trying to convince people to support the little guys, because even I can't do it consistently.

I stood for 15 minutes looking at the Big Screen TV's at Costgo. If I ever pull the trigger, (and I think I've talked myself out of it for this year, because sales have been slow), it will be the first big purchase I've made in....I really can't remember anything else. But even the middle sized places like Radio Shack, McMahons, and Fred Meyer didn't have the really big, huge TV I've got my eyes on. My choices seem to be Best Buy or Costgo. I suppose, to be consistent, I should check with Johnson Brothers, or someone else local, but even I weary of the choices.

How can I blame my customers for doing the same thing?

COMPETITION

This is a subject where being anon. might have been helpful.

I've always maintained that I'd rather have a good competitor, than a bad competitor, because a good competitor lives by the same rules I do. There really isn't any secret formula to business, despite the way the media tries to make stars out of some businesses and bums out of others. We all have rent and overhead. We all have choices between taking money out or reinvesting, where to locate, how to price our product.

For instance, the location of a business can be a make or break choice. But....there is no right or wrong way to go about it. You can pick an expensive location with high foot traffic, or an off the beaten track location for cheaper rent, or a store on the busy road with no foot-traffic, but plenty of drive-by traffic. All of these are valid choices. You just have to tailor your business to your choice.

For instance, you pick a location on Division, and your rent is .85 a foot. Your space is 500 sq. ft. You only have to make a little over 1000.00 a month to pay for that spot. But because you are off the beaten track, you won't be getting much drive-by and/foot-traffic. On the other hand, you could have a space that is twice as expensive, but the variable is that you have more foot-traffic. The results to the bottom line might be the same for both stores.

The variables between each business may be somewhat different, but the same basic problems are there for all of us. People like to pretend they've invented a better mousetrap, but that is pretty rare.

No. I have rent, you have rent. I have employees, you have employees. I have to take a living income out of my store, you have to take a living income out of your store. If you are selling the same product I am, the differences may come down to simple character issues like, honesty, reliability, steadiness, people skills, promotional skills, display skills. But the product is costing you pretty much the same, the prices you will need to charge will be pretty much the same, your overhead is going to cost you pretty much the same, and so on.

So it is easy to see, almost immediately, if a competitor is living by the same rules as you are, and if they aren't.....they probably won't last very long. There are certain key phrases I hear that tell me that they are probably not serious competitors: "I don't need to make money." "I'm just trying this out, and if it doesn't work, I just go back to what I was doing." "I don't charge retail. I sell for half, and make up for it by volume."

There are certain early decisions that tell me if they have a chance. Renting a spot way too big and expensive for the product is one, hiring a manager from the beginning instead of working the store themselves, is another. Splashing the media with ads, and having constant SALES is another. Spending too much money early on frills....and so on.

The biggest factor, and the most unknowable, is the motivation of the owner. When things get tough, (and they always get tough), will the owner be able to knuckle down and survive?

So you add up all the variables, and it turns out most every mom and pop type business is going to make just about enough to earn a living for the owner/s; (I exclude both service businesses and resturants from this, cause they have a whole different set of rules) Some businesses will make more money than others, based on how much the start-up costs, and so on. But a comic store is a comic store is a comic store, and there aren't any rich comic store owners.

This is a huge, subject, and I'm going to visit it over the next few days.

When we opened our store in Sisters (now long gone), we had to go through the city to approve our signs. I submitted a design that had the title PEGASUS highlighted, and below, in regular letters, Books, Games, Toys, Comics. Something like that.

"Oh, no." The sign lady said. "All letters must be highlighted."

I just laughed in disbelief. "If all letters are highlighted, NO letters are highlighted."

All I got was a blank look.

I know she wasn't stupid, she just didn't see the irony in the request. I knew what she was really saying was, "We want a uniform style for the city, and the style we have chosen is that all letters must be highlighted."

But underneath that thought is a wealth of contradictions. AS IF EVERY LETTER WAS CAPITALIZED IN ORDER TO MAKE A POINT. EVERY STINKING LETTER, WHETHER IT IS IMPORTANT OR NOT! NICE DAY OUTSIDE. I JUST ATE LUNCH. LOOK A BIRD. THE WORLD IS ENDING.

Or like requesting that a house be painted Red, so that it stands out, and then requesting that every other building be painted Red, as well. In a nutshell, that is the bureaucratic mind.

I actually understand the need for these kinds of rules. Judging each situation on it's own merits leaves too much space for individualistic and subjective judgements. But ....it also leaves NO room for individualistic and subjective judgements. It creates a uniformness and blandness.

Except that, because people are wonderfully adept at following the letter of the law, but finding loopholes, you get these strange situations where the business owner has a sign that blends in with everyone else, but has painted his building a bright pink.
Or the house is painted the same color as every other house, but the owner has filled is lawn with pink flamingoes.

So the city tries to legislate taste, but taste is individual. On the other hand, without somes of these rules we end up with streets filled with ugly, overblown, and view-blocking signs.

It is a conundrum that is fun to think about.

WELCOME TO THE BEND, OREGON MONORAIL!

I just can't resist commenting on the bus fiasco in Bend. My employee, Pat, was the one who remembered the Simpson's monorail episode, which made me laugh.

Wikipedia: "...Marge discovers the public transportaton system was a dangerous scam.
"Back in Springfield, the monorail has already started its maiden voyage and malfunctions begin almost immediately..."

For years, everyone who looked at putting a bus system into place in Bend, couldn't figure out a way to make it work. If memory serves, we got a new ' transit expert' who promised that she could put a workable system in place for a very affordable price.

I remember at the time thinking that it sounded fishy.

The statistics I'm using are rough, but I think the points are valid.

First off, if the system is truly getting only 75 riders per day, I'm pretty sure we could hire a cab for every rider, and probably save money. If they have truly spent 71,000.00 on repairs alone, that would work at to about 1000.00 per day! That would be (100 ) ten dollar cab rides! Not counting the original cost of the buses, the infrastructure, the cost of the drivers and other employees, and on and on. (The city of Bend has 1.5 million for transportation.)

A boondoogle.

Come on, with 6 buses, you're looking at maybe one and 1/2 riders per hour. If we double that, we're looking at 3 riders per hour. Quadruple that, and we're looking at 6 riders per hour!

Tell you what, give me 1000.00 a day, and I'll zip around town in my Toyota and transport everyone anywhere they want to go! I'll hire a couple of friends to help me out. We'll get it done!

So, we rushed out and bought 200,000.00 buses for 35,000.00 (that were DISCARDED BY ANOTHER TOWN for 1500.00) and we didn't question it? (Hey, kid. I got this here 2000.00 Rolex you can have f0r 350.00!) We forego the 80% of federal money we could've gotten. If a new bus costs 200,000 and we pay 20%, a NEW bus costs 40,000. Instead, we buy used buses for 35,000? (Not just any used buses, but 10 yr old lemons.)

I'm pretty sure that most of these systems are paid for by transit districts, set up with bonds and tax incentives. We thought we could do it on the cheap.

I probably should be outraged, but I find it amusing.

Had a friend and customer, (hey, Paul C.!), come in and say he was enjoying the blog -- but now I had him worried.

One of the things that happens when you write about problems is that people tend to identify you with those problems. But I'll let you in on a little secret I've learned. It's the guys who don't talk about the problems, who tell you everytime you ask, "We're doing GREAT!", that you have to worry about.

I've tried to be consistent. Over the years when we've struggled, I've not been shy about talking about it. But I've also tried to tell people when things are going well.

Things are going well. But I'm a firm believer that only the paranoid survive; it is smart and prudent to be looking at the future, and trying to see problems in the marketplace in advance. I have a few years left in my lease. I see two different factors in my next lease negotiations: the actual level of business, and the percieved level of business.

1.) Both the real level and the percieved level of sales are high. If the rent goes up significantly, I may decide it is worth it. Or I may be doing well enough to change venue, for something bigger or more visible. Ir the landlord may want the space to build something bigger, but I'll have made enough money to move effectively.

2.) The real level is high, but the percieved level is low. Best of all scenario's, and the most unlikely.

3.) The real level is low, but the percieved level is high. The most dangerous of the possibilities, and very possible. That is the one I need to be prepared for, by being in a position to adjust.

4.) The real level is low, and the percieved level is low. This usually takes a few years to develop after an actual downturn. Don't know if there is enough time for that, but if so, then hopefully rents and such will have moderated.

I tend to believe these things work out for the best. All four scenarios have their pluses and minus's. Whatever happens, I've become pretty good at shlupping my way through.

HENCE, THE TITLE OF MY BLOG

I used to read books about business, and subscribe to magazines like INC. or ENTREPRENUER, until I realized that when these guys talked about small business, they were talking about businesses with dozens, if not hundreds of employees. What my store really is, is a Mom and Pop business, (or, in my case, a Pop business, with a half-time employee) and there are little or no books and articles about us. Probably no money in it, just as there is no money in Mom and Pop businesses.

The biggest problem is that all Mom and Pop businesses are so unique that it is almost impossible to draw any broad conclusions. Each store is strongly affected by the personality of the owner, his or her motivations, resources, individual skills. One owner might be great at ordering, but horrible at people skills; another might be a great store layout designer, but unable to stick to a budget. One may be a great wheeler-dealer, the other may be a steady, reliable presence.

These books and magazines (which really exist to just sell more magazines), can be actually dangerous to the small guy. One of the worst business decisions I ever made was to create an incentive program for my employees based on an article I read. Complete disaster.

You begin to realize that all the common wisdom is suspect.

1.) Half of all businesses go out of business within 2 years. Well, it seems to me that most all business last 2 years, even if they are failing from day one. Spread that figure out to 75% of all business fail within 8 years, and I'd believe it.

2.) You should have 3 months (or 6 months or two years) income saved up. Yeah, right.

3.) You should expect to lose money for the first 2 years. Also, yeah, right. Look, if you have enough money saved for 6 months income, and can afford to lose money for two years, why are you opening a mom and pop business? It will take a decade or more just to get back to even. Whatever you were doing before that was giving you those kinds of resources, you should keep doing!

4.) Advertising. Like throwing money into the ocean, but every newbie bites.

5.) Lower your prices to sell more! Cut prices in half and make up for it in volume! Only if you're Walmart, kiddoe.

6.) Or the opposite of #5, you should Keystone, be able to get double your investment. Not in the same world as Walmart, kiddoe.

7.) Turn your inventory at least 5 times a year. These days I feel lucky to turn my inventory over ONCE a year.

And on and on. Almost all the common wisdom about small business is suspect. To me, at least.

The best book I ever read about a 'small' business was, GROWING A BUSINESS, by Paul Hawkens. His basic premise was that you start small and cheap, learn your business, and then grow.

That isn't what's happening downtown. These stores are starting as fully developed concepts, with all the inventory, fixtures and storefronts shiny and new. Looks great. Except the owner really doesn't know what is going to happen, does he/she? Estimates of sales are going to probably be too high or too low, and he/she will have to adjust. If the basic concept is flawed, so much money will have already been sunk into the business that it will probably be too late to change -- that is, if the owner actually catches on to the flaws soon enough and, even more importantly, is willing to make the hard decisions.

Making these necessary changes is difficult for any owner, but nearly impossible for an absentee owner. One of the dead giveaways as to whether a Mom/Pop business has a chance to succeed is whether the owner actually works in the store. I will challenge any small business to survive if the owner isn't there at least 40 hrs a week, (Minimum!). It's a Mom/Pop business, which are by their very nature designed to support a Mom and a Pop! (Hence the title of my blog.)

I want them to succeed, but I fear they will be disappointed in the results.