Welcome to Curious Business

Every Friday, I post a small insight into running Curio City. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
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Friday, July 03, 2015

Profits of Doom





At the end of last year, Quickbooks showed Kraken Enterprises sitting on a nice, genteel $800 loss. That meant no bonus for me and, more importantly, no corporate income to tax on our personal return.* But some accounting hocus-pocus changed that ending balance into a massive $1,762 profit. As nearly as I can figure out -- even a picayune little business like Kraken Enterprises has Byzantine tax returns -- my inventory ended the year $2,500 higher than it started out. Or maybe I sold $2,500 worth of stuff before I paid for it. I don't know. For some actuarially sound yet impenetrable reason, an accounting adjustment reduced my COGS and thereby increased my income by $2,500 without the benefit of having 2,500 more dollars.

By that reckoning, Curio City should have paid me $264 to cover the tax bill (15% of $1,762), plus a $1,123 performance bonus (75% of the remaining profit). But that accounting technicality didn't conjure 1,387 actual dollars out of thin air. Imagine how much louder I'd be bitching about cash flow if I'd given myself a huge payout last year.  

Anyway, my store was technically profitable last year. That's supposed to be a good thing, right? Capitalism fetishizes profits.** I paid my CPA's fee and still managed to squeak out last month's Mastercard bill. To cover those two huge outlays, I had to postpone last Monday's payday for what I thought would be a day or two; unfortunately, another damnable holiday lull is turning this into the second-worst week of the year. I'm only short by $150, but with sales averaging just $45 per day I might have to forgo this paycheck entirely.

Neither of my bulk golf ball customers came through, obviously.  I never expect those inquiries to pan out, but I always hope that they might.

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I won't go into how we got reamed on our personal tax returns because Kraken's unexpected profit was only a fraction of the problem. I had to mail Uncle Sam nearly $3,000 (that's real money, not company money) on June 15 and he expects $2,100 more by the end of the year; I had only budgeted $1,600 for our property taxes. I should get most of those federal outlays back next year since Anne's not earning 1099 income anymore...but I was already stretching to cover the two vacations and house painting that we're locked into. $5,100 in taxes and $800 in emergency dental work...well, I don't know where that's going to come from. The home equity line, if worse comes to worst.

On the plus side, I'm optimistic that Curio City will lose money this year and deliver the healthy tax deduction that was snatched away last year. I need either that or a significant profit payout, and the latter sure doesn't look likely. 

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* S corporations don't pay income taxes. Instead they pass their results through to their shareholders. A profit creates K-1 income that's taxed at the recipient's normal rate (without any employment taxes). A loss gives the shareholders a nice little deduction. So a profit is only welcome if it comes with more than enough money to pay the tax.    

** Did you know that Amazon has never had an operating profit? True story. You don't need to actually make money while your cash flow grows fast enough to pay everybody -- the same classic pyramid scheme that Barnes & Noble used to destroy the independent bookstore industry. Only when the expansion stops do your stores need to pay their own way. Unlike B&N, Amazon can theoretically keep growing forever.

Friday, June 26, 2015

Sleepwalking




Like last month, June's sales tracked LY favorably until this week. Large 6-LED cap and Bald Eagle kite sales made the last week of June 2014 one of that year's best. This week's below-average sales ranked it among 2015's worst. Paying my CPA for my long-delayed tax returns (more on that next week) was the coup de grace for both the month and the year. Now I'm just going through the motions.

June

Total income: -22.6%
Total COGS: -25.8%
Payroll: -12.1%
Marketing: +9.2%
Net Income (Profit) vs LY: -114.1% (-$438)
Actual Profit/Loss: -$822


Year to Date

Total income: -9.4%
Total COGS: -6.7%
Payroll: -4.8%
Marketing: -1.3%
Net Income (Profit) vs LY: -43.6% (-$522)
Actual Profit/Loss: -$1,718

Old, formerly reliable vendors keep dragging me down. Jackite's going into their second year without Create-a-Bird or Sea Gull kites, depriving me of at least $1,000 in sales; they say that they're waiting for Tyvek -- a material that must be more rare and precious than you'd think. My golf ball vendor's new website put them in direct competition for online retail sales. I'm sure they'll eventually realize that retail is an unprofitable pain in the ass, but in the meantime they've killed one of my old summer standbys. Switchables inexplicably discontinued all of their most popular designs last year and those styles that supposedly survived the cut are never in stock. I'll keep my speculation to myself and just note another $1,000 or so in lost business. Panther Vision caps still sputter to life every now and then, but I don't see them ever regaining their former glory.

At the halfway mark, 2015 needs a white knight. Two more potential bulk golf ball customers, one worth $1,200 and the other about $400, have been playing me. Landing both of those would put me even with last year. Both of them ignored yesterday's warning to order by today to beat my July 10 vacation deadline, indicating that they were probably bluffing.

My "find great new products" goal has gone nowhere because I can't muster any interest in shopping and I don't have any money anyway. It doesn't make any sense to waste time on that until August.

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Last July I skipped my traditional 10-day Berkshires trip because money was tight and Iggy was failing. Money's still tight -- is it ever loose? -- but Iggy's safely dead, so we're taking our week off again next month. It does me good to get out of Braintree once a year, but it also makes hitting July's modest targets pretty unlikely.

Friday, June 12, 2015

Hallmark Holidays



Apparently Fathers Day is still a thing. This supposed holiday ranks right up there with Arbor Day in my mind; my dad and my father-in-law have been dead for ages and I successfully dodged fatherhood myself, so it's not even on my radar. Oddly, fathers are expected to be more directly involved with their children nowadays than they used to be even though single-parent households are at an all-time high. Go figure.

I'd appreciate the sales opportunities that Hallmark holidays were contrived to create if I were a better retailer. But I'm not. Somewhere around Mothers Day my brain reminds me that Fathers Day is in June. Then, satisfied that its job is done, it forgets about it until the "holiday" is suddenly upon us.

Would remembering make a difference? It's not like I always forget; I've sporadically marketed to enough of these things to know that they really don't matter. Holiday keywords are way, way too expensive to advertise special promotions. Facebook marketing is useless; fewer than 10 of my 200+ followers ever see my posts. Newsletters are time-consuming and reach the same small handful of regular customers; sometimes I get a discounted order or two, but more often they flop. My recent Mothers Day coupon code cost me around $50 in foregone shipping fees without bringing in any incremental sales that I know of.  

Valentines Day, Mothers Day, Fathers Day...these are occasions for young people. Most of my customers are around my age (which is to say "old") and, like me, got off the fake holiday train a long time ago.

Having said all that, I do pay $16 every month for Constant Contact's newsletter service, so I really ought to produce one when the calendar gives me an excuse. They probably deliver  just about enough sales to pay the Constant Contact bill. Maybe I'll whomp something up for the Fourth of July -- while it's not a gift-giving occasion, it's at least a holiday that even us curmudgeons recognize. 

Speaking of real holidays: I didn't post last Friday because my wife took me to Vermont for a belated birthday getaway -- a "beercation." I hit five breweries within 48 hours and brought home a small supply of highly-prized Heady Topper, believed by many to be the best beer in the world. The Second Fiddle that I also scored gives Heady a run for the money. The weekend peaked with a visit to one of the world's best brewpubs, the Prohibition Pig. And one cannot visit Burlington without having lunch at Al's French Frys.   

Now that, my friends, is what a real holiday should look like.

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