Farewell to 2008...By the Numbers

I said that I was going to stop posting financials, but I slacked off a lot last week, and I don’t have any remarks prepared for today. Besides, it’s logical to literally sum-up the year. My spreadsheet closes the year on Saturday, December 27, so these numbers (through Christmas) are final enough despite having nearly a week left in the calendar.

Do you see a recession hiding in here?


December 2008 vs. December 2007

• Total income: +75.5%
• Total COGS: +66.9%
• Total payroll: +49.6%
• Total expenses: +22.1%
• Net income (profit): +488.2%


2008 vs. 2007

• Total income: +71.7%
• Total COGS: +68.7%
• Total payroll: +79.7%
• Total expenses: +48.4%
• Net income (profit): +220.7%


In 2007, my gross salary plus profit came to $6,600, and I did not take out any of the $1,200 profit. Curio City paid out $5,400.

In 2008, my gross salary plus profit came to $16,400, and I took out $3,800 of the (estimated) $7,400 profit. $2,200 of my $3,800 goes to taxes. I put $1,000 of the remaining $1,600 into my Roth IRA and gave $600 to my wife. Altogether, Curio City put roughly $12,800 in my pocket, or more than double LY. (I took the payout as a stockholder loan repayment rather than a shareholder distribution, btw. The profit is applied to reducing my life-to-date negative retained earnings. Curio City now owes me $24,700 of the $28,500 that I invested.)

In 2009, I’m planning a 50% sales increase over this year – ridiculously ambitious in light of the collapsing economy, but not in light of 2008’s 70% increase. If I can achieve that, my gross salary should reach $13,700 and my profit should top $11,000; I will pocket $18,000-$20,000 of that. For my first act of the new year, I’ll raise my payroll percentage again to shift a little bit of that anticipated profit into my paychecks. And with a couple clicks on my spreadsheet, I am now paying myself 18% of gross, up from 17.75%.

Sales and traffic were both poor last week, but it’s a throwaway week anyway so I don’t read anything into that.

Happy Numbers

Last week was another doozy, even though traffic gradually drifted back below 300 per day. I raised my spending cap on Google Adwords to an obscene $20 for 100+ clicks per day, and I’m not seeing many conversions. But I’m not going to pare that back until the cash register stops ringing next week.

And ringing it is, as Christmas hangs on. Over the last two weeks I will have personally earned something just over $20 per hour, or nearly $40,000 per year. When you add the substantial end-of-year profit distribution that I’ll be paying myself next week, I would be approaching what I earned in my last real job – if, of course, I could sustain the last two weeks for 12 months. (In fact, if sales kept up at this level all year my profit would make me downright rich.) That’s much more than I ever imagined this whole owning-a-business gig could possibly pay. It’s really encouraging. Makes me wonder what would happen in a growth economy -- or if that would make any difference at all.

Now I’m feeling combat fatigue. I am too old to keep up this physical pace. Next week I look forward to having time to place some reorders, calculate my year-end bonus, tidy up my office, sort out some weird accounting things, deal with vendor errors, tune up my AdWords, work up some proper blog entries, read my trade magazines, and just generally sit on my butt. Meanwhile, I’m happy to keep slogging through frantic orders and watching my bank accounts swell for as long as shoppers are desperate to throw money my way.

I’ll try to write about something more interesting than sales numbers now that the holiday is past and I’m getting some free time back. The year-end report is going to be something to crow about.

Christmas Screwups

Today finally brought a breather. I’d better post while the posting’s good, because I expect a few more rocking days ahead.

After that incredible 2,012-visitor spike that I told you about last week, traffic fell back to 636, then slowly drifted back into the 400-500 range – about what I would ordinarily expect during this week. I really like seeing the number of those visits that convert to sales. It’s grown from the traditional 1-2% to as much as 8%, and my average sale has crept up from $40 to nearly $50.

I’m doing phenomenal business. I surpassed last December’s total sales – which I had thought were pretty impressive – on the 10^th of this month. I recorded 233 sales in those 10 days – nearly 100 of them in just two days -- and worked two 16-hour days to process and ship them all. Those 10 days surpassed my combined sales in June, July, and August – the entire summer. I’ll wait while that sinks in: I did three months’ business in 10 days. Every time I think I can’t possibly get any busier…I get a little busier. I’ve already topped $10,000 for the first time ever and am contemplating a $15,000+ month. Not bad for some old geezer selling stuff out of his cellar. With two healthy paychecks this month and shareholder distribution time looming, I’ll have enough money left after paying the dentist to get my wife a generous Christmas present…and maybe even buy myself something nice. I haven’t treated myself to anything in literally years. Oh, who am I kidding? I’ll put whatever the taxman leaves me toward personal debt.

Worst screwup of the week: I blew through all 144 of my Recycled Motherboard Christmas Trees by Wednesday morning. Not to worry: Last Thursday I placed a 72-piece backup order, followed by 72 more on Friday. My sales rep assured me that I’d have them on Monday. When they still weren’t here on Tuesday, I found out that they hadn’t even shipped yet! If they had arrived as expected, I’d probably have needed another 72 pieces for next week. Instead, I missed two critical peak demand days, and now I’m looking at a mountain of those things as sales slow to a dribble. Although the vendor screwed me over by shipping later than promised, I’m partly to blame for being conservative with my initial order.

Second worst screwup: The USPS rate lookup servers were chronically offline, so my site could only find and display UPS rates. Shoppers had to either buy UPS at triple the USPS cost, or simply leave. Lighted cap sales tanked when that started on Monday, and didn’t start to recover until the post office fixed it on Wednesday. And by “fixed it”, I mean they reduced their server load by disabling Click-n-Ship, the consumer’s online postage interface. I’d have been utterly screwed without Endicia as a fallback. Click-n-Ship didn’t get back to normal until today.

Third worst screwup: Those Christmas trees arrived a day earlier than promised…but instead of getting the 144 that I worried were excessive, they double-shipped 288. Oops. Yes, I can send them back, but in the meantime they are occupying a substantial chunk of my living room floor…and I dread figuring out how QuickBooks is going to want the accounting handled.

After cutting my backorder in half I got the correct eight Equal Measure measuring cups, but the manufacturer charged me for the originally ordered 16. I don’t know how to handle that in QuickBooks, either. My CPA is not going to be pleased with me.

Fourth worst screwup: I’ve had a couple of minor hit products from Can You Imagine over the years, but because they have a way of running out of stock on their popular items, nothing has ever really sold spectacularly. This year I noticed some early movement on the Amazing Coin Factory Bank. Even though exorbitant shipping costs from the Left Coast yield a very marginal gross margin, I decided that keeping it in stock will pump up my dollars. It has obligingly sold a respectable number of units -- better than anything else I've had from this vendor. Early this week, though, I started getting complaints. The defect rate is running a little over 10% (I consider anything over 2% to be unacceptable). I won’t find out how bad it is until disappointed children all over America discover broken toys on Christmas. I am already juggling returns and replacements, much to the consternation of QuickBooks and eventually of my CPA. With a little luck this won’t blow up into the customer-dissatisfaction disaster that I fear.

Least screwup: AFAIK, I have made only two minor packing errors, and I didn't switch any shipping labels during my crunch time. I've been very, very careful...but I've also been very, very tired and very, very stressed.

Into the Stratosphere

Everything comes down to December. The month started well. Sunday hit 13 sales (my record is 19) and traffic surpassed 300 visitors for the first time this year. On “Cyber Monday” traffic rose to 336 even while transactions fell to 6. Tuesday brought no sales at all through noon – maybe because the stock market dropped 600 points on Monday? Then it came back in the afternoon to finish strong.

I spent Wednesday morning in the dentist’s chair, and then struggled to catch up for the rest of the day. Visits surpassed 400. That afternoon a New York Times editor called to tell me that they are featuring one of my products in their holiday gift guide. I only had 21 of my original 24 recycled motherboard Christmas trees in stock. They were gone by 10 am Thursday morning.

There are not enough superlatives to describe Thursday. I had 49 sales (previous record was 19, remember?). Google counted 2,012 visits; I had thought 400 was a lot. The day’s dollars surpassed my monthly totals in February, April, and August – I did a month’s worth of business in one day. This week (with most of two days left) beat April and August combined – two months worth of sales in one week.

Yes, it’s a silly product, but such is the power of the media. I’m taking notification requests for the 288 more that are now on order; some could arrive as soon as today, but more probably on Monday and Tuesday. An astonishing 89 people have joined my notification list, many asking for three or four pieces. I’m running out of merchandise, boxes, packing material…everything. Shoppers are stripping me of even my oldest, most moribund merchandise. I am having trouble keeping up.

Ironically, the New York Times was not among the 50-or-so newspapers that we targeted with our email marketing last month, nor was this product among those that I tried to promote. It really was a random lightning strike.

I aspire to earn the minimum wage someday. Earlier this year I got my average pay consistently up to about two bucks an hour, but that still makes the Massachusetts $8 minimum wage seem like a distant pipe dream. Well, for the two weeks ended 11/22, I earned $9.84 per hour. Thanks to the New York Times, my next paycheck is already at $15 per hour and still growing. $20 per hour isn't out of the question. It’s been many years since I’ve earned that kind of money. I can even pay the dentist!

Earning a living without an employer, working alone and from my home -- in my pajamas! – must describe some kind of new American dream. Especially for an undereducated, unskilled person like myself.

Now my thoughts turn to the annual shareholder distribution. How big will Curio City’s profit be this year? How much of that will exist as cash on hand? How much of it will I pay myself? (Answer to the last question: As much as possible! I must cover the 25% income tax burden at the bare minimum, and I hope that I can buy my wife a lavish Christmas present, too. OTOH, I need to make sure the business has enough cash to cover its tax payments and charge bills, with enough left over to pay my CPA for tax prep, too. I am spending money like a madman this week to service the traffic I'm getting.)

***************

November ended a little weaker than I had hoped and dragged down my annual numbers. December is obviously going to pump them back up again. Here are the numbers for November:

• Total income: +53.9%
• COGS: +74.3%
• Gross profit: +38.8
• Payroll: +60%
• All expenses: +95.3%
• Net income (profit): (-38.9%)

Same numbers for YTD:

• Total income: +69.8%
• COGS: +70.2%
• Gross profit: +69.5%
• Payroll: +88%
• All expenses: +57.5%
• Net income: +97.7%

As you can probably imagine, I need to get back to work pronto.

The Day of the DayClock

Business is still booming. Traffic hit 273 visits on Monday, and my conversion rate has climbed over 2%. Sales this week more than doubled LY and blew my plan away again. I wasn’t expecting this rate of sales until after Thanksgiving. I’m having a little trouble keeping up. I think I’m pretty well positioned for these next four make-or-break weeks, even though the benchmark numbers are intimidating. If I skip a blog entry or two, you’ll know why.

*******************

The mighty DayClock was one of Curio City’s earliest bestsellers. I’ve sold nearly 200 of them – very good for a $40 item. Other products have surpassed it, but the DayClock always remained a steady performer and one of my favorite products.

Then it died out. I eventually discovered that the manufacturer was advertising them at a discount price in wholesale magazines. New competitors sprang up, all of them offering either free shipping or discount pricing. The few clocks that I had left at the original price threatened to last forever. Well, I’m not going to sell them at a short markup. I’ll wait for these flash-in-the-pan competitors to move on to something else, and then go back to my nice plodding pace with these. But meanwhile, I was still paying as much as $1 per day for clicks on DayClock ads. So I shut down my ads until such time as sales come back.

The very next day I sold one. The day after that, I sold two more. Now I’m on the verge of reordering (they have another, lesser pricing special going this month). And I’m leaving my ads turned off for now, since I apparently don't need them!

Anatomy of a Sale

Business is booming as the make-or-break weeks draw closer. Visits peaked at 270 yesterday. This week has already demolished LY and will almost certainly exceed plan – something I thought was impossible.

My Google Adwords spend has topped a dizzying $15 per day. I’m gradually cutting my per-click bids on my highest-volume keywords and suspending ads for some products entirely. For example, over the product’s lifetime I’ve spent $175 to sell just three record purses. The DayClocks manufacturer cut their wholesale price last summer and didn’t tell me about it, so my competitors are now all underpricing me; I have spent $165 to sell only four DayClocks in the past six months. Some products have been priced out of the advertising market entirely. After a small surge in sales motivated me to beef up my pursehooks selection, I discovered that Google now wants a ridiculous 75 cents per click to advertise them (I had been paying 21 cents). Now I can only hope for organic Google search traffic, plus the few comparatively cheap, low-quality visits I get from Yahoo. How in the world can anyone afford to pay 75 cents per click for a $22 item? Maybe bulk sellers are bidding the rate beyond what retailers can pay.

******************

Ever wonder what happens when somebody places a Curio City order? Of course you didn’t. But that’s today’s topic anyway.

1. MS Outlook’s email chime signals an order notification (two emails if the sale was paid for with a credit/debit card or Paypal, one if by Google Checkout.)

2. I crack open the email from my shopping cart to see what I sold. These moments are among my favorites. Will it be a $4 PicoPad, or a $90 globe? (It is usually one or more $20 caps).

3. I log in to the Admin side of my shopping cart, open the transactions page, and print out the packing list. For some reason my Admin session expires after five minutes of inactivity, and I’m powerless to change that, so I have to log into Admin at least a dozen times every day.

4. I update my Inventory.xls spreadsheet. This is a tool that I created to keep track of my merchandise flow at every stage from product research through sales. I’d be lost without this database.

5. I update my Accounting.xls spreadsheet, another invaluable planning and reporting tool that I’ve been using since the day Curio City opened. This is my second-favorite part of getting a new sale. Not only is this spreadsheet rich in statistics, but it also updates my budget numbers for half a dozen variable line items – including my favorite, payroll. I can see my next paycheck grow with each sale that I record. I like that.

6. I record the sale in Quickbooks. I open the email from Authorize.net to see what kind of credit card was used, because Amex is handled differently from Visa/MC. If it was a PayPal sale, I visit my PayPal account to find the transaction fee, and then record the payment in Quickbooks. (This could be automated if I were smarter, or had serious dev support; Sunshop does contain a rudimentary QB export function.)

7. I fold the packing list in half to indicate that the order was processed and is ready for fulfillment, and add it to what I hope is a steadily growing pile next to my computer.

8. If I sold out of something, I log into Admin again and change the product page – either to take it off display, or to add an out-of-stock notification option.

9. At some point before the 2 pm cutoff for the day’s shipments, I take the accumulated orders downstairs, root through my stacks of boxes, and pack and weigh each order. This generally doesn’t take more than 5 minutes per order. I mark the weights and box sizes on the packing slips and take them back upstairs again. (This is a function I’ll eventually need to farm out or delegate to an employee).

10. The most complicated and time-consuming step is actually creating and printing out postage labels for the boxed orders. I use the PayPal shipping interface to print out labels for my PayPal orders. I use UPS’s website to prepare any UPS shipments. I use the USPS Click-n-Ship website for Priority Mail orders. And I use my Endicia program for First Class and Parcel Post orders. Each order takes a few minutes. International sales take as much as 20-30 minutes (you can see why I hate them). As each label comes off the printer, I log into Admin again and change my transactions from “Pending” to “Awaiting Shipment.” Update my accounting spreadsheet with postage expenses. (This is another function that will eventually be outsourced, automated, or delegated; for now, I do it all manually).

11. Take the labels and packing lists back down the cellar, match them with the boxes, seal them up and apply the labels. This is my most error-prone step. Three times I’ve had to straighten out mis-shipments. Once, I never got my mis-shipped merchandise back, and had to write off $65 worth of merchandise.

12. Haul the boxes upstairs. Check my email once more for any last-minute orders. If any orders came in, I decide whether to include them in today’s shipments or start making tomorrow’s pile. I determine this by the lateness of the hour, the complexity of the order, and my own whim.

13. Drive the boxes to the post office (and the UPS Store when necessary).

14. Come home, log back in to Admin, and mark the orders Shipped.

15. Ta-daaa!

Here We Go Again

This is it. My third Christmas. Curio City should collect literally half of its annual income in the next seven weeks. Half of November’s business will come during Thanksgiving week alone. LY’s sales numbers are formidable and plan looks insurmountable. Every day during this period needs to pull the weight of five non-Christmas days.

It’s too late now to affect the results very much. All I can do is strap myself in and manage the wild (I hope) ride. I pulled out all the stops this week, taking my open-to-buy back into deep red ink, raising the spending limits on my ad campaigns, and increasing many keyword bids. Traffic obligingly rose from a post-move nadir of 121 visits to peak at 213 on Tuesday.

Wheeeee! How’s it going so far? It depends on what you expect.

If maintaining my YTD growth rate and reaching plan is the goal…not so well. I’d need to do an impressive amount of business to do that. The economic news keeps getting grimmer by the day. Expecting dramatic year-over-year increases is not at all realistic right now.

If matching LY’s results is a reasonable goal, then things are going better. I might squeak that out this week. Then the targets for the next two weeks get a little bit easier.

My wife still intends to send out the product-announcement email that I created for newspaper gift guides. If she does that, there’s a slim chance that one of the 50-or-so recipients will give me a little ink. Even one small media mention would be a huge deal…assuming that I can get stock. Two of my new vendors are having trouble filling orders.

Reasons to hate Yahoo: A Yahoo muckety-muck sent out an email reassuring advertisers about Yahoo’s strengths in light of their collapsed agreement with Google. She does not explain, for us in the peanut gallery, exactly what that agreement was – a merger, I suppose. But messages of reassurance from on high almost invariably mean that a company’s circling the drain. Lo and behold, the minimum bids on another 25-30 keywords rose last week to ridiculous heights. I deleted most of them. It looks like they’re milking the biggest players for all they’re worth, and everyone else can go hang -- who the hell can make any money while paying 75 or 90 cents a click? I still regard 30 cents as an absolute ceiling, and anything over 25 cents is a hard sell. And yet, rather than fold my Yahoo tent once and for all, I instead increased my daily spending limit (see “pulled out all the stops” above) and nudged up a few bids. If I’m going to hit my numbers, I need every click I can get. Even the expensive ones.

October Surprise

October is just a few hours from over. One of the worst months in the history of the world economy turned out to be among Curio City’s best non-Christmas months ever. I can’t explain why. Maybe my business is just too small to be affected by macroeconomic trends. Incremental improvements in my own operations and market position dwarf the overall decline in consumer spending. Or maybe Christmas just started early this year. Ordinarily the holiday uptick starts around Halloween. This year, it started after Columbus Day.

Here are the juicy numbers for calendar October:

• Total income: +64%
• COGS: +49.6%
• Gross profit: +76.6
• Payroll: +292.5% (yay me!)
• All expenses: +79.6%
• Net income (profit): +20.2%

Same numbers for YTD:

• Total income: +75.2%
• COGS: +74.1%
• Gross profit: +80.3%
• Payroll: +95.3%
• All expenses: +50.8%
• Net income: +1,190%

To celebrate, I gave myself another raise, from 17.5% to 17.75% of gross sales (works out to around $150 per year). That’s my second raise this year, up from 17%. I’ll eventually need to get my payroll percentage north of 20% if I’m ever going to hire employees.

Now I’ve got to keep bucking those macro trends.

Eric upgraded Sunshop to version 4.1.7 last week. It went smoothly. While I was bumbling and fumbling my way through various account management screens, I discovered that MochaHost has only assigned me 25 simultaneous database connections. It’s no wonder I keep getting the max_connections shutdown! I wonder now if there was ever a bug at all, or if they are just being niggardly with server capacity. When I complained about various speed issues, Mocha moved my site to a new server. I just re-pointed my domain name servers this morning. Right now I can’t access my store from my other computer, whose DNS cache I did not flush. I suppose that’s for the best; I don’t really want orders coming in on the old server, since it’s not easy to flip back and forth between databases. It supposedly takes up to 72 hours for the Internet to cope with a DNS change. I’ll leave my other computer unflushed so that I can periodically check for access. Meanwhile, I’m suspending my ads for the second time this week.

The version upgrade and the server move certainly explain why this week’s sales performance fell back into the “merely OK” category. At the moment I am exactly $1.28 ahead of LY and plan looks elusive, especially with advertising suspended and the DNS change still propagating. I’m sure that my site’s improved performance will pay off over the long haul. The site is much, MUCH faster on the machine whose cache I flushed (maybe because it’s not getting any traffic yet!).

Upcoming topics:

• SCORE!

Wacky Ideas

First, the weekly sales report.

While Wall Street continued to crash and burn and all the economic indicators took a dive…while NPR aired a show about what to do with all the vacant stores after the upcoming “retail Katrina”…Curio City blithely turned in another nice week. With a day and a half left to go, I’m only $40 short of LY and within striking distance of plan. Having already demolished LY and achieved plan, October is certain to be one of my best months yet. Enough cash is flowing again to bring in another new product or two before I have to switch to reorder-only mode. I intend to order something cool from a new vendor next Monday -- without relying on credit.

When you put these last two strong weeks together, my paycheck is the fattest I’ve seen from routine business since mid June. It’s still not a lot of money (as I always hasten to add). It works out shy of $4 per hour, which is just half of minimum wage. But still…that’s about twice what I was making at this time LY. If Curio City can keep on defying gravity, I could be earning minimum wage by this time next year. That would be quite a milestone. (And as I also hasten to add, this doesn’t include the year-end profit that I’m going to pull out of Curio City this year to pay my personal taxes).

My pay-per-click advertising charges are growing, too, so these sales are not coming without a cost. Yahoo has nearly doubled, thanks largely to some new-product keywords that I added. You have to spend money to make money, but Yahoo’s own tracking says that the $150 I spent there last month delivered only nine sales. That’s more than $15 per conversion! If their report tells the whole story – if there aren’t indirect or uncounted conversions – then Yahoo Search Marketing is clearly a losing proposition.

Which leads me to my first wacky idea: Discontinue YSM. Although killing it would definitely reduce traffic and sales, my metrics say that YSM is not cost-effective. My average sale is $44.21. Those nine Yahoo sales should therefore have grossed roughly $400 (I’d need a developer to customize their tracking code to capture the actual dollars). My advertising budget is 10% of gross. Therefore, $400 worth of Yahoo revenue would justify $40 in ad spending. I actually spent 37.5% of my YSM gross on ads. Losing nine sales and $400 per month would be regrettable. Saving $150 would not.

Next week I shall follow through with testing FaceBook’s PPC advertising. Perhaps that will replace Yahoo. I don’t have any tracking code or analytics for Facebook, but as I currently get zero traffic from them, I ought to be able to deduce the results well enough for comparison.

OK, maybe that idea’s slightly heretical, but something grounded so firmly in numbers is hardly wacky. Let’s go a little farther out.

I get periodic requests for imprinting or embroidering merchandise. Such inquiries are often for large quantities to be given to employees or customers. How hard can it be?

The most frequent request is for embroidered caps. An embroidery machine can cost anywhere from about $1,000 up to $16,000, with the median being around $7,000. There are supplies to buy, and a learning curve to overcome. I’d certainly ruin some of my merchandise until I became expert with the machine. It would take up considerable space that I don’t have. The customer making the inquiry invariably expects a hefty quantity discount as well as customization, so the markup is comparatively low. But sheer volume makes it tempting – these people typically want at least 100 pieces, and sometimes as many as 1,000 (or so they say; the likelihood of actually closing the sale decreases in proportion to the quantity that the person supposedly wants). It could potentially bring a lot of dollars over the transom, even if the markup is poor. But I would need to sell one shitload of caps to recoup a $7,000+ investment.

Assuming that I could get around the space problem, is that a good way to spend my time? How many hours would it take me to set up the machine for a job, feed it 100 or more caps, and then package them all for shipping? What happens to this embroidery machine and supplies after the cap business peters out? Do I become a novelty T-shirt store to justify my investment? No thank you.

Imprinting might be more realistic. A decent hot-stamping machine can be had for $3,000 or so. The space requirement and materials look a little bit less intense than embroidery, although they’re still substantial. The main drawback here is that the things people want imprinted come prepackaged. I’d have to remove them from their factory packaging, imprint them, and then shrinkwrap or otherwise repackage them. Again, this could get really time-consuming, and the markup isn’t there unless I’m buying enough pieces to import them directly.

The bastard child of imprinting is stickering. Customers like stickers least of all, and the investment is correspondingly lower. If I were going to test the customization waters, I might start with stickers. You might be able to do that with the same machine that does imprinting.

After mulling it over for ages, I decided to sell suction cups with my most recent Switchables reorder. They cost $0.15 each. I hope to get $0.50 each as a product add-on. The potential income from these things is less than staggering, and keeping them stocked might become a hassle if they sell better than I expect. But that hefty markup makes them worthwhile over the long haul. While I was going through my Switchables pages I discovered a couple of products that I’d taken off-sale some time ago, so fixing those was worth the time.

Selling batteries is another idea that keeps popping up. Many of my products require batteries. I could make a hefty markup selling them at the prevailing retail store price. Some customers might regard it as a convenience. Their limited shelf life is what always stops me. Batteries start to fade after a year or so, and I’d need to buy large quantities to get that attractive markup. I sell products that take C, AA, and AAA batteries, not to mention various coin cells, so it’s not like I can just stock generic “batteries.” And they’re heavy. They would inflate my shipping rates by more than I care to do. Still…it’s tempting. It could be easy money.

Importing stuff directly from China tempts me every now and then. The minimum order quantities are huge, and so is the risk if I make a bad bet. But the merchandise is extremely cheap (shipping usually accounts for half its value), so the potential reward is correspondingly huge. Becoming an importer has lost some of its appeal since the financial meltdown – my operating budget won’t generate that much open-to-buy, so I’d certainly need to use credit for that. End of discussion (for now).

Last, and probably least wacky of all, is looking into Google audio ads and display ads. Once again, the costs are considerable and I have no experience with them. But PPC advertising keeps getting more expensive, too, and it’s taken me about as far as it’s going to take me. I need to break out of that somehow.

Forthcoming:

• SCORE!

The Not-So-Great Depression

I’m going to keep reporting sales trends for as long as economic ruin remains the foremost topic on everyone’s mind. Hopefully that won't be for very much longer. I would be remiss to gloss over Curio City’s experience in the worst economy of my lifetime.

Except for a few hairy days, sales are surprisingly strong. The first half of October blew away LY and came in comfortably ahead of plan. That’s phenomenal in these circumstances. Maybe the financial pain has not yet seeped from the rich investors and over-indebted young people who are the worst afflicted. My customers tend to be a little bit older and more settled than the general population.

Although October's on track to be a very good month, sales targets for the next two weeks are steeper. Can I keep the streak alive?

That’s up to the American consumer. Curio City has no debt, but after paying Q3 payroll and sales taxes it hasn’t got much cash, either. Fortunately, most of my costs scale with sales. I have very few fixed, uncontrollable expenses and I keep an iron grip on my financials. My conservative, no-debt, bootstrap business model looks very prudent in light of current events. Of course, the business still doesn’t pay me a living wage, and it still needs to grow rapidly if it’s going to become a viable means of support. My paycheck only amounts to 25% of the $8 Massachusetts minimum wage. I could quadruple my paycheck if I got a job bagging groceries. (That doesn't include the year-end profit that I can pocket).

So Curio City’s viability depends on reaching some very ambitious growth targets: 75% in 2009, 50% in 2010, 35% in 2011, and 20% in 2012. Can I really strive for phenomenal growth during an all-out economic crash? Or should I wave the white flag now and look for a job after the holidays? Eight bucks an hour sounds to me like a lot of money.

What can I do to buck the tide?

Priority 1 is obvious: fix the max_connections bug. This is my single biggest frustration, and it’s entirely beyond my control. Why should I hustle to drive more traffic when that traffic brings my website to its knees? I found a third-party mod that is supposed to speed up Sunshop by reducing the number of MySQL connections. The latest Sunshop patch plugs a major security hole that’s making me very nervous. Eric says that he’ll upgrade me to the latest version and apply that mod sometime next week – if nothing else comes up. Of course, I’m not even sure that’s the solution, but it’s all I’ve got. I believe that sales from August to date would be at least 10% higher, and possibly more, if my site was reliable. Long term, I might move to a new web host and start with a fresh install. But I’m going to need a new developer first, and I can’t step up that search until Eric’s role is completed.

New merchandise always promises to drive growth. Among the things I’ve already bought, I’m most optimistic about the Fuzz scarf. I’ve got at least a dozen more products wishlisted (as always). But the cash isn't there. A big Switchables reorder took a whack out of my OTB this month. The minimum order quantity (MOQ) on my bestselling Mini Briefcase Business Card Holder quadrupled to 200 pieces; reordering those now would set me back an entire month’s merchandise budget. A company rep offered to reduce the MOQ to 100 pieces – still double what I want, but I can just barely swing it, so now I'm just waiting for a free shipping offer next Thursday (they wanted to charge me $75 to ship a box that shouldn’t cost them more than $25, tops). My supply of some Panther Vision cap styles is getting ominously low, and those reorders are budget busters if I want the best pricing. Anyway, with my cash either depleted or tied up, my Christmas lineup is mostly frozen unless I either start buying on credit (which recent economic events suggest is perilous) or use some of the startup cash that I’ve been hoarding all this time. I could float the company a $1,000 cash loan to be repaid out of December sales (assuming, of course, that the economic collapse doesn’t kill Christmas). But since my next startup CD doesn’t mature until early December, I’d need to use the credit card float anyway, using my savings as a backup to guarantee the December repayment. Whether Curio City borrows money from Mastercard or from me, it would mean carrying some debt for the next six or eight weeks. That makes me nervous.

I put out a newsletter advertising my new stuff last Wednesday, with no apparent results. Ten of the 220 emails that went out either bounced or unsubscribed. 78 people are known to have opened their newsletter so far (the tracking is imperfect). They’ve made only 18 clicks and no purchases. It’s certainly important to let my regular customers know what’s new, but the immediate payoff is always pretty small.

I still need to contact a SCORE (Senior Corps of Retired Executives) representative for meta-advice about my business strategy – my SCORE post was originally going to be this week’s topic, and might be next week's. My wife is nagging me about it. But this seems like a terrible time to look for big-picture advice. Even if I can find an internet-savvy retired retailer, what practical advice can anyone offer in this economy?

Speaking of my wife...she wants to sent out a media mailing in the hope of garnering some free press mentions. Every year we try this, and every year it fails. But the cost of trying is very low. If she's willing to put her time into doing the mailing, I'll put some time next week into creating the email.

I spent a little time following up my earlier musings about Facebook. Created a business page and a personal account, although I still don’t know what I’m supposed to do with them, and they have apparently garnered exactly zero interest. If any Curious Business readers happen to click that link, please leave me a comment or write on my wall or whatever they call it. I also stumbled across the interface for creating pay-per-click ads on Facebook. Hooray! PPC ads are something I know how to do. I might test a couple of ads there next week. Maybe I can eventually replace my perennially worthless Yahoo campaigns. New product ads have sent Yahoo’s cost northward of $5 per day, and it rarely delivers any sales.

An SEO newsletter persuaded me to join Twitter. It feels a lot like instant messaging with a bunch of strangers. I don’t think I can fake enough sociability to squeeze any value from this, but I’ll keep reading it for a few weeks anyway. Maybe an opportunity to pimp my merchandise will come up.

Once my website code is stable, I can implement many (free) third-party mods to Sunshop. Most are very minor, but taken together they’d add up to some nice improvements. Of course, I don’t want to do that until I have backup dev support.

There’s always the hoary old idea of hiring an SEO expert. That takes time to show results; it’s very expensive; and I’m not convinced that my pages need substantial optimizing (I’ve been writing my web copy with SEO in mind for a long time, and quite a few of my pages are rising on their own). It’s not a magic bullet by a long shot. But it's still one option for investing my remaining money. Maybe that SCORE idea isn’t so bad after all. I could use an expert second opinion.

Finally, I'm going to have to revisit those aggressive growth projections. Can I simply reverse the required percentages so that the big increases come during the anticipated recovery, instead of the depths of the crash? Or does that leave me too poor for too long? I’m going to have to get out the calculator again.

Coming Topics:

• Score!
• Wacky Ideas

Legal Extortion

As long as the world economy continues its accelerating collapse, the routine weekly sales updates that I had discontinued for being boring and insignificant (to everyone but myself) gain new interest. And so I hereby reinstate them.

Curio City is starting to feel the pinch. On Tuesday, when the Dow first closed below 10,000, traffic dropped by 50 visitors per day and sales dried up completely. Wednesday delivered a better-than-average six sales. They were all quite small, but the customers were there, and they were buying. Thursday was weak. Now, on Friday morning, equaling LY looks touch-and-go; the market appears to be cratering again today. Plan looks impossible.

Like everyone else, I’m at the mercy of events that are beyond my ability to even understand, much less affect. Pray, if you are the praying type, that all of this horrid background noise dies down soon. My sales targets rise for each of the next two weeks. President Bush is going on TV tonight to reassure the nation. Seeing President Bush always has the opposite effect on me.

********************

This post has been on the hook for ages because I’m a little bit afraid to publish it. Even the most innocuous things come back to haunt you when the law gets involved. But I’ve always been the fool who rushes in, so here goes….

Last December, I got a FedEx letter from some lawyer in New Mexico. Unexpected letters from strange lawyers are never a good thing. Somebody is suing the manufacturer of the Levitron AG levitating globe for patent infringement. They threatened to drag me into it unless I (1) stop advertising and selling the globe; (2) return my unsold globes to Fascinations; and (3) send them the money that I made selling these globes. They timed the letter to arrive during the one week of the year that Fascinations is closed, and gave me only 10 days to comply.

Yeah, right.

Fascinations offered to indemnify me against any future legal proceedings, and the amount of money involved is laughably small (I have sold exactly three of those globes), so I didn’t even answer the blackmailer. Background materials that Fascinations sent me made it clear that this extortion attempt is just harassment. Informal advice from two lawyerly friends confirmed that maintaining silence is the prudent response. So I’m ignoring it. I haven’t heard anything in the ensuing 10 months, but of course the law moves at a glacial pace. It could still come back to annoy me someday.

A friend who watches daytime TV told me that our local TV Channel 4 stole my name. They have a news segment that features some oddball story about Boston. They call their feature “Curio City”. The words “I am curious about…” animate, “curious” morphs into “curio”, and the word “city” rises from a silhouette of the Boston skyline – or so she described it. I haven’t actually seen it myself.

If one bad extortion attempt deserves another, I’ll bet I could make them stop using it, or maybe even pay me for the privilege. I own the service mark “Curio City”. I have three friends who are intellectual property lawyers. But since the TV folks aren’t selling anything, I can’t imagine how showing the words “Curio City” on TV every day can possibly be a bad thing for Curio City Online. I don’t think it harms my brand. Maybe it will even send me a misguided visitor or two. So I choose to ignore it unless somebody tells me otherwise.

A few months ago a telephone caller told me that a consignment shop in Lacey, Washington is also using my name. She says that their store’s door refers customers to the website “shopcuriocity.com”, which I happen to own. When that URL redirected her to my store, she called to find out if I was affiliated with the store in Lacey. Because they are a retailer, and because they presumably own a URL that’s close to one of mine, this could potentially be more serious. Yet, none of the variations on my URL that I tested led to a store in Lacey, or anywhere else. If there’s a conflict, I’m not seeing it.

While I was searching on that, I discovered that “curio city” returns my store in Google’s #1 natural search position. Hooray! That’s real progress – so much, in fact, that I finally dropped my name from my paid keywords. I’m also #1 on Yahoo. My only brand competitors are a Curio City antique store in Beijing and a shop in Birmingham, England, whose nature I can’t quite determine. It looks like I really do own the name, as far as the search engines go, so I feel no compulsion to sue anybody.

Now if I could only remember what Dale told me about having to renew my service mark after umpty-ump years.

Forthcoming Topics:

• SCORE!
• Wacky ideas

The Zombie Store

Before I raise this topic from the dead again, I ought to mention the economic news that still overshadows everything. Congress has larded up last week’s failed bailout bill with $100 billion worth of “sweeteners” – or bribes, more accurately – that might grease its passage through the House today. Conventional wisdom now says that if the bill passes, we are merely facing a deep recession. If it doesn’t, we’re facing complete economic meltdown.

That would suck. I wonder if it's true.

Last week's sales started out strong, and then weakened with each passing day. The first fiscal week of October still blew away both LY and plan, simply because LY was so weak. Still, I'm content with average sales, under the circumstances.

And that’s a good enough segue into today’s subject: The Zombie Store.

Eventually Curio City has to grow up and get its own place. Yet, only two months each year bring in enough money to cover a rent payment. It’s going to be a very long time before revenues rise sufficiently to cover commercial rent the other 10 months. By that time, my November and December business will have outgrown my ability to handle it.

This conundrum always points toward opening a store. Its purpose would be shipping/receiving for my Internet business, while producing just enough additional sales to cover its own expenses: Rent, utilities, and 1-2 employees. Even though I slew the store once after considerable anguish, the concept is going to keep coming back from the dead until the underlying problem is solved.

(Incidentally, the financial meltdown makes me really, really glad that I decided against borrowing big bucks to open a store this year. I would surely be facing final failure right now).

While I was killing the store, I mentioned once that maybe Curio City should always be a home-based business. This heresy was discussed very briefly during Wife Summit II, and then dropped. Today I’m going to resurrect and explore it.

The zombie store keeps arising because my commercial space has to bring in enough money to cover its existence; web sales can’t subsidize such an albatross. But I can justify feeding a money pit if it fills more than one purpose – such as housing.

Why, exactly, does CC need to move in the first place?

1. Our house is too small. We run two businesses out of a 1,100 square foot “starter house” that we bought 20 years ago. My wife is a pack rat, and my merchandise needs storage space. The house is simply stuffed to overflowing.

2. It’s configured all wrong. My office is a closet on the second floor. My warehouse is a dark cave in the cellar. My loading dock is an ordinary door on the first floor, with steps down to ground level. When sales are good, I spend a lot of energy running up and down stairs. It couldn’t be less efficient.

3. It’s inseparable from our living space, so I can never bring in an employee. That means I can never get sick or take a long vacation. I have to work ~350 days a year.

My wife (Anne) and I would both like to trade up to a larger house for personal reasons. The ideal time to do that would be at the bottom of the depressed market – probably 12-24 months from now, say the prognosticators. That’s also about when I expect Curio City to need more space.

To serve as Kraken Enterprises world headquarters, the new house would need these characteristics:

• Two offices (repurposed bedrooms), ideally on the first floor;
• Two actual bedrooms and bathrooms (one for us, one for guests);
• Warehouse space on the first floor (a heated garage or utility room, or another bedroom);
• Easy drive-up access to the warehouse;
• Secure entrance/exit, separate from the rest of the house, so that an employee could come and go in my absence;
• A “public” bathroom for my employee and Anne’s students;
• Another area where Anne can teach her classes; and
• Proximity to commercial shipping outlets (post office and UPS store).

That’s a tough list. I count four to six bedrooms and three bathrooms (the public one, a private one, and a guest bath). That is a ton of house to expect for $500,000, particularly if we want to stay in a desirable neighborhood and not move out to some damned suburb. But we might just be able to swing it if we can buy at the market bottom. I can’t justify buying a new house purely on its merits as living space. But if it doubles as the zombie store (and if Anne is running her classes out of it, too)…well, suddenly it makes sense. Some of the money that Curio City would have spent on rent would instead offset our utilities and expenses, just as Curio City already reimburses us for telephone service and gasoline.

Unfortunately, we have a $0 down payment, almost no savings, and $40,000 worth of personal debt. Could we churn the equity in this house into a new house? In the pre-crash credit market, no problem. Now it’s going to depend on how the mortgage industry gets restructured. Our house is worth roughly $200,000 more than we owe on it. Subtract the equity loan, subtract some repairs and spruce-up, subtract the costs of selling and moving, and we would still come out $100,000 in the black. That’s a 20% down payment on a $500,000 house. The logistics of financing and moving are scary, but shouldn’t be unsolvable.

One large problem remains: It’s a residential address. None of the carriers will provide business services to a residential address, nor would I ever get volume shipping rate discounts. I’d still need a commercial place to accept deliveries, and I’d still need to drive my shipments to the post office/UPS outlet every day in my little Miata. I’m going to outgrow the UPS Store within the next year or two.

Maybe renting a storage facility could fill this gap. Anne says that you can arrange for one to accept deliveries. But now I’m back to paying rent again, and that inevitably snowballs into opening a store that will pay its own way, and that in turn negates the whole home-business argument. Outsourcing order fulfillment is another (expensive) non-store option that negates the arguments for being home-based.

So I just solved nothing by spilling all of those words. Well, I’d like to keep this idea warm. If we discover that we just can’t do it, I’ll resurrect the zombie store yet again.

Forthcoming Topics:

• SCORE!
• Legal extortion
• Wacky ideas