Looking Back at 2007

Looking Back at 2007

Despite failing to achieve the primary objective that I laid out for this year (doubling my sales), 2007 ended up being more successful overall than I had hoped.

Sales

The Good: Net sales this year were up $5,000 over LY, or >17.5%. Most companies would kill for 17.5% annual growth.

I had planned to inject $5,000 in startup cash for web upgrades this year. The company paid me about the same amount in salary, so Curio City would have been a revenue-neutral, breakeven enterprise in 2007. Circumstances limited my tech spending to just $2,117, and I got fewer than half of the enhancements that I wanted. Unexpectedly, Curio City paid for these upgrades out of operating cash -- and still showed a small operating profit! Not only did the company pay its own way LY…it managed to finance some self-improvement, and it did so while putting money in my pocket.

In other words, I now have a profitable business. Let me emphasize that: After just two years, I have a profitable business. That’s a significant achievement. Huge, really. It overshadows all else.

The Bad: I had originally planned for sales to double this year. When it rapidly became obvious that that wouldn’t happen, I cut the plan to 75% sales growth. The 17.5% that I achieved is not even close to 75%. The 25% increase that I’m planning for 2008 might also be too ambitious. As a business matures, its growth rate slows. And as I enter my third year, the word “startup” becomes a stretch.

Sales still only amount to about 10% of what I need to generate a living wage, yet I could just barely keep up with the pace during the busiest weeks. There is simply no way that I could possibly handle 10 times as much business during November and December by myself (although I could handle a significantly heavier workload during my 10 off-months). Yet, if I’m earning only a fraction of a living wage myself, how could I pay an employee anything at all, much less Massachusetts’s extravagant $8 minimum wage? I dream of someday making $8 per hour! Even if I could forgo my own token salary temporarily to pay some help, what would I do? Invite some kid to hang out in my cellar a few hours a week? My biggest near-term challenge: How do I increase revenues by an order of magnitude without increasing my workload or expenses more than marginally? If that isn’t possible, what are my alternatives?

The developer who has been with me from the start (Eric) is only sporadically available to address my current punch list, and would rather not take on any future tasks. If I hope to upgrade my site at all this year, I need to find a new developer. I’ve failed at that several times already, and I don’t have any current leads. Unless I get an unexpected break, I have to either pay dramatically more money for fulltime developer support, or content myself with whatever minor adjustments I can make myself. Making this decision is another huge challenge for 2008, and depends on the direction that I decide to take. That will be the subject of next week’s post.

As the economy continues to erode, consumers will cut back on such luxuries as the gifts and novelties that I sell. I’m still so small that my growth potential overshadows anticipated cutbacks in consumer spending. But a rip-roaring recession, like the one gathering steam now, will still present a serious challenge.

Footnote: For reasons too wonkish to concern anyone but me, I’m changing the way I calculate gross sales this year, so there’s going to be a slight disconnect when comparing sales year-to-year.

Payroll

The good: My salary equaled LY’s pay despite devoting a lower percentage of gross sales to payroll. Lowering the payroll percentage created a profit. Profits can be retained, or distributed to shareholders (that’s me) as Schedule K income, which is taxed at a lower rate than wages. I also have the option of repaying shareholder loans, which aren’t taxed at all since I never deducted them from my personal income. Curio City owes me $28,840.45 in loans. After some hand-wringing, I repaid myself $340.45. Since my still-sketchy plans for 2008 all include infusing some or all of my remaining startup cash as additional loans, this little repayment is merely symbolic. But it’s a good and encouraging gesture.

Because I did turn a profit last year, I’m increasing my payroll percentage somewhat this year. If I hit my sales plan, my salary will grow by double digits – without eliminating the hope of making another loan repayment at the end of ’08. I still don’t make enough money to contribute to our household expenses…but I hope that I’ll at least have enough walking-around money to pick up more incidentals than I have for the past couple of years.

The bad: My gross salary is still barely 10% of my minimum acceptable wage. As encouraging as the percentages are, there are laughably few actual dollars involved. This was my third consecutive year earning only a token salary, and now I’m facing a fourth. Even if I can increase my salary by an impressive 25% next year, we’re only talking about a $1,000 raise. Ordinary people spend that much on their morning coffee.

Footnote: Because not all of my costs scale up with income, I can probably raise my payroll percentage as sales increase. That means I might not have to increase sales 10x in order to increase my salary 10x. OTOH, I still need to introduce some major budget items (like insurance) that will probably derail this approach.

Products

The Good: Panther Vision caps saved my bacon in 2007. I grossed about $6,000 selling over 300 of them – 20% of Curio City’s gross income came from those caps!

Overall, a few high-margin items helped me keep my overall markup just barely over the critical 50% “keystone”. When I have to sell products at less than double their cost, I start missing my budget numbers. Sales don’t generate enough profit to replace the sold merchandise, and a death spiral begins.

The Bad: I overspent on Christmas merchandise by nearly $1,500. I’m almost out of some bestselling items (caps!), my OTB is in the red, and I’d love to spend an additional $2,000 right away. Even if I make my sales plan, it will take all of January and February to struggle back up to zero – and that assumes that I don’t buy anything else. Since that’s obviously not practical, I arbitrarily reset my OTB to zero effective Jan. 1. That’s going to mean taking money from someplace else, like advertising. (On the bright side, the first week of January blew away my sales plan and recouped much more of this shortfall than I had hoped).

Panther Vision is not an easy vendor, either. Their lineup changes frequently and without notice. There are supply interruptions. They do not communicate sales or special deals.

Finding Panther Vision was a stroke of luck. I seriously doubt that the caps will still be hot next Christmas. The American marketplace thrives on novelty, and finding the Next Big Thing is going to be a permanent challenge. But I don’t have a fulltime buyer. I can only devote a fraction of my attention to seeking new merchandise...and that fraction shrinks as growing the business increases other demands on my time.

Winners: The caps and the clip-on cap lights were such runaway hits last year that I’m not even going to link them here again. Other things that did better than expected: Temperature-Controlled Faucet Lights, Lovell Studios jewelry (I was ready to give up on it after I had not sold a single piece in months), and even Periodic Table Shower Curtains and the Infinity Optics Watch (which I had thought was completely dead).

Standards: Vinylux products, DayClocks (nothing like last year, but still a decent item), golf balls, Switchables, and levitating globes all did about as well as expected. Finding half a dozen more standbys like these would be a big leap forward.

Disappointments: The two biggest culprits for my OTB budget hole: Pursehooks did OK, but didn’t come anywhere near their early promise. I overspent heavily on Big Schnozz tissue covers, and especially the new styles, to take advantage of a free shipping offer that was not supposed to be extended to US customers; freight from Vancouver is very expensive. The manufacturer raised their price, so I raised mine, too. I’m guessing that other stores – especially Canadian retailers -- undersold me. Those two lines were my biggest miscalculations.

Cigarette case PPC keywords are very cheap, so that page brings in lots of traffic for very little cost (about 5 cents a click). Since the margins are good, it ought to be an easy profit center. Yet, they stopped selling entirely. I find something clever and new, I’m getting out of the smoking accessories biz. Sorry, smokers.

Record purses are proving too difficult to sell, as the turnaround time on special orders is too long and I can’t publish the list of all available titles without giving away the source; I fear that these might end up on the “great ideas that don’t work out” pile, along with Sea Stone bottle stoppers and Memo Clocks. I’m not giving up on them yet – Valentines Day and Mothers Day could bring a surge -- but I’m glad I don’t have a lot of inventory dollars tied up in them. Given the steady-but-unspectacular success of levitating globes, I’m a little surprised that I didn’t sell a single Zero-G Sports item. Maybe other stores undercut my price. I got them at a remainder price and kept the retail above keystone. I don’t care; eventually the supply will become scarce, and my price will look attractive. I am not in any hurry to sell those.

Footnote: Giftwrapping was the big loser this year. I only collected $14.50 in giftwrap fees this December, against $51.75 LY. I’m pretty sure this is an early indicator of the impending recession.

Marketing

The Good: I achieved everything above despite having no marketing or advertising going for me in 2007 except pay-per-click advertising. All of my other efforts at marketing failed, so I have nowhere to go but up in 2008.

The Bad: All of my efforts at marketing failed, and I have no reason to think that 2008 will be any better.