Boiling It Down

Today I’ll boil down the salient points of my past few posts into an easily digested bullet list. Maybe the process will help me decide.

But first, a status update: January’s stellar business destroyed every non-holiday month that has come before. That’s due almost entirely to lighted caps. If Panther Vision had been able to resupply me with my best-selling and most expensive 4-LED camouflage cap, January would have actually rivaled November’s sales! Astonishing. I’m beginning the year with black ink and looking at the prospect of a significant profit. There is no way I can spin that into bad news. :)

A single $900 sale made February the strongest non-Christmas month of 2007, so the drama is unlikely to go on. I will be content to equal LY’s sales and preserve January’s margin of surplus.

My chronically depleted open-to-buy is not keeping up with my needs. Including several large backorders, I’m over $2,400 in the red again – and that’s after arbitrarily wiping out 2007’s deficit at the beginning of this year. My new-product wishlist keeps getting longer as I struggle to keep replacing the merchandise that I’m selling. I’m not sure what to do about this; my simple and straightforward OTB calculation is not amenable to change. For now, I’m just running up red ink, knowing that the bills for some existing orders won’t hit until March. As I like to say, “I cannot sell what I do not have”. But I have to be very careful. This sales surge could end at any moment. There’s supposed to be a recession on, remember?

Now on to the digest:

Curio Metropolis Online

Pros:

• Low overhead relative to owning a store.
• Likelihood of rapid growth when a small number of known problems (SEO, developer support, marketing & advertising) are overcome
• Feasible with my remaining startup cash – debt is probably unnecessary
• Although the workload would grow heavy, I’d retain control over my schedule

Cons:

• I can’t handle a tenfold increase in the workload by myself, especially during the two holiday months
• I can’t hire help while Curio City remains in my home
• My home is inadequate for greatly increased shipping/receiving and storage
• I can’t afford to rent space without much higher sales; 10 months out of the year, sales don’t justify renting space.
• Relies heavily on outside expertise: Web development and marketing.
• Steep learning curve and ongoing investment costs to keep pace with ever-evolving “web 2.0” technologies

SUMMARY: I am most concerned about being at the mercy of outside experts, whom I’ve had no luck finding up to now and who tend to be unreliable and/or unaccountable anyway. I can’t physically handle a large, rapid increase in business by myself. It’s very difficult to justify the expense of renting commercial space when it’s only crucial for a few weeks out of the year. Finding appropriate space near my home is likely to be very difficult. Commercial space that contributes no additional business (as would a store) – space that’s purely a major new cost – is a tremendous hurdle to overcome. There must be some creative way around this that I'm simply not seeing.

Steady As She Goes

Pros:

• Lowest overhead of all.
• Requires only incremental tech improvements and new knowledge
• Postpones the need to move into commercial space, perhaps until the cashflow can support it
• No hired help required
• Little or no further investment necessary; builds upon existing cashflow
• Lowest risk – January’s sales exceeded the benchmark 50% growth
• This option best suits my personal preferences and lifestyle

Cons:

• Lowest potential reward. Even using optimistic assumptions, it will take at least several years before I’m paying my share of the bills again
• Merely postpones, rather than solves, the main challenges posed by Curio Metropolis
• Given the limits imposed by my physical facilities, keeping up with even a mere 50% sales increase will be extremely difficult during November and December

SUMMARY: Low cost and low risk are very appealing. I had planned for a 25% increase from 2007 to 2008. Doubling that to fifty percent would be a huge success. Sales so far this year are running 150% ahead of LY. That's a powerful argument for Steady As She Goes. I already know what I need to do to maintain or accelerate that increase, if not how to actually accomplish it. During the slowest months, I have the freedom to run errands, do chores, tend my garden, do the marketing, cook the meals, and generally be a good housewife. Arranging a vacation is not a huge problem. Even when the Halloween-to-New Years stretch compels me to work a lot more than 40 hours a week, I retain some control over my workday. I like the idea of spending little or none of my remaining savings, and letting Curio City pay its own freight instead; I never thought that would be possible this soon. This is the approach that I want to take. But I worry that my natural caution, fear of change, and plain old inertia are holding me back. Even with the dramatic percentage growth that I’m enjoying right now, the dollars involved remain small – maybe too little to justify the required effort (although a hefty year-end profit and shareholder loan repayment could change that calculation). The plodding approach that has gotten me this far can probably carry me much farther… but slowly, and I will ultimately encounter the same growth-related challenges as Curio Metropolis would face right away.

Curio City Offline

Pros:

• Gets Curio City out of my house; easy to employ help
• Best potential for dramatic sales and personal income growth
• Long-term growth and expansion path is well defined
• Easy learning curve
• Easiest to finance
• Less competitive than online retail; easier to define and defend a niche (despite living in a retail Mecca, there is no similar store nearby)
• Cash-and-carry is much less work than shipping every sale

Cons:

• Highest fixed and operating costs; will require substantial debt
• Highest risk of rapid and unrecoverable failure
• My forecasts just don't add up: Rent, payroll, utilities, insurance, and debt payments? How can that work? I need revenue of $400,000+ to cover all of that, and that's twice what a small store in a secondary location can deliver
• Might require more effort than I am capable of handling alone
• Completely monopolizes my time and attention, probably for years; significant hit to quality of life. No vacations, no garden, no housewifery
• Web business will definitely suffer from inattention
• Dealing face-to-face with the public and their children
• Significantly more returns, damages, theft
• Not how I want to spend my days – I just plain don’t like stores

SUMMARY: Every time I think about this, I immediately ponder how I can get myself away from the cash register – I need to work at a higher level than that, and I am not temperamentally suited to sitting in a public space all day, every day. So I’d need help right from the start. Yet, far from being able to afford hired help, a new store often can’t even pay its owner anything for the first year or two. Is opening a store that I don’t want to run myself a stupid idea? I think of it primarily as a base for web operations (where the real growth potential ultimately lies, and where I am already earning a profit). Although owning a mature store with routine operations and reliable staff several years from now is beguiling, getting from here to there will be a frightful amount of work and expense. Most people who do this have a partner. During the holidays running Curio City Online is already more than a fulltime job. How can I possibly do that and open and operate a store, too? And finally, there is no chance that I can spare the necessary time and attention for pre-opening while also maintaining my existing web business. I don’t see any way around putting the website on life support while I turn my energy elsewhere. Walking away from a profitable and growing business strikes me as a foolish idea, even if it’s only for a few months.

CONCLUSION: If I had one, it would go here. Next week, I’ll see if I can find better numbers and revisit my budget forecasts for the umpteenth time.