March On!

Steel yourself, dear Reader, for another long navel-gazing session. This one has one particular reader in mind.

Year-to-year sales comparisons are a little flaky because I’ve changed the way I define gross sales, and the way I chop the calendar into fiscal months. Last March was a five-week month, and this March has only four weeks. By any measure, though, last March was a bloodbath. It held 11 days with no sales at all (including a record six-day shutout streak) plus three more days with gross sales under $10.

This month started out looking just as grim. Postage costs sent the first two days negative. When I left for my habitual Tuesday bar night, my weekly gross sales had recovered to a whopping $1.22. Then a flurry of orders turned the month around. By Wednesday morning I had done 66% of last March’s monthly sales and a third of this year’s plan. As of right now, I’m happily looking at 90% of LY and 50% of plan. Even my deep open-to-buy hole is finally filling in. It’s astonishing how suddenly things can turn around. (And that cuts both ways; sales can, and often do, collapse without warning. It would not surprise me to go directly into a days-long shutout).

Here's a paragraph is from a draft of this post written on Tuesday evening, before I left for the bar:

“All of my choices look hopeless. “Steady As She Goes” is going steadily nowhere. “Curio Metropolis Online” seems like a pipe dream when I can’t even solve my current minor technical problems or find a new developer to knock off my extremely modest and oft-postponed upgrade checklist. And how could I possibly cover the rigid cost structure that comes with “Curio City Offline”: $2,500 for rent, $500 for utilities and insurance, $1,300 for payroll (that’s one minimum wage employee and not a cent for me), another $1,000 in debt service, hundreds more in assorted smaller bills…where does all that money come from??? I would need to gross a minimum of $12,000 a month just to cover core expenses and replace the goods sold, without making a dime for myself. That is ridiculous. There is simply no way a store is going to bring in that much money, not in March.”

What a difference a day makes. After three days without a single order, Curio City snagged 15 sales in three days, and the tenor of this post changed from despair to optimism.

T.C.O.B.

Before I return to my regularly scheduled anguish, two operational trends bear mention:

First: Since I upgraded PayPal from "standard" to “Express”, at least half of my receipts have gone directly into the interest-bearing PayPal account where I park my operating cash. Before the change, fewer than 10% of my sales went through PayPal. PayPal’s processing charges are about the same as credit card fees, without the annoying 2-4 day delay and the weird fee guesswork. The less business I have to put through CTS Holdings, the better. I loathe that credit card processor.

Second: For reasons unknown, I had several international sales last week – three to Canada, one to Great Britain, and one to Ireland. Although I’m ambivalent about the extra work and the uncertainty involved in exports, I am grateful for every sale I get, especially during March’s anticipated drought.

Incidentally, my original developer has unexpectedly found time to upgrade Sunshop from version 4.0.8 to the current 4.1.0. In addition to fixing a couple of obscure bugs, the newest version will finally let me enable the Google Checkout routine that gave me such grief. And it adds a shipping charge estimator to the shopping cart. Both of those additions are sure to improve conversions a wee bit – and given the increase in PayPal payments since I upgraded, I expect a lot of shoppers to use Google Checkout, too.

Crystal Balls

Why did I give you this long diversion about March sales?

Wife Summit II happens tonight at the Randolph Picadilly Pub, a homey place that has hosted many earnest discussions over the past 20+ years. This post is my last chance to lay it all out before I try again to force a conclusion. I have cash earmarked for Kraken Enterprises in the bank right now, with two more CDs maturing in the next six months. Will I finally spend the last of my inheritance? Will I roll it over for another year? Stay tuned….

(You might have figured out that I hate spending money. I only even had an inheritance because I was raised to be cheap. This is not exactly an entrepreneurial trait. Frugality separates the capitalists from the managers. I’m a good manager. The jury is still out on whether I’m a capitalist.)

This week’s unexpectedly strong sales emphasize the folly of changing direction while my business is still strengthening (in a recessionary climate, no less). QuickBooks says that YTD gross sales are 99.3% ahead of last year. Payroll – which lines my pocket – is running 75% ahead of LY. Net income – a.k.a. The Bottom Line -- is +145%. I must always hasten to add that the actual dollars involved are still low-budget, and I’m still poor. But despite my puny scale, the year-over-year improvement is undeniably dramatic. Now that I know how profits work, “Steady As She Goes” could almost double my personal income over LY. If I don’t change direction, I can take out some profits in December. Again: It’s not very much money, but how many people do you know who might double their income this year?

I know how to evolve “Steady” into “Curio Metropolis”: Increase and improve my merchandise selection…improve my organic search results…and raise my conversion rate. I understand how to do all of those things in theory, if not in practice. None of it is beyond my ability to learn. An expert customer who took an interest in my blog very kindly sent me a long, detailed list of SEO instructions that ought to improve my organic traffic at very little cost.

Last week’s unexpected busy-ness kept me from reviewing my store financials spreadsheet. I’m still using numbers that I compiled nine months ago. But I don’t think it’s going to change much. My calculations are correct. The most important starting assumptions (rent per square foot and sales per square foot) still look realistic. I can tweak a few variables here and there, but it’s not going to change the big picture very much.

A store is expensive and risky. At best, opening and running one will freeze my web business at its current level as I put it into caretaker mode. More likely, the store’s ravenous demands will force me to mothball the website entirely for at least a few months. At worst, the store will drag the website into bankruptcy as it goes down. The short-term financials are downright frightening; I see no way to avoid losing considerable money coming out of the starting gate. A store might offer the best income potential in the medium term (about five years), when the loan is paid off and I’ve worked the kinks out of my merchandise, advertising, and operations -- if it survives that long. But in the long run, you can only put so much stuff on the shelves and get so many people through the door. The internet is comparatively limitless. I always think of a store as a base for my web operations, rather than a goal in itself.

If I were forced to choose today – which is sort of the point -- this is what my crystal ball reveals: I stay with what’s already working (duh). I transition from “Steady As She Goes” into “Curio Metropolis Online” in an evolutionary way, getting constantly better at what I’m doing and investing money here and there as needed, rather than all at once. I won't need debt, and maybe not even all of my remaining startup money -- I could potentially spend some cash on personal needs instead. When the web business gets consistently too busy to run from my home – and I mean most of the time, not just for a couple of months – then I will open an offsite base of operations. This facility's main role is shipping/receiving, warehousing, and a place to employ help. It would be nice if it included a sales counter that earned enough to cover its own costs, but that would be secondary. For convenience, I'll refer to it as a "store", even though that isn't its main function.

When, Ken?

Sounds logical and practical, doesn’t it? How long would this process take?

I don’t know. My hunch, based on current growth, says that Curio City Online becomes Curio Metropolis by the end of this year or beginning of next. Curio Metropolis outgrows being a home business pretty quickly, and moves out either in late 2009 or late 2010 (assuming that its new home is a store, which has to open during the Christmas season). Late 2009 is my most ambitious projection, and late 2010 is my cautious one. Cashflow from the web should be substantial enough to subsidize the store while it finds its market and I iron out my inevitable mistakes. By the beginning of 2011 – about three years from now -- I would have a break-even store hosting a very profitable web business that pays me a living wage, and I would consider Curio City a mature business.

Look at it this way: Averaging five sales per day would produce enough income to help out with the bills. Ten sales per day would constitute success. Twenty would make me wealthy. So far this year, I’m averaging 2.25 sales per day. Getting from 2.25 to 5 does not seem that daunting.

Look at it another way: There are 6 billion people in the world. Maybe a billion of them participate in market economies. More and more of them shop online every day. At least 100 million of them make a lot of money. I just need to land 10 out of those 100 million people each day. Piece o' cake!

Asterisks and Fine Print

The first drawback is temporal. While I have a real shot at doubling LY’s sales this year, doing that year after year gets more difficult as the absolute dollars involved increase. My three-year timeline is a long way from guaranteed. Seventy-five percent of my business this year comes from one product line. That could peter out at any time, and finding something comparable is not even remotely guaranteed. There is very little that I can do if I find myself without at least one high-volume product to keep driving sales.

Anne has been supporting me for the better part of two years. I’m just now starting to make enough to keep myself in pocket money, and I’m nowhere near making a meaningful contribution toward our joint bills. We are both over 50 years old. We’re constantly postponing such goals as travel, housing upgrades, and even furniture and basic home maintenance. Our short-term, non-retirement savings are essentially gone. Anne’s being bled dry by consumer debt and parasites (me and her mother). Yes, Curio City should ultimately grow into our primary source of income. I’m counting on that. I have no other fallback. But how long is “ultimately”? We can’t wait 10 years. Even five years is an awfully long time. Can we endure three more years of tight money from a single income? How durable is my wife's patience?

None of my scenarios -- including opening a store – pay off any quicker or any bigger than the one I outlined above. The only reliable paycheck comes from a conventional job. At what point do I pull the plug on self-employment and try to get back into somebody else’s harness instead?

The second drawback is technological. I was an English major, for crying out loud. Understanding and solving technical failures, and keeping abreast of innovation, will always be a little beyond my grasp. “Steady As She Goes” cannot morph into “Curio Metropolis Online” until I can count on the services of an expert developer/webmaster – and the $90 per hour variety is not going to cut it when I’m earning $1.50 per hour myself. I should be spending my time searching for new products and creating web content, not trying to figure out why Yahoo hates me or why I’m getting 100 spams a day or why my Google page ranks are so poor or how my shopping cart generates H1 tags. I just spent over three hours figuring out that our internet connection died because I forgot to update the password in our wireless router.

I am better equipped to understand and solve the kinds of problems that a store will encounter than those posed by the Internet. I will always be behind the technical curve as long as the web is my primary emphasis.

The last drawback is logistic – physically moving and storing ever-growing quantities of merchandise, and ultimately moving it out of the house. My proposed path does not solve this. There is still a move to deal with eventually, and the impact of interrupting web operations grows worse as my sales get bigger.

So that’s all I’ve got. Anne still talks as if she wants to own a store, and I’ve pretty clearly acknowledged that I really don’t. She has an equal voice in the future of this business. Will tonight’s summit solve anything? By the gods, I hope so. I am sick of writing about this. I am sick of the uncertainty. I want to move forward.