Kicking It Out

Unlike the current generation of young adults, Curio City needs to move out of the house before it can grow up. My inventory is limited by physical space and by my own ability to handle it, and my office functions are limited by my available time and expertise. My current glide path should grow net sales from $25,000 in 2006 to $123,000 in 2020. That’s impressive for a one-man home business, but it’s not enough to cash in and retire. And it will crash and burn if I lose my health or vigor. My 53rd birthday is approaching. Can I count on being strong and able-bodied for 10 more years? Can I continue to work 365 days a year that much longer? Do I want to?

Motivated readers can click the “planning,” “moving elsewhere,” and “opening a store” tags to read my previous grappling with these questions. For the less-motivated, the Cliff’s Notes are these: I can’t overcome my personal limitations while my warehouse is in the cellar and my office is in a closet. Renting an external facility brings huge new costs that are financially justifiable only two months out of the year. That has always suggested opening a store whose main function would be to service my internet business while adding just enough new sales to pay its own expenses – essentially a warehouse/shipping facility with a small showroom and a sales counter. If I’d done that a couple of years ago (as I nearly did; see Ding Dong, The Store Is Dead!), I’d surely have gone belly-up in the Great Recession.

What do American businesses do when they want to grow but can’t afford to pay Massachusetts rents and labor costs? Outsource! A reader first suggested this in a comment on The Zombie Store. Most American “manufacturers” handle their own design, sales, and marketing in-house, then outsource production to Chinese factories. Those ship the finished goods to a third-party warehouse that fills orders for many clients – including most medium to large web retailers. Using a fulfillment service would solve the hardest part of kicking Curio City out of the house at the lowest cost. It’s wicked expensive – somewhere around 25% of gross sales, I think, although I haven’t actually priced it out yet. But that’s still cheaper than renting my own space and hiring my own worker. The other disadvantages that would arise -- reduced quality control, difficulty handling returns and damage claims, dealing with foreign sales and expedited shipping, etc. – must be surmountable.

The next challenge is paying for this fulfillment service while still meeting all of my existing expenses. Offloading shipping only saves a trivial amount of money, since I currently do all the labor myself. The warehouse’s access to bulk shipping rates might cut costs somewhat. But the incremental growth in my current sales plan can’t begin to cover a new expense of this magnitude. I’d need (pure guess) to quadruple my annual sales to pull it off. It’s a chicken-and-egg question: How can I quadruple sales without bolstering my fulfillment ability, and how can I improve fulfillment without quadrupling sales?

I know: More outsourcing! I myself am the next impediment to growth; I suck at marketing and don’t understand advertising at all. All I know is pay-per-click advertising, very rudimentary self-SEO, and my blog, newsletter, and Facebook. So coincident with outsourcing fulfillment, I’d have to hire a marketing firm. Even a modest professional campaign should quadruple my sales overnight – again, though, at great expense. Even a modest effort by a small firm would cost (guessing) around $10,000…plus media buys.

OK, suppose I’ve worked that out. I've quadrupled my sales and I’ve got someone else filling them. Rapid growth brings more challenges. Sunshop has served me adequately so far, but I would probably need to develop and maintain a custom website. More outsourcing, more new expenses. I’d also need to streamline my procedures and automate some of the daily grunt work that I do now.

Then I’d need to rethink my merchandise strategy. I mostly buy small quantities from importers -- a couple hundred dollars for a couple dozen pieces of something. I’m content to sell a dozen units of something in a year; my biggest hits sell a few hundred pieces. I don't know if I can quadruple the supply of some of my big sellers. I’d need to buy directly from manufacturers rather than wholesalers more often. I’d probably need to import some stuff directly.

Finally, I’d need to change the way I finance my company. I doubt that I could run a quarter-million dollar enterprise on credit cards. I ought to establish Net 30 terms with a few vendors to build some credit references.

Risk is always outside of my comfort zone. I hate depending on other people; quality suffers, and sooner or later they always let me down. I’m not fond of change in general. But ultimately this business must grow bigger than I can handle alone. I can imagine reaching a state where I spend most of my time finding products and managing contractors.

I’m thinking about all of this again as another very good week winds down. Monday brought an unexpected Valentines Day rush of 14 small transactions. Tuesday brought 11 more. I might double LY's sales for the week.

I won’t take on debt until I’m confident that the economy is really recovering. But I ought to start exploring costs so that I can start thinking about where I’ll raise the money. Depending on how much I need, I might even try to raise some of it from friends. A five-year track record of building a profitable and growing business through the Great Recession should make Curio City an attractive investment opportunity.