Welcome to Curious Business
Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
Friday, February 18, 2011
The Incredible Shrinking Profit
I got my tax return back, so here’s a little statistical trivia: At the end of last year I estimated my annual profit at $3,760. The actual final bottom line was $3,256. The return is much too complex to understand the $500 discrepancy between my guess and reality, and Schedule K-1 has a couple of little adjustments that bring my share down to $3,192. The bad news is that my total compensation for 2010 was only $15,609, not the $16,177 that I had thought. The good news is that I set aside a little more for taxes than I’ll really need. The bad news is that the $2,800 that I took out was really 86% of my profit, not the 75% that I meant to take; the $350 difference explains why my company is having so much trouble making ends meet right now.
Well, that plus the sales collapse.
February is running way below half of LY after recording the worst week since last July. My expectations were low this month, but not that low. Traffic is within normal parameters. My conversion percentage is slowly recovering from the burst of low-quality visits that I bought from Facebook. The average order value has slipped below $37 ($45 is normal). Sales this week averaged $47 per day, vs. $175 needed for success. I’d almost rather have no business at all than these little nuisance sales.
Next week’s monthly sales report is going to be grim.
The consolation for making no money is having ample time. This morning a test drive unexpectedly turned into the full-blown ordeal of buying a new Honda Fit. I’m finally just sitting down to Curio City at 3 pm. The consequences of missing most of a day? None, apart from trading our whole savings account for a new car.
I’m going to give my Parcel Post experiment one more week before I blame this slump on eliminating those cheap rates. My latest thinking goes like this: If I reinstate Parcel Post, I will again have to pay more than I collect to ship some of my larger orders (because I always ship Priority Mail). But suppose that I raise my handling fee 20 cents instead of cutting it by 10 cents, as I did last week. People placing larger orders won’t notice the 30-cent difference if they’re offered the cheapest rate class again. The real impact will be on low-end First Class orders. Because they’re more numerous, they should make up for the lost margin on bigger orders.
I like the idea of the small sales subsidizing the bigger ones. I’m just not sure yet that shipping costs are the root of my current problem.