2015 By the Numbers

I realize that financials aren't exactly riveting reading so this will be my last number-driven post for awhile, even if that leaves some Fridays with no topic. I can't avoid numbers entirely, since the whole point of retail is generating statistics. So with that apology out of the way, let's dive into the end-of-year reckoning.

Excel says that December beat LY by $344, making it the best since 2013 and only the 4th worst (or 7th best) of all time. If I can rack up another $72 by the end of tomorrow it will move up one notch to become the best December since 2011. Excel further believes that 2015 finished $1,200 behind LY, for a 2.39% decline. It was the 4th consecutive year-over-year drop.

QuickBooks matches Excel pretty closely: 

December

Total income: +0.7%
Total COGS: +73.8%
Payroll: +12.8%

Marketing: +120.7%
Net Income (Profit) vs LY: -131.3% (-$4,016)

Actual Profit/Loss: -$956

Year End

Total income: -2.5%
Total COGS: +9.3%
Payroll: -1.1%

Marketing: +20%
Net Income (Profit) vs LY: -282.8% (-$4,993)

Actual Profit/Loss: -$3,227

You'd think that I somehow screwed up the Cost of Goods Sold in a major way, but that's an accounting illusion: My CPA made a mysterious inventory adjustment on last year's tax return that lowered December's COGS by $2,500 and turned 2014's loss into an unexpected profit. It's like he conjured some free merchandise out of thin air. I didn't understand that then, and I sure don't understand it now. But if you remove that weird line item, then year-over-year COGS actually improved slightly.  

The marketing overspend, OTOH, is a real and ongoing crisis. I've been trimming unprofitable keywords with a scalpel when I need to use a meat cleaver. On Monday and Tuesday I spent $94 to land one $7 sale. On Wednesday I shut down everything except Product Listing Ads, which simultaneously shrank my spend to $25 per day and tanked sales completely. If I don't buy ads I won't have any sales; if I don't have any sales, I can't afford to buy ads. I'm in stasis for the weekend but will need to grapple with this again come Monday. 

That $1,764 year-over-year advertising increase accounts for more than half of this year's actual loss, and nearly all of it came in December (which would have been profitable otherwise). Let's put it this way: More than doubling my ad spend increased revenue by just 0.7%. The $10,587 that I spent last year exceeded my $9,827 salary (which was itself $100 less than I made LY). Compare the 20% of net sales that I take in salary to the 21.3% that I spent on advertising. $8,809 of that ad money (17.7% of sales) went to Google alone. If you add the few hundred bucks that won't appear until my next Amex statement, Google came very close to out-earning me. The whole point of owning a business is supposed to be "working for oneself." If I'm going to work for Google, I ought to just get a job with them and make the big bucks. (Hah! Ten years of solitary self-employment have ruined me for the workforce.) 

After diving deep into marketing numbers, all I come up with is needing to either spend less on advertising without reducing sales or spend the same amount while increasing them. Well, duh. Maybe AdWords has just become too expensive to continue. The price of keywords creeps inexorably up as more competitors come online and those with the deepest pockets always win the bidding. Bing is no better. Is there some form of online advertising that could replace pay-per-click entirely? Two trials have shown Facebook advertising to be too expensive and ineffective. That creepy "remarketing" trick where ads follow people around the Web would surely put more money in Google's pocket; I don't know if it would line mine, too, but maybe I need to puzzle it out, even though it's stalker-ish.

There's always trying to draw more organic (unpaid) traffic, raising the unsavory prospect of ess-ee-oh. Just writing those letters here would be like throwing chum to sharks. Those companies are all a crapshoot and I obviously don't have money to gamble. Plus the technical limitations of my PHP shopping cart often prevent me from implementing even free advice.

Converting more of my existing visitors might be more feasible. Many of my product pages (see Panther Vision caps) give shoppers as much information as possible. Chatty pages work when people browse them on proper computers, but those who surf in on smartphones simply won't read more than a sentence or two. As the percentage of mobile shoppers grows, wordiness becomes a liability. "Keyword-stuffing" used to be an optimization thing, too, although I've read that it's since fallen out of favor. Stripping some of my most informative pages down to the barest bullet points might improve conversions. 
 
What else I can do to either boost the top line or trim the bottom line? 

Raising prices is nearly impossible in our low-inflation economy. Online shoppers can effortlessly compare prices for the commodities that I sell, and they always gravitate to the lowest. "Free shipping" suckers in a lot of people, but the 15-20% that I'd have to raise prices to pay for it would drive away many others. Many of my Switchables covers are priced a buck below MSRP, so I've begun raising the prices of the most popular designs. That might deliver $100 or so over the course of a year...assuming that I don't lose regular customers who appreciate my "underpricing."

How about better markups? Most Jackite dropship orders come in way below my 50% benchmark and push COGS up. I recently brought back the 5-LED Clip-On Cap Lights that I had discontinued for multiple reasons despite having sold 1,600 of them over the years at markups of 55-60%. I raised the price on this new batch by a buck; we'll see if that's sustainable. I don't want to carry a lot of cheap products from China, but there are some very good margins there if I can find a few winners that don't have quality problems.      

The only two big variable expenses are advertising and payroll. I was mulling over a pay cut until I ran those advertising numbers. There's no way I'm going to let Google earn more than I do, and I'm already limping by on less than $10,000 per year anyway. Curio City needs to pay me more, not less, and if paying me kills it...well, maybe it has no reason to live. 


Remember that losses are desirable at tax time. S Corporations pass their profit or loss through to stockholders, so that's going to be a $3,300 deduction on our personal return, assuming it survives the accountant.

Ignoring COGS and marketing, all of the other numbers are more or less in line.
I'll look at the prospects for 2016 next week.