Progress

I addressed most of the problems that I laid out in last week’s post. If you missed that, you ought to read it before this one.

I finally – finally! – got the return labels for my double-shipped orders from DCI. It took all of one phone call. Our living room looks downright cavernous without those five enormous cartons dominating it. It still remains to get my $1,200 refund; at the moment I have neither my money nor the merchandise. I’ve been dangling the promise of a large new order in front of both the sales rep and the customer service rep, but neither of them seems very motivated.

I finally – finally! – quit dithering and submitted my application for merchant services from CDG Commerce. Yes, after three years I am bidding Merchant Express and Pipeline Data a not-so-fond adieu. Here’s hoping for better service at lower cost.

Hours after I posted the story of the UPS 2^nd Day Air screwup, another customer complained that her Express Mail shipment (supposedly overnight) took a ridiculous 10 days to reach her. I immediately refunded her money, of course. Unlike UPS, the post office honored its service guarantee and refunded my shipping cost -- in cash -- on the spot.

Months ago I foolishly agreed to accept a Canadian check drawn in US funds. Business was dreadfully slow then and the risk was small, so why not? First, the customer took over a month to send payment. Then my bank bounced the check without explanation. I took it to the local branch, where they scratched their heads and suggested that I redeposit it. Yesterday it came back again. This time, though, they gave a reason: The date field wasn’t filled in. :rolleyes: At least there are no bounce fees, since they keep intercepting the check before depositing it. I shall fill in the date and try again. Third time’s a charm, right?

Customer returns are still coming in. Sales would’ve been pretty good last week if I hadn’t had to refund nearly $300. Those blankety-blank Coin Factory Banks (see “The Worst Product Screwup” in last week’s post) are the biggest problem. I suspect that a few other customers changed their minds about what they could afford as their December charge bills arrived. I still managed to edge out LY despite the negatives, but I fell far short of plan and I have at least two more large payouts yet to come. January could wind up looking weak despite decent sales.

Now taxes are the last big nasty steaming thing on my desk. I intend to file my Q4 state returns online today, and see if my federal form 941 has arrived yet. I see that Massachusetts has added new tax withholding requirements for pass-through entities, and that Kraken Enterprises is such an entity. Here’s what their introduction says:

The pass-through entity compliance program allows non-exempt members of pass-through entities to meet their tax obligation by: agreeing to file and to subject themselves to personal jurisdiction in Massachusetts; participating in a composite return by the pass-through entity; or having the pass-through entity withhold and pay tax on their behalf. These three options are explained more fully below. The compliance program generally exempts the following members: Massachusetts resident individuals, estates, and trusts; federally tax-exempt organizations; corporations with income (other than pass-through entity income) subject to tax under M.G.L. c. 63 for which they are filing a return; and pass-through entities that are filing a return. To be treated as exempt by the pass-through entity, these members must file an exemption certificate (Form PTE-EX) with the pass-through entity.

Crap. Being a Massachusetts resident individual, I am probably exempt, but there are going to be paperwork requirements anyway. It looks like I have a little light reading to do before I can slide several thousand dollars to various governments and get back to running my business.

Further Christmas Screwups (or, Good Riddance to Bad Service)

The worst vendor screwup: Remember the company that double-shipped my initial order of 144 Recycled Motherboard Christmas Trees? Well, not only are those three monstrous cartons still sitting in my living room, freezing $700 of inventory dollars…last week the same company screwed up again and double-shipped another order of 72. Now I have got five enormous cartons of 212 unwanted Christmas trees tying up $1,200. This is heading into its third week without resolution. Naturally, anybody who can do anything about this was on vacation this week. Only we self-employed types work a normal week between xmas and New Years.

Since the vendor seems oblivious and the sales rep seems useless, I am sorely tempted to return the cartons freight-collect and dispute the credit card charges. That would get their attention. It would also poison my relationships with two companies with whom I hope to do considerable business in 2009. In fact, this ongoing screwup is the only thing preventing me from placing a sizable new-product order from Décor Craft right now. I shall phone them and lay down the law on Monday.

The worst product screwup: I mentioned the quality shortcomings of the Amazing Coin Factory Bank in my first screwups post. It looks like five of the 35 that sold are coming back. On Monday I’ll find out if that company’s new sales rep can make good on the old sales rep’s exchange promise, or if I’m going to be stuck with these broken things after paying $10 apiece in return freight. Even if they do come through as promised, this will be the least profitable successful seller that I have ever carried. And if they leave me holding the bag, it will be my worst money-loser ever. Unlike the company that stuck me with 212 unordered Christmas trees, this vendor has always been marginal. I will drop them in a heartbeat. My tolerance for inferior products and service is very low right now.

The most irritating service screwup (or, another reason to hate UPS): Late on the afternoon of 12/22, a customer paid $20+ for UPS 2nd Day Air. She mistakenly thought that she would get her order on the 24th, because she didn’t take into account the time that I need to pack the order. I diligently shipped it early the next afternoon (the 23rd). When she complained on the 24th that her order had not arrived, I explained the logistics and timing and assured her that her package would arrive on the 26th.

It showed up on the 29th. That’s right: 2nd Day Air took six days from door to door. Obviously, I had to refund her shipping charge. Just as obviously, I would recover the cost from UPS. Not at all obviously buried in the fine print of their Terms of Use page is the tidbit that UPS’s service guarantee doesn’t apply to packages picked up from Dec. 12-24. When I explained that my business had to pay the price of their failure, they sent a polite apology with an excuse – but still no refund.

Lesson learned: Never again will I offer expedited UPS services during the holiday week. They are too unreliable.

My own worst judgment screwup: Remember my huge surge in business from that New York Times gift guide? Well, I lacked appropriate boxes to ship all of those orders and delayed ordering them for one crucial day, so I sent out 100+ single-piece orders in padded mailing envelopes. Three of them arrived damaged – two to the same customer…the first via UPS, and its replacement via First Class mail! I did recover the cost for two of those shipments from UPS, but it still inconvenienced my customers and made Curio City look amateurish. I should have waited two days for proper boxes to arrive.

My own most costly screwup: I see that I wrote about credit card processing almost two years ago. Here's a Cliff's Notes refresher: Companies called “merchant service providers” sell service packages to merchants. When a customer uses a credit card, lots of people take a tiny slice out of the sale. The “payment processor” gets the biggest piece.

Have you ever tried to compare mattress prices between two stores? You can't do it. The manufacturers use different model numbers for identical products specifically so that mattress stores never have to meet their lowest-price guarantees. The credit card industry’s cryptic pricing is like that – no two products are identical. I knew that Pipeline Data Systems (who appear in my bank account as CTS Holdings) was on the expensive side. Now that I’m no longer a risky new business, I could do better. But when my contract expired in October I was getting too busy to bother with it, and I’m always loathe to perturb a system that works smoothly.

Then, a week before Christmas, they pulled their “annual fee” trick.

Every December Pipeline tries to charge me the annual fee that my contract specifically forbids. Every December, Merchant Express makes them reverse it. This year’s annual fee was disguised as a mandatory PCI compliance fee of $150. “PCI Compliance” is a government security requirement that doesn’t apply to little guys like me who use third-party processing, but it gave Pipeline another way to bleed their merchants at the busiest time of year. I ran to my Merchant Express rep, who said that they could move me to a cheaper payment processor (Fast Transact) to get me out of the stupid PCI fee.

Did I mention that this was a week before Christmas?

I was busy. Lo and behold, I blew it off for too long, and they finally debited my bank account $150. They will not discuss refunding it, even if I cancel their service before it takes effect. No appeal. End of story.

I am finally motivated now to scrap Pipeline. Their customer service (the two times I tried to use it) was the most arrogant and unhelpful I’ve ever encountered, and their monthly fee reports are indecipherable. I have not decided whether to go with Merchant Express’s payment processor Fast Transact, or switch to the highly recommended CDG Commerce. I think CDG might be a little cheaper overall (they have higher fees but lower discount rates). I might eventually recover more than the $150 that Pipeline Data stole from me. But I'd have to give up Authorize.net as my gateway. I like Authorize.net. And I wouldn’t put it past Merchant Express to pilfer my bank account for cancellation penalties, even though my 3-year commitment ended months ago. I wonder if there’s a way to revoke their withdrawal privilege.

I must force myself to decide on Monday. Each day that I put it off, a little more of my money goes into Pipeline Data Processing’s bank account. Bastards.

My dumbest screwup: I forgot to schedule my Amex payment with Citizens Bank. This is the first time Kraken Enterprises has ever been late with any payment of any kind. I am so embarrassed. I know that credit card companies delight in smiting tardy payers, and that Amex has the reputation for being the least forgiving. I hope they don’t punish me beyond the $38 late fee they already hit me with.

Miscellaneous little screwups: There’s the customer who placed a double order, did not answer my email inquiry, then announced right after I sent out his boxes that he is going to return the duplicate and make me issue a $80 refund...when I knew all along that I should’ve just canceled the second sale. There’s the customer who returned a defective levitating globe (surprise, surprise) to its manufacturer for warranty replacement, got blown off, and has asked me to intercede. If I can’t help her, she’s probably going to want a refund from me...and I can’t do that when she returned the merchandise to somebody else. There’s…um, well, that’s all I can think of.

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Visits were below 200 per day all week. If you subtract one unusually large sale from LY, the week came in very slightly ahead, but still not even half of plan. The first fiscal week of 2009 is not encouraging.

Farewell to 2008...By the Numbers

I said that I was going to stop posting financials, but I slacked off a lot last week, and I don’t have any remarks prepared for today. Besides, it’s logical to literally sum-up the year. My spreadsheet closes the year on Saturday, December 27, so these numbers (through Christmas) are final enough despite having nearly a week left in the calendar.

Do you see a recession hiding in here?


December 2008 vs. December 2007

• Total income: +75.5%
• Total COGS: +66.9%
• Total payroll: +49.6%
• Total expenses: +22.1%
• Net income (profit): +488.2%


2008 vs. 2007

• Total income: +71.7%
• Total COGS: +68.7%
• Total payroll: +79.7%
• Total expenses: +48.4%
• Net income (profit): +220.7%


In 2007, my gross salary plus profit came to $6,600, and I did not take out any of the $1,200 profit. Curio City paid out $5,400.

In 2008, my gross salary plus profit came to $16,400, and I took out $3,800 of the (estimated) $7,400 profit. $2,200 of my $3,800 goes to taxes. I put $1,000 of the remaining $1,600 into my Roth IRA and gave $600 to my wife. Altogether, Curio City put roughly $12,800 in my pocket, or more than double LY. (I took the payout as a stockholder loan repayment rather than a shareholder distribution, btw. The profit is applied to reducing my life-to-date negative retained earnings. Curio City now owes me $24,700 of the $28,500 that I invested.)

In 2009, I’m planning a 50% sales increase over this year – ridiculously ambitious in light of the collapsing economy, but not in light of 2008’s 70% increase. If I can achieve that, my gross salary should reach $13,700 and my profit should top $11,000; I will pocket $18,000-$20,000 of that. For my first act of the new year, I’ll raise my payroll percentage again to shift a little bit of that anticipated profit into my paychecks. And with a couple clicks on my spreadsheet, I am now paying myself 18% of gross, up from 17.75%.

Sales and traffic were both poor last week, but it’s a throwaway week anyway so I don’t read anything into that.