After the Gold Rush

Curio City needs a successful kite season (per my last post) to cover its monthly operating expenses. If it can’t pay its bills, it has no reason to exist. How much money is that?

Less than you might think. Arithmetic tells me that $1,000 a month will do it. CC has made that much every month this year – even in February, when I closed for a week after my computer died. If you remove kites from the equation, the bar falls closer to $750 because I’m not replacing any other inventory. 

Quickbooks says that there's still $15,300 worth of stuff in the cellar, and that it would be worth $32,100 at full retail. Quickbooks can’t see markdowns until an item sells, so it can’t tell me what it’s worth at the prices currently marked…I’d guess that's around $20,000. Selling $1,000 worth of stuff every month gets more remarkable as my stock dwindles. If I can keep reducing inventory by $500 a month, I could shave it to as little as $11,000 by the end of the year. After 13 years of acquiring things, that would mean that I ended up with less than $1,000 worth of dead stuff per year. Is that good? It seems good to me. 

It’s been a long time since Curio City actually required me to put in a full workday, but this week Mothers Day and Pentecost apparently combined to drive a whopping nine orders yesterday alone, and I've been in the saddle for five hours so far today. With expenses cut to the bone, CC’s checking account is finishing each month comfortably in the black, even after buying me a new laptop just three months ago. So I just gave myself a raise from 20 to 25% of sales – that’s more than I’ve ever taken out of it before. Congratulations, me! Monday’s paycheck will be the best one so far this year…and possibly better than any that will follow, since I just don’t have enough stuff left to keep up this pace. 

Just as I started to get carried away by the rush and reconsider closing my store, a problem customer reminded me why I'll be so glad to put an end to it. She ordered the wrong thing because she didn’t read the description. She demands her money back…but she doesn’t want to pay to return the product because this is my fault, somehow. Naturally, this was a dropship, so I have to loop the vendor in, too. 

As the old retail joke says, this would be a great job if there weren’t any customers.

The Sale of the Century!

A friend asked if Curio City will have a big clearance blowout at any point. It hadn't occurred to me. Maybe. If so, it won't be until late summer at the earliest. 

Most merchandise is already reduced to near cost. I don't like to go below cost. If I paid $5 for a thing, I want to get my $5 back. Sometimes I might let it go for $4 or even $3, but not often. Isn’t it better to recover a couple of my five bucks than nothing? Not necessarily. Sometimes reducing Kraken Enterprises' profit by $5 is more valuable than increasing its income by $4. 

The first draft of this post walked through the accounting in mind-numbing detail, but I’ll cut to the end without showing you how I got there. Essentially, if I take $4 for that $5 item, I increase my personal income by $0.80, and at the same time I raise my personal income tax liability by $0.80 (because Kraken’s profit/loss goes directly onto my 1040), for no net gain. If I write off $5 instead, I don’t pocket anything, but I reduce my tax liability by about $1. 

In favor of selling below cost anyway, I’d rather have 80 cents now than save a dollar later on. I’d also rather ship the item to somebody than throw it away, and I usually make a buck on the shipping charge. Blue Hills Editorial Services enters the picture here. 85% of Blue Hills income goes into payroll. The other 15% covers the employer's portion of payroll taxes and leaves a tiny profit toward the $1,500 it costs to be a corporation every year. Apart from that, Blue Hills has almost no expenses to offset its profit -- that's where Curio City’s losses are nice to have. When Curio City is losing money on operations, as it’s doing right now, it offsets Blue Hills' profit without needing to take markdowns. I can sell that $5 thing for $4 and pocket my 80 cents without driving up next spring’s tax bill. But when kite season puts Curio operations back in the black, I need write-offs to make Kraken's profit disappear.

I'll talk more about Blue Hills in my next post. To return to what I opened with: I don't plan to have a big end-of-business blowout sale because the write-offs are usually worth more than the small amount of cash that I can get for them. Between now and closing day, individual prices will slide a little bit here and there, but if you see something you want...don't wait. It probably won't get any cheaper, and it might sell out at any time. 

I keep mentioning kite season. Kites sell year-round because there are people who live in warm places. But it really gets going when spring weather settles in. Ordinarily it opens with Christians buying dove kites for church plays. Dove kites have been out of stock since last October, and the manufacturer will only say that they'll be back "in the spring." So I don’t know if I can count on the Christians to kick things off this year.  

Finally: The same person who asked about a going-out-of-business sale also wondered when Curio City will close. I still don’t know myself. The short answer is “It depends.” At this point I'm only staying open in anticipation of kite season. If it doesn't perk up by the end of March, and the cost of staying open continues to exceed the money coming in, I’ll close earlier than I had intended. 

September – the end of kite season -- is the earliest ending that I foresee; Christmas is the latest. But circumstances can change – for example, PayPal keeps sending me technical emails that I don’t quite understand about PayFlow integration, and a friend identified a problem with my security certificate that will, if I don’t do something about it, blow up in either April or June (I’m not clear), but only on the Chrome browser…maybe. Meanwhile, Turnkey just published another Sunshop update, putting my store software at least three versions behind now. Some technical thing might come along and deep-six my site before I’m ready to sink it myself. OTOH, I keep updating my master Excel file each month, and that’s currently formatted through next February, so there’s a ghost of a chance that I’ll keep going into next year. I don't plan to or want to, but I just got word that my biggest Blue Hills job isn’t going to come through this year, so I still need Curio City’s financial lifeline.  

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Speaking of that, I robbed myself of more than $100 last month by forgetting to reset February's payroll percentage from 10 to 20% of sales. Since Curio City unexpectedly bought me a new computer, though, I’m going to let it off the hook for the difference.

Make Curio City Great Again. Or Don't.

Pressure to decide Curio City's future is growing. I had said that I don't need to make the call about investing in another Christmas until September, but some optional expenses are already starting to pile up. For example, the USPTO wants $400 if I'm going to own the name for another 10 years. Turnkey has put out two Sunshop updates: One that specifically addresses the scammers and thieves who hijacked my checkout page, and one that adds new templates that could update my site's look and feel. Turnkey will install those for just $75, but in reality I need to pay my developer $200 to preserve all of the customizations I've accumulated over the years. Should I reorder merchandise that sells out? Replenish shipping supplies? Try any new merchandise? These questions come up regularly.

So let's run through some pros and cons, shall we? 

CONS

People: Curio City faces the public in a way that Blue Hills does not. A typical month might bring 75 sales, each representing one customer. Most of them are faceless and routine, but if even 5% have problems and complaints, that's three or four people that I have to mollify or avoid each month. Blue Hills involves only a few people, and they're professionals. So far (and it's early, I know) I've gotten only praise and encouragement from my few clients.

The Phone: Because my customer demographic skews older, I get a disproportionate number of people who just don't trust the Internet or know how to use email and insist on phoning me, despite my Contact page's attempt to gently discourage them. Putting one's phone number on the Internet generates a huge volume of junk calls, and removing it isn't an option because Google punishes businesses without phone numbers. I shudder every time I see the blinking blue LED that means I missed a call (I never answer the phone anymore). I cringe when notified that I have a new voicemail. One of the only ways I identify with young people is that they neither leave nor listen to voicemails. I ranted at great length about hating the telephone in the first draft of this post, but you get the idea. So far, Blue Hills has required exactly one phone call.  
  
Products: I'm not a consumer and I have never cared about buying and selling. Once I thought that viewing the marketplace with skeptical and disinterested eyes was an advantage. Not really. Trying to figure out what people will buy -- and, more importantly, what I can conveniently and profitably advertise and ship -- was an interesting challenge for the first few years. Gradually, I learned that it's an ever-moving target, and every time tastes change (or I just read them wrong), I end up with more unsalable stuff in my cellar. Once upon a time anything with USB was hot. Then it was LEDs. Before the Great Recession, when online retail was still something of a novelty, people would buy damned near anything. Now they're smarter about comparison shopping, and not so fast and loose with their money. 

Sometimes, even vendors let me down. They become unreliable, or they cut me off because they don't like online sellers, or they sell to discounters who undercut me. Losing Switchables (my second-best product line) while sales are already contracting was a hard blow to take. And I just don't have the fire in my belly to seek out a replacement. 

Promotion: The topic labels to the right show that I've written 48 posts about marketing, so today I'll just say that it's been my weak spot since the beginning, and it will ultimately be my downfall. I don't like it, I'm not good at it, and I can't afford to hire somebody who does and is.

Prospects: Sales have declined every year since 2012. Unless I invest in some new inventory pretty soon, they'll go down again this year, too...and I can't do that until I get out of debt. Without a major infusion of time and money, even just bumping along at my current depressed level is ambitious; continuing a long slow slide is more likely. That feels pretty pointless.  

Perils: Our cellar, a.k.a. Curio City's warehouse, floods every few years. All of my stock is raised a couple inches off the floor, and that's usually enough to spare it...but I invariably lose some packing supplies and face a multiday cleanup. A bit of water on the floor this week ruined some old (empty) boxes and hinted that the heavy rain coming this weekend might bring a full-scale flood. With that warning, I've picked up everything that I can, but there's still going to be a mess. Insurance is a luxury that I've never been able to afford, if I could even get it -- applying would almost surely reveal that my home business is "illegal" on some level. 

Technology: Like products, this is an ever-moving target, and one that I lack the expertise to follow. I used to care about it. I don't anymore.

Scammers & Thieves: The Russians who hacked my checkout page last month were kind of the last straw. Even though they did no actual damage, they pissed me off and reminded me that Curio City is always vulnerable. Blue Hills doesn't collect money, so it's immune to this kind of crap.

Workload: Blue Hills is brain work. Despite having a lot of facets, Curio City's routine is comparatively mindless...but it's "always on." It can demand my attention at any time, 24/7/365. Blue Hills will demand more time and intellectual involvement when it gets going, but it will happen mostly on my own timetable. Curio City also forces me to take on roles from management to marketing to shipping/receiving to accounting to IT, and more. I'm competent at some of those things, but not others. I enjoy, or at least tolerate, some of them, but not others.

Perhaps more to the point...I just turned 60. I can retire in six and a half years. Either Blue Hills or Curio City can scale down to a retirement job -- and everybody needs a retirement job, right? But Curio City is physically demanding and less portable. As my lifespan ebbs, I don't want to keep running two marginal businesses. Curio City has been shrinking for years, while Blue Hills is just getting started. Curio City is tied to inventory and shipping/receiving facilities; Blue Hills works wherever I have a laptop and an internet connection. 

PROS:

Financial: It might not bring in very much money, but Curio City consistently brings in at least something every week, and customers pay in advance. Blue Hills is still highly irregular, and payment can come months after I do the work -- I'm sitting on one invoice for work completed in February, waiting to hit the company's minimum billing threshold. Every couple of weeks, they dangle an assignment in front of me, but it never comes. Blue Hills pays me $50 an hour or more when I pays me at all; Curio City works out to around $2-3 per hour. Blue Hills will obviously win hands-down when I develop a few more clients, but in the meantime, advantage Curio City.

There are also some benefits beyond the paycheck. Curio City currently contributes $90 a month to our phone and internet bills; without it, I'd have to replace that money somehow. In better times, it bought me a smartphone and two laptops, not to mention consumable office supplies.  
   
Systems & Statistics: I'm not much of an entrepreneur, but I am a pretty good manager. I enjoy running a well-designed system and crunching the numbers it generates.

Taxes: For the past five years, Curio City has reliably lost money, and that makes a nice deduction. Even though it threatens to show an operating profit this year in the wake of my 50% pay cut, I can write off enough old merchandise to push it comfortably back into the red. Blue Hills, OTOH, has almost zero expenses, so I need Curio City to offset some of its pure profit. 

Workload: Curio City's chores aren't enjoyable or rewarding, but they do get me up and moving every day, which keeps me in good physical condition for a 60-year-old. Also, Curio City's task list is highly diverse, whereas writing and editing are just sitting and typing. Blue Hills has more potential for boredom.  

Writing this post made me realize that I just don't care enough about Curio City to want to keep doing it. I dedicated 12 years of my life to it, and it's sliding. Best-case scenario is that I get out of debt, put major time and effort into rebuilding, and eventually recover to the glory days of 2009-12. Even if I did manage to pull it off, the most money I ever made in one year was $16,700 -- that's a fortune compared to the $4,000 that it will pay me this year, but it's not a huge motivator. I can comfortably afford beer and smokes and occasional meals out on $10,000 a year. I think Blue Hills has the potential to pay me more than that, but getting Curio City back up there would be a long, hard slog. 

It's not a question of whether I'll close Curio City or not, but how and when. Now I need to work through those questions and come up with some kind of timetable.