New small business

[Bazinga22]

I started my business when a local used book and movie store closed and I bought out the remaining inventory. 9,000 + books, 1,000 + movies, cds, all priced and shelving for $1,200. Our location has been open almost 3 months now and we added video games, toys, comics & collectibles, also people can Buy-Sell-Trade all in one location. We are not where we need to be yet, mostly because of rent & utilities that cost $1,000 a month, it was more because I'm month to month and not in a lease. I know that I have competition from other stores, we are unique in a way that we cater to the Nerd, Geek & Gamer which our inventory appeals to all ages plus it's a collage town. I have been considering getting a loan or have an event to help raise funds to secure land and a small building, I understand businesses tend to fail in the first 5 years, even if we started on a 1/4 acre of commercial property and a converted shipping container or metal building, something inexpensive that we could expand out in the future. Also the thought if we don't do well, we could always rent out the building. Is attempting to invest in land and a building a good idea this early ? My thoughts are getting someone to sell a small piece of commercial land might be difficult , which there are 4 good areas in town and everything seems ridiculously priced. Trying to get a loan would be my last option.

[trunker]

I would focus on trying to get where you need to be right now without taking a loan out... My opinion though. I don't like borrowing money unless I am certain the outcome will be positive. I would try and make what I have more profitable.

Do you have any online presence at all? Have you considered using Amazon? Ebay? Maybe listing odd or rare collectables that are hard to find?

Do you have room to make a gamer's lounge? Have LAN parties? Something unique? The new Harry Potter book is coming out this summer and people will be lined up at midnight for that, same with popular games for playstation and Xbox? Can you capitalize off of that somehow?

Have you had a grand opening or marketed to people to let them know you exist?

I really do not have a lot of knowledge about your niche but I would try and come up with something that brings people back often. Book stores have turned to selling coffee and pastries to make money.

[Business Attorney]

Is attempting to invest in land and a building a good idea this early ?

Every situation is different but normally I would say that it is not a good idea. Unless there is simply no commercially reasonable alternative, I think a retailer needs to concentrate on its core business. An investment in real estate is not your core business.

In some cases, such as franchised fast food businesses, the real estate location is so important that it is a core aspect of the business. Most franchisers have professional real estate teams as a integral part of their business.

For most retail businesses, however, owning the real estate is a distraction. If the real estate proves to be too small, or too big or not the best location for the business, your hands are tied.

[Bazinga22]

I have set up amazon and eBay accounts, though I have focused more on the store itself.

The reason for wanting land and a building is security, the city is growing and will be starting it's 6th shopping center this year, another video game store is opening soon with twice the space of gamestop making it the 5th one in town. New games and midnight releases we have 2 walmarts and 2 gamestops within 10 miles.

My location is probably 1,200 sq ft in front, it is in the location our city markets to tourist for unique stores there are 8 restraunts in a five block radius, once it warms up the foot traffic will pick up., the building across from me host's events and the Chamber Of Commerce.

We began with social media ads, passed out flyers and business cards and this month we started radio advertising, next month we will have our Grand Opening and already started announcements for that plus people can come in now and sign up for our give away for 4 tickets to the batman vs superman movie. I still need to get some t-shirts made, talk to the news paper and possibly the chamber about a ribbon cutting ? Plus our social media page we post new interesting items and that draws people in, plus they share it with friends.

We have a small area with a tv we might do 1vs1 game tornaments, people have offered to bring consoles and tvs, a couple tables so far for card and board game nights, possibly a movie night collage students wanted that plus we do have soda and candy. What really helped has been the Star Wars and other toys, some new and old toys from the 90's that you don't see very often, but our prices are better then the new toys. We have a few items like a lego DeathStar that no other store around has, a couple collectors editions of games that sold out in only a few days, nerf guns, legos. Our goal is to get people to trade in items so we constantly get new inventory, save our money and make profit. In the past two weeks people have traded in 300 movies and 100 video games.

They open from 4-1am , I normally open 10- 6 pm and I've been adjusting my hours, staying later it helps. The locations around me close down about that time and traffic dies down as well. Unless there is an event across the street, normally on the weekend.

[Freelancier]

If you have money to invest in land, maybe you need to get off the month-to-month lease and get a 1-year lease instead.

That said, my understanding of retail is that it's all about maximizing profits per sq foot. In other words, look at every piece of inventory that's taking up space and figure out whether it's either directly or indirectly providing the profit number you need to stay open. If it's not, time to dump it. If the inventory isn't "turning" enough times a month, time to look at that and figure out how to move items that are just sitting there. Remember that a square foot also takes into account height (not in math, but if you break it down, the airspace above a square of your floor is also part of that square when it comes to inventory placement), so figure out how to stack more inventory into a smaller space, which then lets you have more inventory, which can then increase your profits if all that inventory is being sold.

And, yes, adjust your hours to the local area; if Friday night dinner walking traffic is good during the summer and those are potentially good buyers, stay open those hours to capture those people. On the other hand, if 10 in the morning is too quiet, open at 11 instead. Just because the average store is open 10-6 doesn't mean that needs to be your hours, as long as you're consistent for a period (i.e., don't vary it week to week unless there's a special event to extend your hours).

So, to summarize: (1) Look at your inventory and figure out what's not contributing to your profits and figure out how to eliminate it; (2) look at your floor space as a grid and figure out how to maximize profits per grid space; (3) adjust your hours to match the traffic pattern for your best potential customers.

Oh, and get off the month-to-month lease if you can get a discount from the owner for doing that. On the flip side, don't sign for more than a year, because you might get hung for the rent if your business goes out of business (just as you would if you bought a piece of property for your store and end up closing the store, but in the case of renting, the period is shorter and you have more flexibility to relocate if your traffic moves to another part of town).

[kimoonyx]

Hi Bazinga,

This is what I do bro... so...I'm gonna give you a bunch of freebees here...I wont even scratch the surface of what I do so it will not endanger what I do in terms of consulting to share and help. first off. You have entered a market that is perceived by many to be in decline. There is no doubt about it. but as I said that is a perception. Lucky for you, there is currently an upsurge and desire for printed entertainment, and retro/new video gaming. Do not try to be Game Stop.. you cant... be very different from them. They no longer resurface on site... get a resurfacer, make sure its a good one as the new games are out on blu ray and many of the inexpensive resurfacers do not do blu ray. If it says blu ray "ready" its not. Your POS system will make you or break you because of the video game portion of your market. They go up and down like mad... you need something reliable that handles pricing. Binning is nice too as filing by the alphabet doesn't work for many reasons. If you are filing by the alphabet like most indie stores are, I can tell you that your cash wrap takes about 4 minutes too long for each customer. look into binning. It is very important. you also want to look into repricing. does your system catch, and handle reprices? If a video game drops to 30, and you still have it at 45, you are going to end up getting stuck with it. similarly, if a new level comes out for a game, and gamers flock back to it, and a 30 dollar title jumps to 45 and you sell 8 at 30. you lose again. Indie stores without a quality POS are at a loss because if your inventory is big enough to succeed in this business then it will be impossible to comb through it manually twice a day to handle repricing.

gaming areas: (video games) they dont make money domestically. plain and simple. focus on the retail... have the gaming area to differentiate you from game stop and bring people in but do not put your time and energy into it.. set some games up at the beginning of each day and let people have at them...maybe run a smash bros tournamant once or twice a month for your customers. It will be nice to have... but will help profits indirectly, and will never be a profit center...let that be the end of it. understand this. Most have a set up in their homes in domestic us/canada. they have no need to pay you by the hour to play in your shop so keep this area small... i know folks wish it were true.. almost every client I have starts with the dream of becoming like, a coin free arcade of the 80's late 90's. it will NOT happen... We have some shops that were able to achieve this but they are in asia and the Caribbean in areas where internet and the hardware is scarce. Focus on your retail... focus on adding distributors of all kinds of nerdy products.. If you want a play area that will fill up... go to costco and get some folding tables and chairs, sell board games and trading card games and pop trading card packs and sell singles.. boom... success.

New titles... to be successful your store should be about 75 percent preowned and 25 percent new. Make your new products relevant... use preorder data to determine which titles you want to order heavy at launch focus there to avoid getting stuck. your dependent on trades, its where your margins are. you MUST have new games to bring in trades at a high enough level to benefit properly.

Cash is king so keep yours... do everything you can to pay store credit in all facets. service recovery, trade values, tournament prizes, and limit store credit except for same day trades to preowned. Do this correctly and your customers will remain satisfied.

Lease your building! why in the world would you want to put that kind of risk on the table. I recommend a different type of location for store 2. strip mall... front facing, no pad locations.. no indoor malls..AT ALL... make sure they can see your signage and make sure your sign is max size to city allowance and LED lit.. incandecent is dead. if you have a channel shaped led sign that is brighter than those around you and it can be seen from the road... they will come... if they cant see you... they wont..

Loans... leave em alone... focus on trades.. take in as much as you can, as your trade inventory builds... 3 things happen... your high margin items come in at a lower cost of goods, making your cost to goods sold to sales ratio become inverse as traffic picks up which is a rare edge that we have in this industry. your inventory will cycle replacing items that you paid a higher cost for with items that you paid a lower cost for. your margins will increase and you will begin to see an upward change in terms of profit. The other benefit is that it is an excellent way to gain the inventory needed for store 2 in lieu of a loan. after youve been in business for a while you will get calls from factor organizations looking to purchase your receivables (credit card deposits) they are gonna offer you a chunk, to be paid back by your credit card transactions... DO NOT DO THIS. It will be a losing proposition for you.

brother I could go on forever... there is so much more, I have to retain SOME stuff for my clients :) You are in a market that can succeed and does if ran correctly... let the perception of decline work in your favor. Game Slops are closing all over the place. gamers are idealistic, and they have said bye bye to game stop, but not to game stores. (i know you handle many other types of media... video games are the tricky part and thus my focus here, you also mentioned game slop in your article) The more competition that falls to hubris, the more market for you.

Good luck bro... do it up! LIVE WHAT YOU LOVE!!! :)

[Bazinga22]

So far things have picked up, not where I need to be yet but it's improving. I have decided to get rid of the books not relevant to the stores theme and trading them in for store credit for things that i can sell at the place I received $130 for 5 containers of books which was 9 small bins of theirs and they had books to give back, though I didn't take them because the closest place is 100+ mile drive. A person once asked if I would sell 2 shelf fulls of books I offered them for $120 cash they didn't take it, 1 shelf both sides filled was more than 5 containers. We still have about 90 containers worth of books.

The space the books take up is about 1/4 of the store, that is a good amount of size space. The idea of investing in a small coffee bar has crossed my mind, it would make us a very unique place. We just need a few tables and chairs that we planned to get anyway plus the video games we already have would go well with that, drawing more people in. The hospital is 5-6 blocks from us and the college campus is 10 blocks. There are two local shops about a mile past us, one merged with the other becoming the same shop.

The idea of buying a piece of land and building would be security as the city grows, land and building prices will go up, becoming harder to find. If we started small now we could develop out as we do grow, if the building was bigger than needed we could find people to consign items. If we didn't do well we could rent, lease or sell it as a package turn key business, building and land.

[steve imke]

What about buying an old RV trailer or better yet an cargo trailer and use it like a mobile store. It works for food trucks! You could move it from location to location and use social media to help people find you. If don't work you can sell it and be no worse off.