Finally Entered the Fastlane - Hobby store & Ecommerce - Progress thread

[Jeix]

Hello fastlaners, I've been meaning to make this thread for a while.

- A short summary of my life -
I'm from Italy and I'm turning 29 this year 2023. I first read The Millionaire Fastlane 5 years ago when I was working in real estate and being paid under the table to ring doorbells for over 40 hours a week for a measly €750/month, a fitting end for a person that thought getting a university degree would change the reality of the job market in this country.
When I quit that job, I knew I wanted to make something with my life but I had much to learn still.
Aside from some failed hustles such as an app I wanted to make that ended up nowhere and other things, I started creating content online and was able to slowly grow that into a huge source of income (compared to my peers and the average income of my country) over the following years. In the meantime, I also met the person who is now my wife.
After my income reached a comfortable €2500/month (higher than the national average of my country), I began moving it more to the side and spent the past 12 months doing that. I barely lost any paid subscribers as I moved from creating 8 videos a month to just 1. Thanks to the sheer amount that I had created by hustling between 2018 and 2021 a lot of people were still coming in just to enjoy what I had already made and didn't mind a slower upload schedule.

The product of this five-year hustle is a job that I can work from home (or anywhere I have my laptop), only requires a handful of hours every week and brings in more than double what I would make from any full time job.
It was time for me to take my next step.
My job was nice but it would always stay a job, dependant on my own time and my own effort. It was hard to scale and hard to automate. At one point I was banned from youtube and lost the over 10,000 subscribers I had struggled so hard to build. Afraid that my life was too vulnerable and dependant to the whims of the giant corporations that control where people share and monetize their content online, I knew I needed something different if I wanted to truly own a business that I could call my own. I could continue this job to the side but it was far too risky to bank staying full time on it, especially since I had just gotten married.

- Entering the fastlane -
I've been passionate and knowledgeable about card games my whole life, having spent many years playing all sorts of card games and trading cards all over. I noticed the lack of a good store of that kind in a big town near where I live, with almost 100,000 people living there. I gathered 3 friends, all of which had been interested and passionate about starting this kind of business for a while, did some research and went for it, knowing we could rely on our experience, expertise and passion for what we were doing.

We set up our company in July 2022 but we opened our doors on November 19th 2022. In the meantime, we made sure everything was ready to go. We found a great place to rent, a small store where we could house 16-player card game tournaments (a required number to become a partner with most suppliers) and we set up a warehouse/workshop in the basement (which we had to clear out, do a few renovations and set up some furniture in). Rent was cheap, overheads low. I had a website developed and hired a designer to maker sure it looked good and functioned well (we are using shopify). In addition, we have a courier service right next door that takes care of all our ecommerce shipping needs.

As we opened our doors, we made €600 in sales on our first day.
Two weeks went by and we sponsored an old group of friends who were hosting a big tournament in Milan. We set up a little table with some products at the event and made another €500.
In the meantime, we were running ads leading to our ecommerce store hoping to catch some Christmas traffic. And boy catch it we did. In the month of December, the first full month we've been open, we made €7000 in sales, €2000 of which came from our e-commerce.

- What comes next & our future goals -
As a person who has lived alone his whole life, both as an only child and as someone who quit his job and built himself up alone, I was very surprised to find out how useful and important my business partners are. They've proven invaluable, committed and determined. All four of us are working two jobs and we take turns managing the store, I could not have even started this without them.
Our goals are to develop an MO (a way of doing things) that we can later package and sell as a franchise opportunity. We are looking to have this ready within 12 months and start discussing franchise opportunities with potential franchisees by 2024.
I understand it won't be as easy to replicate the Christmas success we've experienced in December but I've already taken that into account in my future calculations.
Given our unique position, each partner can contribute extra money every once in a while should the business need it, allowing us a more aggressive marketing stance, which should allow us to grow more quickly than otherwise possible.
Another goal we have is buying a small brand currently managed by some old time friends of mine, the same ones whose tournament we sponsored, because they regularly host 100-person events every two months and we would love to monopolize who gets to sell product there (us) as well as what cut of registration fees go into the prize pool and how said pool is given to the players (we'd love for it to be our own store credit) but they won't let us fully control all that with a simple sponsorship.
On a personal note, I'm doing some house renovations and setting up a studio in our spare room for both me and my wife to work or game in, that's going to be fun! Looking to get all that set up this year too.

- In conclusion -
I hope you found this thread insightful. I'm open to any suggestion or criticism and I'd be happy to answer your questions.
I'll pose one to you too: we are getting a lot of traction from google ads but almost nothing from advertising on meta platforms. Is this something you've experienced too recently? We plan on branching out to TikTok soon as well, given how some of our card games are aimed at a younger audience.
I'll leave you with today's lesson, something I'd like to write in every post I make here if I can, talking about something I've noticed or found out in this experience I'm having as a new business owner.

- Today's lesson -
Today's lesson is actually a quote from a user on this forum whose name I've forgotten that I've come to realize how true it is.
"A business is something you can walk away from and when you come back 2 years later it's grown to ten times the size."
A lot of jobs such as creating content or dropshipping from your bedroom, however nice and comfortable they may be and however profitable they may get will always remain jobs and they'll stop working the moment you stop doing them.
I traveled to the US for the holidays and my partners continued to manage every aspect of the store for me without any issues. In the future, if the business gets big enough, we could hire employees to do that as well as a manager to manage them. At that point, all of us could go abroad for a full year and come back to a business that has opened seven new locations and a fat check with our names on it for our yearly dividends.
I know, wishful thinking for now, but an entirely plausible scenario if you play the right cards.
Notice how I didn't say "if you play your cards right".
Take it from a person who has played a lot of cards in his life: no matter how good you are, you'll often lose if your deck is bad. You can be the best player in the world but you'll go nowhere trapped in a 9-5. Conversely, terrible players will win a lot of games if they are holding a powerful deck because it will carry them with minimal effort on their part.
As we made the switch to entrepreneurs we realized that very quickly. We were in a position of power. A position we had never been into before and from which we had the freedom to do as we pleased in a lot of situations.

Take care and until my next post.
- Jeix

 

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[Jeix]

UPDATE - A Math Lesson & More

Since I'm relatively new to business and this is my topic, I'm going to share what I'm learning as I go, even though most of this stuff will sound obvious to the veterans. Hopefully there are other newbies out here that will find it helpful. Besides, I'm here to share and it's what I'd like to do.

On Retail
One thing that's important to understand about retail businesses is that most of what you make isn't actually profit because you need to immediately reinvest that money into more product to sell, otherwise you have no way of making money. It can get tricky to calculate your margin when you deal in a lot of different products all with different margins. I try to keep a conservative estimate as my average. For example, if some of my products have a 15% margin, some others have a 30% margin but sometimes I run discounts that can bring my margin down to as low as 5%, I can keep a conservative estimate and say that my average margin is about 17%. Obviously my actual margin will never be that but it's good to be wrong and find out you actually have more money than you thought rather than the other way around.

Because of what I've just described, our business is currently in a position where it doesn't have a lot of overheads, about €1000 a month on average, though a lot of them are one-time payments that happen once a year and 70% of that is just rent + accounting expenses. However, like I said, I can't generate €1000 of sales and be safe. I have to generate sales so that my profit is €1000, then use the profits to cover my costs and reinvest the rest of the money my sales generated to buy back more product to sell at a profit.
This is how our wheel turns.
If my margin is 17% and I must cover overheads for €1000, the formula to calculate the break-even point is: (COSTS/MARGIN)*MARGIN
If you are using excel, your margin will often be expressed as a percentage. You'll need to convert it into a number (for example, 17% would be 1.17) then use this formula: [(COSTS/MARGIN-1)*MARGIN]
Applying what we've learned, to break even and cover costs of €1000 when my margin is 17% I need €6882.35.

To extrapolate this data further, if I plan to make sales for that amount, I need to buy a quantity of product that's capable to generate those sales given my margin. The answer to this question is simply SALES-COSTS, so €5882.35, meaning that I need to already have this liquidity available if I want to buy enough goods that will generate the sales I need to cover my costs.

I think these simple math lessons are very important to any retail business. It's a world with low margins and plenty of logistics, the biggest challenge is probably the logistics aspect I'd say. If you can build a well-oiled machine that can deliver products to your customers efficiently, you've got yourself an Amazon on your hands (okay, not that big but you get the idea).

Naturally, any other venture I might want to go on, such as an ad campaign or simply ad spending, must be put through this calculator to determine if I expect to be able to generate enough sales to cover it or if I expect that it's okay to operate at a loss because I think my sales will go up in the future.

Predictably, the month of January was quieter than December but we still generated about €4000 in sales. Giving that it was only our second month, I thought it was going to be a lot worse. The website still accounts for 20% of our sales, proving to be an invaluable ally.

Our margin varies wildly, especially when dealing with collectible cards. Oftentimes we buy them for a fraction of their market value and sell them for an inflated amount because we operate in a captive market (a tournament where the only choices people have is to buy or to not play that card that day). Yesterday, for example, we bought over €100 worth of cards for €20. One of them alone is worth over €50.
It can be tricky to keep up with all this when this is where your business operates, so I've come up with shortcuts.

A Lesson in VAT (for EU businesses)
Companies in our country owe VAT whenever they sell something and they charge the customer for it. It's similar to US sales tax but it's always included in the price the customer sees and never added after. Also, whenever a business buys something, they also pay VAT. However, unlike final consumers, this expense isn't lost and becomes tax credit that you won't pay next time you are owed VAT.
For this reason, whenever you calculate the real margins of your products, you must always take into account VAT.
If you sell at a profit (which you do), you'll always owe VAT. The profit of a product is calculated as follows:
PROFIT = SALE price - COST before VAT- OWED VAT
If you buy a product for €8, you'll pay a 22% VAT tax on top of it.
Your total cost is €9.76, since VAT is worth €1.76.
Let's say you sell it at a profit and the customer pays €12.
22% of 12 is VAT tax that you owe, meaning you now owe €2.64 and you are left with €9.36.
However, you had already paid €1.76 in VAT so you don't owe that.
Your final profit is €12 - €8 - (€2.64-€1.76) = €3.12.
In a tax-free world, your profit would be 12-8=4 but it's actually 4-owed VAT. At the end of the day, this product has a 26% margin, not bad for the industry I'm in but not very exciting either.

Due to VAT, whenever I sell products that don't normally carry it (like collectible cards that follow market value), I always make sure to add an extra 22% to the price so that I'm certain I'm collecting VAT from the customer, otherwise I'll owe it regardless and it will eat into my profit.
You might think a customer would refuse to pay an inflated price but the world of collectible cards is full of captive markets and shipping costs. If the customer wants to buy elsewhere, shipping costs alone will probably set them back more than my extra charge, plus they'll have to wait for it.

So, how's the store going?
After mixing together all of our margins and taking into account special events that are worth thousands, I've estimated we would need about €5000 monthly to cover our expenses and break even. Naturally, it's higher than that if we start to add advertising costs and the like but I'm keeping a close eye on it.

Like I said earlier, January went well considering it was only our second month, I was expecting it to go a lot worse.
We did a one-time ad on a local TV that came with a free 13-second reel from them, which we got their permission to reuse. We put it to use as a Youtube ad and we signed a deal with a local movie theater to air our ad before their shows 100 times every week to an average of 56 people each time.

I believe the brick and mortar store has a much higher conversion rate than our website because people who took the time to drive there and check us out are less likely to leave empty-handed, even if they can find better deals online. Also, in the store we sell a lot of card packs, whereas online we sell entire boxes of them. We have a higher margin on packs than we do on boxes so if we could sell all our boxes as packs we'd be a lot happier.
Online, however, customers are always one click away from a better deal and it's harder and more expensive to get them to convert.
Still, like I said above, our store is worth 20% of our total sales, a godsend.

Early February started with a bang. We had a massive launch event to the latest Yugioh set and we sold out on our product right there, making over €1500 in a day. That was good but now we can't meet the rest of the demand on launch, which is when people go crazy and buy a bunch. Next time we'll try to stock up more so that we can satisfy launch demand and still have some product leftover to catch the stragglers of the following weeks.
The day right after we had a big tournament that we attended as a store and set up shop. Over 150 people attended and we totaled over €1200 in sales. Two of our partners kept the store open that day as well and sold a few hundred euros of product. A great start to the month and there's still another big MTG release coming up in a week, we'll see how that goes.

Our website is growing, ads aside, and now features a live chat, option to pay with PayPal and an affiliate program. We are already reaching out to content creators to have them join it and get a discount code for their fans. I think it's a great way to drive traffic that you don't pay for until you've sold something.

Our biggest challenges right now are logistics. I'd like an extra pair of hands on the job and honestly I wish there were better suppliers. They keep running out of product and every time a customer wants something it's always the thing they don't have in stock. Shipping is a nightmare, they always want cash and they keep trying to deliver when the store is closed.
As a long term goal, I wish to turn my store into a franchise and become the supplier for my own chain. I think the industry has A LOT of room for improvement that nobody is capturing because they've been running their php websites for the past 20 years and it's still working so why bother upgrading? Who cares that it keeps crashing and customers can never find what they need? I'm the biggest in the country, LOL!
If they took a page out of amazon's book they could improve their service 1000% without a lot of effort. But, again, you can't teach an old dog a new trick. Seems like it's up to me yet again.

Lesson of the day: watch your discounts and your real margin!
This is a real story from a real store owner that is now out of business.
He would offer his customers a 10% cashback as store credit, no questions asked. Meaning that if a person spent €1000 on product, they would get €100 to spend on any product.
If you are familiar with cashback programs, you know you are lucky if they go above 2%. There's a reason for this.
Let's go back to our lesson in costs and margins and let's assume this person had a resonable 20% margin on its products. If you offer a 10% cashback, is it the same as a 10% discount? Not at all. If you sell €1000 at a 20% margin, you only make €200 profit. If you then give out an extra €100 for free, you are actually giving up HALF your profit.
You must always be very careful when offering discounts or you'll risk messing up your entire business. Mistakes are costly when margins are thin so you need to be on top of your game.
I'm sure this wasn't the only reason this person went out of business but it was certainly NOT a best practice to have. Discounts are well and good but you can't forget that you must always make ends meet at the end of the day.

I hope this update was interesting to you, I'll be back next month with more!
Cheers!

 

[sanas915]

thank you for the post!!! congrats for the step that you did in your life and keep going

 

[Jeix]

March update

February went very well, we made about €8000 in sales. We had a few things going our way such as new product release and a new affiliate program on our ecommerce website. We signed up a few youtubers to promote it and we got amazing results.

I predict March will not go the same way because there's less product coming out but it's definitely a good thing that we are starting to make a splash in the different communities of our area.

We are also learning from our mistakes. This business carries low margins so one must be careful when managing cash flow. The wrong investment at the wrong time can leave you illiquid and have you miss out a big product release and therefore a lot of money.
Similarly, buying the wrong amount of a product could leave you with unsold inventory that clogs up your cash OR with you going sold out on day one and missing out on the biggest demand there is because you couldn't keep up. By the time the product is restocked by suppliers, it's already too late.

We made at least two mistakes like that so far. On top of that, we were reckless on our publicity adventures. I won't lie when I say that going from zero to 6k a month in 3 months can get to your head and my partners were falling into a sort of "whatever it will be fine" mentality that tends to make you skip due diligence. We bought ad spaces that will probably turn out to be a complete waste of money but we still managed to snatch a decent deal by paying in installments, the next one is due in September so we have time to prepare. It probably won't be our end but we definitely should tread lightly. Given the incredible results that sponsoring content creators has given us, we should just focus on that and forgo other less targeted stuff like generic ads in random spots like local movie theaters, no matter how good of a deal they may seem.

Another important mental pitfall me and my partners face is being scared of buying product because you f*cked up last time and are afraid you won't sell it.
At the end of the day, product is the only way you can make money. If you buy less and less, you'll make less and less until your overheads bury you. If anything, one should be ten times as wary of shiny initiatives (like ads or fancy spots at events that are barely related) that promise a lot but are only a guaranteed expense rather than of product itself, your bottom line without which your entire business can't function.

For our next steps, we plan on increasing our focus on the content creators because they are extremely targeted audience and they've brought great results. I think an approach focused on targeted advertising to drive both traffic and sales coupled with investments in stock can work.
Another thing we are planning on doing is hosting our own tournament circuit for card games, something that can be very lucrative if done well. We already have some contacts for it but it's something that we'll organize in March for April to give us the appropriate amount of time to advertise it.

That's it for now, see you in the next update!

 

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[Oso]

Any chance by "trading cards" you're referencing Pokemon, etc.?

 

[Jeix]

Any chance by "trading cards" you're referencing Pokemon, etc.?

Yeah, we are a hobby store so we deal in the big 3 tcgs (magic, pokemon and yugioh) and related products, on top of mangas and comic books.
We might expand into warhammer and D&D at some point in the future.

 

[KiwiEC]

MTG and WH40K are my guilty pleasures.

I have stopped (too expensive and time consuming) but I really enjoyed those universes with stategy, collecting, and social interactions.

My usual store had a room for playing, trading and meeting new people. Maybe is it a good development for the future? IF people know they can meet people sharing their hobbys, they will come frequently generating reccuring income.

When I will get successful, I will definitely spend some free time on these games.

 

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[Oso]

Yeah, we are a hobby store so we deal in the big 3 tcgs (magic, pokemon and yugioh) and related products, on top of mangas and comic books.
We might expand into warhammer and D&D at some point in the future.

Fantastic. Feel free to connect, if you'd ever like. Been in the industry 20+ years and my first brick and mortar was in this industry. Currently creating an application for players.

Always cool (and rare) to meet fellow industry peeps.

 

[Subsonic]

Thanks for sharing. It's always inspiring to see others succeed.

Gl to your store and I hope to see the franchise listed on the s&p500 some day