You Need Another Zero

Happy New Year! Let's start there, and build from that! The new year means new goals, and for aspiring entrepreneurs around the world sometimes that new goal is "I'm finally opening that game store I've been talking about!" If you've been in this industry for any amount of time you've had other aspiring store owners come to you and ask you for advice. My advice almost never changes. "You need another zero." I've been approached by people who say they have ten thousand dollars, and I've been approached by people who say they have twenty thousand dollars, but among the dozens of people who have asked me about opening one of these things I've only one in my life spoken to a person who understood they needed at least a hundred thousand dollars, and had it. In every other case I've been appalled by the idea that people thought they could open on ten thousand dollars or less.

Recently a 'Go-Fund Me' post came across my desk with someone attempting to crowd source the ten thousand dollars they believe they can open a store on, so today I find myself laughing at the appalling low standards of our industry if someone believes this is a real life monetary figure. Today, we'll do a thought exercise to see where that $10,000 goes? Ready? Let's start with our theoretical retail space. We'll start with a modestly sized store, 2,000 square feet, approximately half my current space. The national average is $17.67 per square foot in retail rent. That means our 2,000 square feet will cost us $35,340.00 annually, not counting any triple net fees that get added to this. We'll be nice and pretend they're included, so our monthly rent is $2,945.00. You're going to have to pay first month and last month on most retail rental agreements, so let's take that out of our ten grand.

$10,000 - $5,890 = $4,110 Starting at the back of our theoretical retail space we'll want to build some play space, because butts in seats and all that. (Despite the sarcasm in that statement, play space is vitally important in building the 'third-space' that makes the modern brick and mortar game store successful.) We'll start off with seating for 24 players, meaning six Lifetime tables and 24 Lifetime chairs. Six tables at $48.00 each = $288.00 Twenty-four chairs at $20.00 each = $480.00

So we've spent $768 on the bare minimum, barely acceptable, industry standard tables and chairs, and can now seat twenty-four players for card events. Take that from our $4,110 we have left. $4,110 - $768 = $3,342 Now, we need to be able to display the merchandise we want to sell. To do that we'll need slat wall, gondolas, display cases, and a cash wrap. We'll start on our walls, where we can get 4'x8' slat wall for about $50.00 a sheet. That means we need $100.00 for each eight foot tall by eight food wide section. If we do the first twenty-four feet of each wall in that slat we need twelve sections of slat wall, at a total of $600.00. Then we need some floor displays. I'm partial to the Maple slat wall display gondolas, which cost about $200.00 each and are 2'x4'x4'. We can go with only four of them and provide nice wide aisles to start, but we've spent another $800.00 here. We still need a place to check people out, and glass display cases to build a counter with. Two maple display cases at $300.00 means we've spent $600.00 more, and a maple cash wrap large enough to hold our POS computer and check people out will set us back another $200.00. So we're out $800.00 for our cash wrap area. $600 (slat wall) + $800 (gondolas) + $800 (cash wrap) = $2200 $3,342 - $2,200 = $1,142 Now that we have shelves and gondolas we need to be able to put things on them. We're going to need hooks for things with hang tags, and shelves for large boxes, as well as brackets to hang those shelves.

The 12"x 24" maple shelves work perfectly for most of what we do. We're going to need to build multiple rows of shelving, and we've hung hundreds and hundreds of inches of slat wall. Half of our gondolas will be boxes, so we'll need 16 shelves for our gondolas. Then if we're being way conservative we'll need half of our slat wall to be shelves as well, so let's call it 48 more shelves for the slat wall. 64 shelves at $9.00 each = $576 in shelves

Each of those shelves will need at least two brackets, but with the weight of much of our product I use three. Sixty-four shelves at three brackets means I need 192 brackets. They come in 12 packs for $29.00. Sixteen boxes at $29.00 means I'm spending $464.00 on brackets. $576 + $464 = $1,040. $1,142 - $1,040 = $102 (that's what I left of my $10,000, if you're keeping track). Now we need slat hooks for all those hanging items, expansions for certain games, card sleeves, etc. I use four inch, six inch, and ten inch, hooks in my store, but we want to make things easier for our start-up here, so let's just buy the six inch ones. How many do we need? Boxes of 25 hooks cost us $12.00, and we're going to need, what, 200 to start? 200 hooks, 25 hooks per box, means we need 8 boxes. $12.00 per box, times eight boxes = $96.00 for hooks (and I think we don't have nearly enough hooks, but whatevs) $102 - $96 = $8.00 (we're running out of money) We have a cash wrap, but we don't have a point of sale system on it yet, so we're going to need one of those. I'm going with Lightspeed here because I know it, and there might be cheaper POS options out there. $700.00 - Annual Lightspeed service agreement $2,000.00 - Computer that will run the damn thing. $2,700 - First year POS cost. $8.00 - $2,700 = ($2,692.00) We are now ready to stock our store, and we're only several thousand dollars in the hole before we buy any of the merchandise we need to sell! To figure out how much of that merchandise we need we have to do some math. $2,945 - Monthly Rent $300 - Gas/Electric $100 - Internet $150 - Insurance I'm leaving off a lot of expenses here, like payroll. I mean, you're going to have to pay your bills at home unless you're living in your office, so you should probably have some money left to pay yourself as well. So those monthly expenses come in at $3,495.00. Annual fixed fees are approximately $41,940.00. So we need to make $42,000 in annual sales, right? Wrong. We also have to be able to buy the product in order to make those sales. We're not going to get max tier as a new business, and in the world of tiered discounts we're going to be making only a 45% margin on a lot of product in the early days, if we're smart about it. So, to make $45,000 we need to make $100,000 in sales that first year. The very best retailers can count on turning their inventory six times a year, so to make $100,000 in sales we need to have about $16,700 in inventory. Except that first year retailers aren't the best of us. A turn rate around four is more common in a first year business, because this is also when you'll make mistakes and buy some of the wrong stuff. So, we probably need $25,000 in retail inventory. To buy $25,000 in initial inventory we're going to need to spend about $14,000. We were already overspent by $2,692.00 before we started purchasing inventory, and now we need another $14,000. ($2,692.00) - $14,000.00 = ($16,692.00) That, maybe, just barely, sets up to pay our bills for the store in the first year, hopefully. Of course, at this point you're working every hour the store is open, and if you're not keeping real hours in your business you're never going to build any steam and grow. So, how much is your time worth to you? Let's be generous and let you close one day a week, pick one. I think it's silly to be closed any days, but you can have one day off a week, and be open eight hours a day the rest of the week. Let's call it noon to 8:00 PM. You're now working 48 hours in the week. Do you want to get paid? The median household income in the United States in 2017 is just under $60,000. I'm going to generously allow you a fictional roommate or spouse who makes half of that, so you need to make the other half. That means we're adding $30,000 to your annual store expenses, meaning we need to add approximately $55,000 to our annual sales. That means we need to add $13,750 to our average retail inventory, so let's call it about $7,500.00 in additional wholesale startup costs. ($16,692.00) - $7,500.00 = ($24,192) So we've budgeted about $21,500 for startup inventory. Any idea what that looks like? Let's place some sample orders. Wizards of the Coast I'll assume if you're deciding to do this you'll be supporting the most popular card game in the world. It's had its ups and downs in 2017, but you'll still need the consistent revenue it provides.

Standard (the most common constructed Magic format) contains five current sets, but is about to include a sixth one. We're going to want some of all of those in stock, yes? People want to buy packs, or we hope they do, at least. So, let's do two boxes of each of the standard legal sets that we're not currently drafting, so eight boxes of Magic spends our first $608.00. We're going to need more of the most recent stuff, and I'd start with a case of each, Ixalan, and the upcoming Rivals of Ixalan. Twelve boxes of Magic means $912 or so dollars. To provide some legitimacy we're going to need some of the other Magic stuff as well; Duel Decks ($64 per display), maybe Explorers of Ixalan ($35) and Archenemy: Nicol Bolas ($32). $1661.00 (Magic Orders)

While we're dealing with Wizards we should probably make sure we're carrying the most popular role-playing game in the world, yes? The D&D line is large, expansive, and every piece of it is worth carrying. Let's just start with the basics though, so we'll carry the Starter Box, the PHB, the DMG, the Monster Manual, and the most popular of the books. Three starters = $30

Three PHB = $75 Two DMG = $50 Two MM = $50 Two DM Screens = $15 Then there are four or five other books worth carrying immediately, so we're going to call it another $125 in D&D product. We've spent $345.00 on D&D, and it's a meager selection that probably isn't large enough. $345 (D&D Initial Stock) $2,006 (Total Wizards Order) Wait, not the total yet. While you're placing your Wizards initial order don't forget Risk Legacy, two copies of Betrayal at House on the Hill, one copy of Widow's Walk, two copies of Betrayal at Baldur's Gate, and two copies of Guillotine. You've spent another $160.00 or so. $2,166 (Wizards Final Order) Board Games

You're going to want to carry board games, right? But which ones? You can purchase a single copy of my best selling fifty board games for about $1,600 wholesale. My Top 50 accounted for only 30% of the sales in the category though, it's that book store effect we've talked about before. So $1,600 accounting for 30% means we actually want to spend $5,300 or so to build that department well enough to do what we need it to.

So we've spent $7,500 or so, and we've done Wizards of the Coast and some board gaming. I'm not going to keep going from here, but you can see how this continues, yes? $10,000 doesn't open a game store. $20,000 doesn't open a game store. At $30,000 you might be able to build the barely acceptable store, that's what my 'I'm ashamed of it' example above is tracking towards, $30,000 in initial outlay, with no money set aside for emergencies or operating capitol while we start things out. At $50,000 you might be able to do it. You might be able to build a large enough inventory and have the cash reserves to keep the store running while you're building a clientele, but really, you shouldn't try to do this for less than $100,000. We've gone with the cheapest possible everything in the above examples, and shouldn't be proud of that store at all. We haven't put a nice light-up sign out front so that people can find us. We haven't spent one penny on advertising, and we've barely built an inventory. At $30,000 you are setting yourself up to fail unless you manage to open in a town where rent is $8.00 SF and your nearest competition requires a passport to get to. At $50,000 you're maybe on the hairy cusp of possibly being around in three years. If you want to open one of these things for less than $100,000, I'm going to bastardize Nike here to start your new year off right. Just don't do it.

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