Five Unseen Costs that Threaten Game Stores (GameHead)

Posted: September 27, 2012 in Uncategorized

I’ve highlighted a Michael Bahr post before, but I wanted to do it yet again – just because of the fascinating information contained within.  As owner of Desert Sky Games, he has a lot of insights into the gaming industry.

In his latest article at GameHead, he talks about five unseen costs that can destroy a gaming store.  He starts out…

Pete Proprietor, owner of the fictitious Rocky Mountain Gamesters (RMG) in remote northeastern Arizona, is an intelligent game store owner who came to town with a thick bankroll and a great business plan. Pete opened RMG in a great shopping plaza with a beautiful fixture buildout and cutting-edge point-of-sale infrastructure. RMG grew a solid community of players and has regular traffic providing consistent cash flow. The part-time employees keep RMG clean and attractive. Pete’s rent and utility bills are reasonable, and he even gets free haircuts from the barber shop next door in exchange for referrals. RMG has been open for six months and everything appears to have gone according to plan.

And Pete is about to go bankrupt.

Somehow, it hasn’t added up. Despite good margins and income, RMG is bleeding cash. It started as a blip on the radar in the early months, a net return figure 10% lower than it should have been. Then it snowballed. Pete’s net shortfall actually got worse in the month of the highly anticipated new Magic: The Gathering “Risen Empires” expansion. Every month, the shortfall grew larger. Pete missed payroll for the second time in a row and his two part-timers quit. Pete had to use inventory seed money for bills, and the shelves began to thin out. JHC Distribution cut Pete off on his net terms, and now every order is “COD–Cashier’s check.” New releases have stopped showing up on time, and just this week the store ran out of Magic “Persian Nights” boosters before draft night, prompting grumbles from RMG’s loyal player base. The Arizona Department of Revenue is fining Pete for being late paying his sales tax. RMG is falling apart at the seams. How can this all have happened, when Pete was doing everything right?

Pete had control of the costs he knew about, the costs that are “seen.” The costs that are causing Pete’s demise with RMG are the ones that customers, and even many owners, fail to see. Pete Proprietor, for all his acumen, failed to see these costs until it came time to reconcile the books.

Want to see these five costs?  Check out GameHead to read the whole, very good article.



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