The Early Years

In the first few years, you’re always thinking ‘will we make enough to cover the bills? How long before I run out of money?’.   It’s an intense refrain, one that continues for days and hours till you finally make it.  Then you start wondering if you’ll make enough to pay yourself a salary.  It’s incredibly stressful, and sometimes you wonder why you decided to get into this business at all.

For most, this period lasts 1 to 2 years, 3 at the outside before you ‘breakeven’. And for a moment, there’s euphoria.  Then the stress comes back.

The Growing Years

It’s an equilibrium that is made up of a minimal salary & expenses.  Of course, no one wants to earn a minimal salary and that equilibrium isn’t stable anyway.  If you’re lucky, it moves in the right direction and you get even more business.  Of course, that business just adds more work and suddenly you need to hire.

And a new kind of stress comes – that of people.  It’s one thing when you only had to worry about yourself, about your own salary. It’s another when you realise you have paychecks to meet.  If things were slow one month, I could cut my pay and no one was the wiser.  You can’t do that to employees so you suddenly need a reserve.  One that is significantly larger than your previous one.

Then you realise that you keep running out of stock because business has picked up so much.  Now you need to carry more stock – a larger investment in capital.  More stress, as you scramble to find the money to devote to increasing stock.  You can’t touch your salary reserve, so you have to find it somewhere else.  Maybe a loan or line-of-credit? Maybe you just short-change yourself (again) for a few months.  Either way, stress.

And on it goes.  It never ends.

Coping

As a business owner (and human); the only thing you can do is learn to deal with the stress.  Whether it’s meditation, exercise, talking about it, learning to partition or just going out and enjoying your life – it’s a necessary must.  I think part of the reason most business owners fail is because they burn out; by not learning to cope with the daily stress of running a business.  It’s not easy at all and if you’re prone to ulcers; you might consider avoiding being an entrepreneur.

It’s the little things that get you – Stress is a post from: Starlit Citadel

Video Review: Dungeon Petz is a post from: Starlit Citadel

Food Fight : Snack Attack
Dust Tactics : SSU Command Squad
Dust Tactics : Operation Zverograd
Dust Tactics : SSU Airborne Transport
Dust Tactics : SSU NKVD Close Combat Squad
Dust Tactics : SSU NKVD Battle Squad
Alcatraz : The Scapegoat
Top-A-Top
Savage Worlds : 50 Fathoms Explorers Edition
Redshirts

New Board Games: May 11, 2012 is a post from: Starlit Citadel

Valuation Methods

There are basically a few major forms of valuation:

• Income Approaches
• Asset-based approach
• Market approach

Income Approaches take a run at a company’s profits to decide it’s sale value.  The simplest form of this uses a multiple of the net profit – generally between 2 to 5 depending on the business.  Sometimes, the net profit is adjusted to add back the salary paid to the owner; though that is obviously dependent on the business involved.   This is potentially quite useful if the business is profitable; but quite often (at least in this industry); it’s not profitable.  And a multiple of a negative number isn’t going to be useful at all.

Asset based approaches basically take the combined value of all the parts of a business to come to a valuation number.  It doesn’t take into account things like Goodwill or Growth factors; just the actual assets of the business (generally adjusted towards fair market value); so it actually provides a lower valuation number for an on-going business.  In a gaming business, most of your assets would be in terms of stock and potentially shelving /office equipment.  If you have a website and domain name, it might be included in this too – especially if the website has been well developed.

Market Approaches value a business based on its competitors.   It’s really only useful if you know the sale value of another business; which is uncommon when you consider that we’re dealing with private businesses here.

Discounts

Before we finish; I’d add that quite often a discount is also added to a business. The most common reasons for adding a discount is for purchasing a minority control (added risk) or a lack of marketability (especially relevant for private sales).  If you’re buying a private business; getting out of the business is a major problem since there’s only a limited number of individuals who might wish to buy it.

My Experience

All of the above factors make buying another game store difficult.  If someone is offering to sell to you; 90% of the time what they are selling is a business that is losing money.  As such, you’ll need to value them based off their assets.  However, quite often the seller bases their sale price on unadjusted value of their inventory, goodwill and growth ‘potential’ and other intangibles.  Sometimes those intangibles include things like ‘what I invested to get the company this far’.

Now, some of those factors make sense – goodwill from customers and a strong brand has value.  The question is; how much? That’s where things might get highly contentious, since a business owner is often much more optimistic than the purchaser.  As a purchaser, quite often you also have to input an amount for opportunity cost – if I paid $15,000 for your business; what else could I have done with that $15,000? To make it worthwhile, you’d need a sufficient amount of ‘discount’ or potential for profit to make it worth spending that $15,000.  On the other hand, if you expect too high a discount you won’t be able to purchase the business.

It’s this gap that I think that is often why the end game for a game shop is so bleak.  Unless you’re selling the business at firesale prices; it’s hard to get much money back as most purchasers will just value you at your cost of inventory (with a slight bump for brand name, etc).  Yet, quite often none of the years of hard work you’ve put in is valued at all; which can be quite frustrating.  Sometimes, it’s just better to close shop rather than deal with the hassle.

Business Valuation is a post from: Starlit Citadel

With such a spotlight on the game, it’s had a knock-on effect on sales (mostly). Here’s a little chart to show the ‘mostly’ for us.

Click on Image for full size

As you can see, I added a few weeks of pre-Tabletop / Wheaton to all the sales figure to give an idea.  You can see there’s a lot of variation on a week to week basis for bestsellers like Settlers of Catan, so the 0 sales on release date means very little.  Yet, there’s no real change in demand there; unlike the other 3 games showcased.

My guess? Settlers is such a popular, mainstream game that is easy to find; it’s no wonder that we don’t see a change in sales.  Customers don’t need to come to a game shop to find it – Chapters, Amazon, B&N all have the game in-stock.  The other 3 though are harder to find; and thus we receive the ‘knock-on’ effect from the publicity.

Overall, the sales of these games have certainly increased.  The danger for game store owners is correctly guessing the amount of sales we’d garner; and making sure we don’t overstock when the demand dies.  If that happens, especially for really slow-sellers like Tsuro, we’d be caught with ‘dead’ stock once again.

I’ll update this chart in a few months once the current season of Tabletop is over to get a better idea of the Wheaton Effect.

The Wheaton Effect is a post from: Starlit Citadel

Video Review : Claustrophobia by Asmodee is a post from: Starlit Citadel

Agricola : World Championship Deck Expansion
Call of Cthulhu LCG – Words of Power Asylum Pack
Hive Pocket
Maya
Revolver: The Wild West Gunfighting Game
Masters of Commerce
Labyrinth 25th Anniversary Edition
Nations at War – White Star Rising
Zombie Survival 2 : There Goes the Neighborhood
Seeland

New Board Games: May 3rd, 2012 is a post from: Starlit Citadel

Let me know what you think of the list.  I’ll also be updating some of our lists soon too – there’s been a few new games since we wrote them in 2007 that I think should replace some of those we originally listed.

Top 10 Games for Large Groups is a post from: Starlit Citadel

The Landlords

The landlord’s motivation is simple – he’s there to rent his space for the most amount possible.  Now, depending on the landlord; he might value this amount in the short-term (i.e. the most money he can get per month) or long-term (taking into account ‘down-time’ when the space is empty and the most over the terms of the lease).  He might also value his time and peace-of-mind (i.e. long term tenants who are quiet) quite highly.

So, time, money & peace-of-mind are his 3 major motivations.

The Lessee

The Lessee wants a good space, he wants a location that he can likely grow into (if they’re thinking of growth) and the least onerous terms possible including the lowest rent.   Depending on the lessee; they might also value peace-of-mind and certainly want to mitigate potential risk factors as much as possible.

His incentive is his bottom-line and any risk mitigation possible

The Realtor’s

The realtor works for the landlord generally, posting his listing in an attempt to find a lessee for the landlord.  His motivation is the sale.  There’s also a secondary motivation – a desire for continuing business from the landlord and to a much lesser extent, the lessee.  How much they value each of the above is dependent on the realtor obviously; but here’s where incentives come into play in a large part.

The realtor is paid by the landlord as a percentage (%) of the final lease.  As such, he is incentivised is to get the highest possible lease rate for the landlord; especially when you consider that the landlord likely has multiple locations to lease.

At the Table

At the table, as a lessee you need to realise that while the Realtor might sound like he’s working for you; his greatest incentive is to get the highest lease amount possible.  Close behind that is keeping the landlord happy (not necessarily the same thing).  He is not greatly incentivised to make you happy . Understanding these motivations allow you to approach the negotiation in the right frame of mind, allowing you to get a better deal.

This is true in any negotiation of course, especially when there are multiple parties involved and there often are.  It’s also why creating the proper incentives for salespeople is important.

Negotiating : Understanding Incentives is a post from: Starlit Citadel

Gold!
Coney Island
Agricola : NL Deck Expansion
Pathfinder Player Companion : Blood of Fiends
Who’s Got Game? The Game with Benefits
Tschak!
Catan – Junior!
Pathfinder Campaign Setting: Isles of the Shackles
Pathfinder Adventure Path : Skulls and Shackles – The Wormwood Mutiny
Pathfinder Module: The Midnight Mirror
Munchkin Zombies : Kill-O-Meter
Fantasy Flight Deck Box : White
Fantasy Flight Deck Box : Red
Fantasy Flight Deck Box : Green
Fantasy Flight Deck Box : Blue
Fantasy Flight Deck Box : Black

New Board Games: April 26th, 2012 is a post from: Starlit Citadel