Losses and Gains
My last post was about a letter I didn’t write; today’s is about a letter I had wished I didn’t have to write. Two months ago today, my grandma on my father’s side died very suddenly and very unexpectedly. Geography had kept us from being close in my childhood, and it also kept us apart in her passing; every effort made to make it to the funeral was in vain. Regardless of the distance between us, I felt close in writing a parting letter to her, which I posted with my dad to be placed in the velvet lining of her coffin before it was lowered into the Illinois earth where she will forever lay.
As unfortunate as her passing has been, the experience has really strengthened the bond between my dad and I. There has never been a physical distance between he and I, but there has frequently been an emotional one. Historically, both parties were at fault, I think. Over my lifetime, my dad has introduced me to a lot of interests that I have loved from the start (history, model rocketry, complicated board games), a lot of interests I eventually learned to like (Star Wars, Das Boot, American football), and some interests I will likely never love (most 80s music, punk rock, collecting every business card known to man).
My dad always played the Good Cop or Indifferent Cop to my mom, who had to alternately play both Bad Cop and Good Cop, and everyone always told me that I came from my dad’s side of the family; I never took it as a compliment. I always identified with my mom’s ambition, passion, and extroversion and on the other hand, my dad’s easygoing nature, contentedness, and familial introspection seemed lacking. I ascribed some sort of inferiority to just going through life and being content with everything that happens. Looking back, I think I hated his traits so much because I have so many of them myself. I recognize that I am the balance of my parent’s traits; sometimes ambitious and outgoing and sometimes simply contented and introspective.
I see my history and sometimes I see it literally; while going through photo albums with my dad recently, I flipped a page and saw myself – or at least I thought it was myself until my mind recognized the person in the portrait as a 23-year-old version of my dad. On the next page was a photo of him in the mid-80s, shortly after moving to Phoenix from Illinois. Standing on a fallen pine tree, he was in his mid-20s, fit, tan, and more excited to be on the Mogollon Rim than any native Arizonan could ever be. “Ages and inches of waistline ago,” I thought, as my eyes glanced up at his belly. But in only moments, I had seen myself 30 years ago and myself 30 years from now. “Uh oh.”
In the months that have passed, my dad and I have made sure to have dinner together at least once every week. Usually this means that we end up at his new favorite restaurant of all, which happens to be my girlfriend’s aunt’s restaurant. I really can’t blame him though; once you’ve had real Chinese food, you don’t really want to eat anywhere else again, so here’s to many more plates of house special fried rice…
State of the Company 2018
At the time of my November post, I really was not at all sure what direction to take with the netting business. Over the nearly three years of running the business without outside income, I did manage to increase revenue and inventory levels, but I also incurred $13,000 in debt.
At the start of this year, wary of burnout and eager to jump into different products, I was considering a.) listing the company for $92,000 not including remaining inventory b.) selling off 100% of the inventory and then selling the brand to my competitor or c.) continuing the incremental growth of the business with a better debt-to-cash ratio. To be honest, I was strongly considering option B.
Today, options A and B are maybe still on the table, but I am focused on option C with primary focus on customer service, inventory management, time management, profit (in that order).
Here are the financials for this year so far compared to previous years (note: monthly ad spend has remained the same every single year)
2016 Revenue – 1 January to 29 June – $23,999.55
2017 Revenue – 1 January to 29 June – $30,957.22
2018 Revenue – 1 January to 29 June – $45,306.40
More importantly, the company debt-to-cash ratio has reversed while still maintaining strong inventory levels.
November 11, 2017 Status – Debt: $13,601.11 Cash-on-hand: $791.00
June 29, 2018 Status – Debt: $0.00 Cash-on-hand: $18,280.54
Even more surprising, the amount of hours I put into the business has decreased a bit. Last year from April to June, I spent an average of 31 hours on the business each week. This year from April to June, I spent 24 hours per week on the business.
Challenges in this Coming Year
U.S. Economic Health
At this point, I am not at all confident in the future health of the U.S. economy. While the concerns about China’s IP issues and increasing economic leverage are valid, the actions of the U.S. administration are completely counter-productive. At the time of this writing, the trade war has not yet even begun and already the ramifications are evident. Coupled with this likely trade war are a bunch of issues including what I see to be another housing bubble, increased deregulation of financial institutions, the continuing demise of brick and mortar retail even in a “booming economy”, increased speculation by non-customary investors (see: the bitcoin bubble), increasing inflation, and interests rates that will inevitably have to return to normal levels. I fully expect that these combined factors will bring about economic slowdown followed by a loss of confidence in growth and then a massive correction in the national/global economy. In my opinion, the question is not if but when, and every action so far made by the administration has only brought that day closer. My only goal now is to minimize my exposure for when that crash comes.
I am extraordinarily thankful to not be in the position of my competitor. My primary competitor is a multi-million dollar company with approximately 24 employees. They sell the same made-in-USA product I sell but at significantly higher prices (they have much higher overhead and focus on finished products for non-DIY customers while I focus on simpler versions of the same product for DIY customers). Since I own a pass-through company (sole proprietor LLC), the new tax cut will directly benefit me next year. However, my competitor is unlikely to benefit without significant challenge in meeting the requirements. In addition, the Supreme Court, joined by the President’s new addition, Neil Gorsuch, has just this week passed judgement that online retailers can be required to collect sales tax. Since the sales tax amount scales linearly with the total sale amount, my competitor will be at a significant disadvantage to me, since my price is already 45% lower and therefore my sales tax amount will also be 45% lower. Furthermore, their finished product contains a significant amount of aluminum (curtain tracks), which is directly affected by the tariffs; I do not see any alternative material available to them for their products so they will either eat that cost or pass it on to their customers in the form of price increases. If I were the owner of that company, I would not be happy with the administration at all, since every economic action by this administration so far has favored my smaller business while negatively impacting my larger competitor. The sad part is, my competitor is demonstrably more valuable to the overall economy than my business is, considering their revenue, how much U.S.-made product they buy, and that they employ 24 people in Georgia while I employ no one.
Apart from being wary of the health of the national economy, another challenge I need to deal with this winter is increasing operating costs. Over the past year, my business operating expenses have increased 13-fold. From May 2012 to November 2017, my average monthly operating expenses – not including ad spend/marketing – were about $45. Since November 2017, they have increased to about $610 per month. The majority of this cost has come from the addition of a pair of 250 sq ft storage units. I expect that these costs will increase again in October by about $150.
My potential solution to this problem will be to invest in non-depreciating assets (enclosed cargo trailers) using the cash I now have. While the upfront investment for a 16 ft enclosed cargo trailer and a 12 ft enclosed cargo trailer would be between $5,000 and $7,500 total, that cost would be equal to about 1.5 years of paying rent for the two storage units. My total inventory storage cost would drop by at least 80%, rental price increases would be less dramatic (only paying for parking instead of for an enclosed space), and since enclosed cargo trailers have no engines, transmissions, etc. there is really nothing about them that can depreciate, so I should be able to eventually resell them at the same initial purchase price.
I’ve split my inventory into two groups: core inventory, which is made up of 8 products comprising 90% of my sales, and secondary inventory, which is made up of 41 products comprising 10% of my sales. I currently have $22,000 in core inventory and $7,419 in secondary inventory. Annoyingly, secondary inventory takes up almost as much warehousing space as core inventory, even though it only accounts for 10% of total sales. The retail value of this secondary inventory could be as high as $44,000, but it would take 10+ years to sell it off at current rates. I have listed the bulk of my secondary inventory on Craigslist and Facebook marketplace to sell at cost ($4,987). If I can sell the entire quantity to a local buyer at cost, I would be totally happy. The other option is to take all of the secondary inventory, which is primarily unfinished/unpackaged product, hire 10 people on three 8 hour shifts, rent out a large facility for a day, and process as much of the product as possible. This plan could cost as much as $1200 a day for 3 days, but it would make the secondary inventory much more manageable and I would be able to move it all through Amazon. It is kind of risky (potentially a $3,600 cost/investment), but I am considering it for October or November. No matter what, I want/need to get rid of all the secondary inventory within one year.
My website was first built on and continues to exist on the BigCommerce hosting platform. Due to the pricing structure and BigCommerce’s singular focus of attracting large companies to its platform, it is now completely inferior to Shopify’s platform. I have built a new store on the Shopify platform and had planned to launch in March 2018, but delayed the migration due to potential search-ranking issues and wanting to be sure that I do not miss out on the summer season should I completely botch the migration. I’ve never migrated platforms before and it feels like balancing an egg on a spoon while walking, so I’m excited about the new store launching in August but also very anxious for it to migrate smoothly and successfully.
Enough about business. I’m sick of talking about business. What’s really giving me life this year is, well, what has always given me life: podcasts, gaming, and music.
Featured New Podcast Shows
Strong Towns – The most recent and exciting addition to my podcast rotation is called Strong Towns. The show focuses on incremental urban development/design, community building, and long-term community sustainability. While it may sound dry, the shows are very interesting and the less-NIMBY-more-YIMBY attitude and balanced approach of the two hosts to issues like local tax incentives for corporations/jobs, gentrification, design principles, and responsible development is something I have no found anywhere else.
Free Play Podcast from Love Thy Nerd – If you like gaming and you like church, this is the show for you. Honestly, I don’t go to church anymore and I haven’t even played most of the games they talk about, but the banter and chemistry between the hosts is really fun. They post an episode every Friday and it’s a nice break from the heavier, mentally intensive podcasts I normally listen to. Well worth checking out.
Stuff Mom Never Told You – This one has been in my rotation for a few months now, but it focuses primarily on issues relating to women and specifically issues relating to women of color, which is obviously a perspective that I wouldn’t otherwise have.
My current podcast rotation:
99% Invisible – Design
All Songs Considered – Music
Best of the Left – Politics/news, leftist
Black Media Minute – Race and media
Code Switch – Race relations
Common Sense with Dan Carlin – Politics/news, center-right
Crazy/Genius – Tech/culture
Daily Standard Podcast – Politics/news, conservative/neo-con
Free Play Podcast – Gaming, Christianity
Fresh Air – Culture
Hardcore History – History
Hidden Brain – Human behavior/psychology
History of WWII Podcast – History
How I Built This – Business
Humans of Gaming – Gaming, Christianity
Invisibilia – Culture
Make Me Smart – Tech/culture
Marketplace – Economics
Mixergy – Business
On the Media – Politics/news/race and media
Planet Money – Economics
Radiolab – Tech/culture
Reveal – Investigative journalism
Revisionist History – Culture/storytelling
Savvy Radio Show – Real estate/business
Snap Judgment – Culture/storytelling
Strong Towns – Urban development/design
Stuff Mom Never Told You – Intersectional feminism
Stuff You Missed in History Class – History
The Stoop – Intersectional feminism
The Tim Ferriss Show – Business/culture
The World in Words – Linguistics
This American Life – Culture/storytelling
God, I missed gaming. For three of the past six months, I had to give up gaming completely in order to keep up with my work and business schedules, but I just returned to regular gaming two weeks ago and it feels awesome. My girlfriend bought me an Xbox One back in 2016, but it has mostly collected dust since then. I have finally put it to use now, having bought 4k monitors for it last week and a completely revamped Xbox 1 version of Skyrim Special Edition. The graphics are incredible, the soundtrack is amazing (as it has always been), and the new mods make it completely immersive. Since I haven’t been able to physically travel outside the U.S. much in the last three years, just going back into the immersive world of Skyrim is something I have been looking forward to since February. I limit myself to about an hour each night, but it is simply nice to jump out of reality and into another world for a brief amount of time.
I tried to get into Battlefield One and Battlefront last year, but beyond the story lines, they both felt repetitive and goalless. Nevertheless, I still keep the soundtrack for Battlefield One in regular rotation and think it is probably one of the best gaming soundtracks ever. Speaking of gaming soundtracks, I recently found a really fun looking game after first discovering the soundtrack on Spotify. The game is called Abzu and although I haven’t purchased or played it yet, the open-world undersea adventure concept and wonderful soundtrack make it something I really look foward to, so I will probably get it in November provided I meet my other life goals.
Check out the Abzu gameplay trailer here on Youtube
Featured New Artists/Albums
These are my featured artists/albums of 2018 so far. Though all of my overall favorite artists are male or groups fronted by men (M83, Yann Tiersen, Odesza, Erik Satie, etc), all of today’s featured artists are female or woman-fronted groups, which is kind of cool!
Chvrches – Far and beyond any other group this year, the album I have been most excited about is Chvrches’ new album, Love is Dead. While M83 has always been my favorite group and probably always will be, I think Chvrches has surpassed M83 in terms of consistently putting out really good new music time-after-time. Their blend of 80s synthpop, Robyn-like choruses, and live-performance energy is contagious. If I get another chance to see this Scottish group in concert again and they play Miracle, Heaven/Hell, and My Enemy from this new album, I am certain that I will have to call out of work for three days just to recover.
Kacey Musgraves – In a world of “Bro Country” a la Luke Bryan, I’ve always found Kacey Musgraves’ honesty about life and general lack of sentimentality to be refreshing. Her newest album, Golden Hour, is no different. My two favorite tracks are Oh, What a World and Slow Burn.
Sudan Archives – Having only found Sudan Archives this month, I am still discovering a lot of her music, but I already have a feeling that Sudan Archives will be my favorite discovered artist in 2018. Her sound is a mix of R&B vocals backed by Sudanese violin instrumentation.
Mitski – I’ve been trying to figure out how to incorporate Mitski into a music post for months, but have failed so far, and since her new album will be coming out any day now, I am running out of time to plug her last album, Puberty 2. I’ve listened through the album at least a few dozen times and I still enjoy it. Her genre is solidly indie rock, but I can’t really pin her sound to any other artist. Being of Japanese-American descent, many of her lyrics touch on her heritage and existing in the valley between Japanese culture and American culture.
Songs of the Moment
That’s it for now. I’m starting to work on another post about my subconscious/implicit biases based on the results of my 2016 and 2018 Harvard IAT tests. Considering it took me nearly 10 hours to put together and edit this post, it may be a while! Until next time…