Running a business is difficult, running a retail business is a special kind of difficult. Building a business that lasts is the hardest of all.
Sometimes, it can seem like you are walking a tight rope. Your decisions when starting up and growing can tread a fine line where failure and success are hard to predict.
If only there was a list of the top 5 mistakes that LGS owners make so you can know what to avoid. Keep reading, you’re in luck.
#1 Lack of Funding
The first and biggest mistake happens right at the beginning, before you even get started. Opening a game store is an expensive proposition. A common flaw in the plan of many would be game store owners is they underestimate how much starting capital they will need to run a business. On the surface, it looks like a few thousand dollars in stock, a couple for rent, and couple more for furniture should be all you need to get started.
On the surface that’s true. The trouble is it’s impossible to look at an LGS with an outside perspective and see all the behind the scenes machinery that keeps the business running. That and it also doesn’t account for paying yourself or your employees, labour being a business’s largest ongoing expense.
If you start a business, local game store or otherwise, not having an adequate money runway to get the business to profitability is the biggest mistake you can make right off the bat. Sometimes it can take up to a year for a game store to get to the point where it’s generating enough revenue to cover costs and begin growing.
If your business doesn’t have any reserve capital during those turbulent first few months, it could take just a few bad weeks of sales and you and your new business can be wiped out. With no fallback you would have no choice but to close your doors.
A lack of funding during the start up phase also means the growth of your business will be much lower than it could be. No extra money means your business won’t be able to get in the trendy new games as easily, you won’t be able to move on collections as they come in, and your ability to spend money to acquire customers is basically non existent.
As Dan Kennedy says “Ultimately, the business that can spend the most to acquire customers wins.”
So, how much money do you need to start with? That depends on who you ask. Some say $50 000 and others have said $150 000. Figuring out the right number for your game store will be up to you, a good rule of thumb is to calculate what you expect your monthly overhead to be and multiply that number by 12. That way you have a year’s worth of reserve and a runway that will get you to success.
#2 Too Many Partners
The next mistake many entrepreneurs make is taking on partners. As awesome as owning a local game store is, even the most successful ones are not great for supporting more than one owner. Splitting the pie into two, three, or four pieces is likely ensuring that nobody is going to be happy with the arrangement.
The other tricky aspect of having partners is that one person is usually the driving force behind the business. One partner has all the passion and dedication for opening the game store because it was their dream to begin with. The other partners are generally carried along by the first person’s enthusiasm.
But at some point life will happen.
Priorities will change or the life of an entrepreneur and business owner just won’t seem that appealing once the other partners realize how difficult it is.
If you’re reading this right now, chances are you are the first person in this hypothetical partnership. You are the one with the vision and the drive to create something. Be careful about taking on partners who may not share the same dream as you unless it’s absolutely necessary. Even then, maybe you should be considering them as investors instead.
Either way, if you do move forward with these people, make sure you have everything in writing. Expectations have to be set up front, everyone should know what their responsibilities are, and exit strategies should be established before you begin. Like I said life happens, there is no reason your business should fall apart because one partner doesn’t want to keep going.
#3 Too Many Product Lines
The acronym LGS can mean many things.
It could refer to board games, card games, miniature war games. It could entail comics, manga, anime, models, paint brushes, vintage games, classic games, and euro games. It could mean Magic, Yugioh, Pokemon, Vanguard, baseball cards, or sports memorabilia. Video games, arcade games, computer games, puzzles, or kid’s toys. It can mean a combination of a few or all of these.
The list could go on too but you get the idea.
It is too easy for your LGS to spread itself too thin. This relates to the first mistake at the top of this list. Having a product line supported in your game store means that a large amount of your floor space and money will be tied up. Having too many product lines will mean your business will be like a slow, lumbering giant. Weighed down by its inventory and unable to change direction quickly.
You will also run into the problem of some of those product lines not performing well. Jumping into a product line that seems hot and exciting at the time may seem like a good idea, but it could just as easily cool off and leave you with a pile of product that doesn’t sell and collects dust on your shelves. Valuable shelf space that could be used for other products that do move.
Investing into too many products can take away one of the biggest advantages your business has. It’s size. Being small means your store is more agile and flexible, capable of pivoting quickly and making changes that bigger, more established businesses can’t.
This doesn’t mean you shouldn’t expand your product lines, just that you should do your research first and take your time. Start small, test the waters and grow the line in a sustainable way. Don’t weigh your business down until you know your customers are interested.
#4 Not Enough Product Lines
Isn’t this the opposite of what you just said? Sort of.
Just as too many product lines can be bad for your business, not having enough can be bad too.
If your game store relies solely on the sales of a single product line, the fate of your business rises and falls with that product line too. Not being diversified at least a bit is just creating a single point of failure for your LGS.
The trick is discovering the optimal number of products to carry. You need to find out what your customers will support and buy, and you do this slowly. Gamers and hobbyists usually have more than one interest.
Rarely does a person only play board games, or only play Magic. Getting to know your community of customers is the best way to understand what they want to spend their money on.
You should try to find the balance where your business is carrying just enough so that everything in your shop is turning over at a good rate.
While we’re on the subject, figuring out the turn rate of the product lines you carry is where you should start. The turn rate is how many times a specific product is sold over a given period of time, usually a year.
If the turn rate is low it may mean the product is unpopular and the shelf space it’s occupying could be put to better use. If it’s too high it means your business should likely carry more of it because you may be selling out and losing sales because of it.
Turn rates are different for each product line, according to an article on RPG.net by Lloyd Brown these are the numbers you should be aiming for.:
- CCGs: 6x to 20x
- RPGs: 1x to 6x
- Minis: 2x to 8x
- Board games: 1x to 4x
Figuring out your turn rates are a good way to know exactly how well your product lines are performing.
#5 No Community
Gaming is a social activity. Games create a shared experience, whether it’s around the kitchen table at home with friends or across the table at a tournament with an opponent.
Being a gamer means being part of a culture and community. If you aren’t focused on building and nurturing that community than why even bother with a game store. Your money and time could be much better spent elsewhere.
An LGS lives and dies based off the strength of its local community. Making sure that your customers feel welcome and valued is important to ensuring they keep coming back. Creating a place for them to enjoy their passions and build friendships is one of the most powerful elements of an LGS, it’s one of the key differences between a game store and just another business.
Game space in your store is the obvious first component, but building a community is more than just tables and chairs. It’s the attitude of everyone who is involved in your business, the atmosphere you create, and how you interact with customers in store and online.
If you don’t focus on building your store’s community, an LGS who does will sneak up on you and “eat your lunch” as they say.
What do you think about the 5 mistakes that LGS owners make? Did I miss any? What are the top mistakes you see game store owners make in your area?