Knit Spin Weave reached it’s third birthday in October. A real milestone in terms of survival for start ups. Although now in the fourth year I am in no way profitable. We are so conditioned not to talk about money, particularly so for women of my age group, so this might be a little uncomfortable for many to read and many will feel it’s TMI, for us over 50’s that stands for Too Much Information.
I often get asked, “How is it going?” The motivation for asking this is often hard to judge. Are they asking out of genuine concern as they don’t want to loss their favourite shop, are they asking out of curiosity, is owning a yarn shop their dream too and they want to know if I’m raking it in.
Well, Tracy, how is it going? How is the shop of your dreams measuring up? Has it turned into the money hungry monster that many start up businesses become, gobbling up every cent that comes through the door and leaving nothing for the owner/mother. Well to put it simply, it has done that. Which isn’t unheard of for most retail start ups. We start with limited capital, many too limited and that tends to be the downfall of those who don’t make it to the end of that first year. They run out of capital and the business isn’t generating income and they can’t eat what is sitting on the shelves. Making it past the first year is tough but not as tough as making it to the third year.
So here is the rough numbers that no one ever discloses, because we don’t talk about money you know. so I will fudge and round things up and down and these figures aren’t truely exact but will give you the idea..
I started with a capital investment of $40,000. $20,000 went into stock $15,000 in set up costs and $5000 in reserve. By the end of the first nine months of trading I had generated a turnover of around $45K and expenditure of $80K! With those figures I had managed to make a profit of about $1,000, I had not paid myself and every cent coming in the doors was going back onto the shelves. I had grown stock to about $30,000. The bank account was almost empty and we were living off Peter’s wage and family payments. It was costing about three tanks of petrol a week to get to the shop a week, being paid out of the family income. My friendly accountant happily informed me I was actually doing really well as most start-ups make a loss in the first year. I had at least made $1,000 for 9 months.
The end of year two came with the challenge of moving after the landlord wanted a higher return on his investment and being left with no extra money to pay for new signage. At the time it almost brought the dream to an end, but like all good stories the challenge made it interesting. It forced me to grow. It established and cemented my friendships with customers/friends and built community. I ended up in a better location and had a fabulous moving experience enjoyed by all involved. Moving to the Edwards Mall has made me more accessible to many, plus given me a community of fellow retailers.
Income for year two increased to just under the threshold for GST registration! I missed it by about $200! A bit of a relief as I was dreading having to manage GST. I managed to spend $80K on expenses once more!
Remember turnover isn’t profit and my profit margins aren’t 100% like many industries, mine are more like 60% over the full range. A turnover of $75,000 so roughly a gross profit of $25,000 for the second year out of which my lease expenses of around $20,000, insurance about $1,000, electricity and other overheads needed to be paid.
Year two saw Knit Spin Weave make a profit of $2,000! I had doubled my profit from the previous year. Still no drawings and the hungry toddler of a yarn shop was still gobbling onto the shelves all the money, with me still having not learned to be disciplined with limiting the expenses. I had also managed to grow the stock by another $7,000.
Came with extra challenges, more competition saw my USP (Unique Selling Point) evaporate. No longer was I a destination store as many of my unique offerings were no longer unique. That is business and although very upsetting, at the time, the competition in the long run, like the landlord increasing the lease on my old shop became a positive not a negative. It forced me again to grow, to look around again at what isn’t being offered and after a visit from Amanda of The Calm Nook Crafts I became South Australia’s Scheepjes dealer. I once more was a destination shop, plus my turnover boomed and I well and truely hit that $75,000 required for GST registration! Something I had dreaded, but I’m so far finding surprisingly easy. I certainly have to keep my books up to date, also a positive side effect. The bank must of also had great faith in me ( or knew we owned our home and they could sell it for more than the overdraft) and gave me an overdraft to bring in the new stock, so for the first time I was in debt!
So figures for Year 3. Turnover was increased to about $95,000 and expenditure also increased due mostly to bringing in the new stock , a new phone plan and electricity through the roof to $105,000! And once again I made an increase in the profit to $2,500! still no drawings and now with an overdraft debt. Stock increased by $20,000 and Peter and I are still talking. Although the joking about stock levels has become more serious and accompanied with a frown.
Hard to believe Knit Spin Weave is now in it’s fourth year! I am starting to wonder if the dream may be more of a nightmare at times. Four years of doing it tough in the hope that eventually I will have a viable business that will pay me a wage. I’ve finally come to the conclusion that it may never pay me a wage. Although my lovely suppliers and gurus do tell me it takes five years to be paying yourself, so I’m almost there, if that is the case. I’m also desperate enough to do what I was told to do four years ago and be serious about the webstore and site. The local market, even with my lovely customers from as far as Whyalla and Adelaide, is just not large enough to generate the turnover needed to produce a profitable retail business. So here I am writing a blog to generate traffic to a website, so it gets picked up by search engines and gets ranked higher in the searches! I’m enrolled in SEO and WordPress courses to try and get my head around it all. I’ve implemented a POS (Point Of Sale) system to manage my inventory. Selena Knight would be proud. I’m sure she would also be rolling her eyes as from day one she was trying to tell me. But l’m a pretty slow learner at times, especially when my dream of having a yarn shop involved me sitting knitting most of the day.
So will Knit Spin Weave make it to Five Years?
Who knows, I like to think it will but it’s going to take a lot more listening and work by me. I do love what I do and do what I love and even if Knit Spin Weave doesn’t make it, I will never have any regrets about trying to live my dream. But the dream is changing, it no longer has me sitting all day knitting. It has me planning, learning and working. Although I will of course be sneaking in that occasional bit of knitting out the front and justify it by calling it marketing.