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Sunday, January 17, 2016

My First Real Doubts About My Business Model

I am  now half way through my 7th month and I've been feeling an almost uncontrollable sense of fear. I had promised when I started this blog that I would present my journey, warts and all. So far, all of my posts have been upbeat. I have spoken of the "long game" of value creation and the importance of staying the course.

When I left public accounting last year to become a stamp dealer I did so because I was tired of living a life that I felt had no ultimate meaning. I had reached the pinnacle of my profession: I had made it to partner. Yet I was profoundly unhappy. I can still remember the exact moment that I knew I had to leave. I had just returned from the office Christmas party and I was sitting at my desk which overlooked the entire staff work area. I remember thinking "so this is it". This is all there is to my life: I'm going to come here every day and tell a constantly rotating group of people what to do and then I'm going to retire. I remember thinking "why bother?".

I love stamps. I owe virtually everything I know about this big, wide world to this hobby. If I did not see it on a stamp, then I was inspired to learn about it because something I saw on a stamp made me curious: everything from places in countries, to historical figures and events, to exotic flora and fauna. Stamps were my way and an entire generation's way of travelling the world without ever having to leave home. I really believe that so many people could benefit from this hobby and I can see from the number of Facebook friends that I have made over the past year, that there are a lot of stamp collectors out there.

So I thought that the best way to contribute to this hobby was to provide collectors with the best possible selection of material from a few specialized areas on a retail basis and to focus on quality by:

  • providing highly consistent descriptions and grading.
  • providing highly detailed descriptions.
  • providing high quality scans. 
  • shipping orders out promptly.
  • contributing to the body of publicly accessible  philatelic knowledge by maintaining blogs that I would post detailed and informative articles to that would provide information not available in standard catalogs.  
  • charging reasonable prices and giving my customers the option of making offers if they considered my prices too high. 
I have experienced some success with this model, but not enough to make a living. I have up to this point assumed that this is because I do not yet have enough material listed on e-bay and that as I listed more items, sales would increase. This seemed to be happening until December. Then sales just ground to a crawl. 

When I analyze my sales to listings ratio on a micro-level everything looks like it is going to plan. But I am aware of the fact that there are dangers inherent in using margins and percentages to analyze everything, for a business that makes a 500% profit margin is still not viable if it only sells $20,000 per year and requires a full time effort to earn those sales. 

So what if I am wrong? What if collectors really don't value any of my above contributions? What if all they want is their stamps for the cheapest possible price, offered in bulk for them to pour through?

I have avoided that business model because it is the model that many stamp dealers follow. You'd think that what everyone else is doing is a good indication of what I should be doing as well. After all, they are successful and making a living right? But that begs the question, "How do I compete?". "What is my value proposition?". "Why should collectors buy from me?".  

To me, competing purely on price has been a non-starter. I still don't see any compelling evidence to suggest that charging a low percentage of catalogue price causes sales to increase. It seems to me that all this does is signal to collectors that you do not value the services you provide the hobby and are willing to work for peanuts. It seems to me that in the long run, it will undermine customer confidence in the quality of my product, since if I cannot make a living providing quality stamps, then I will not be able to continue to do so, and the only way to survive would be to lower the quality of my service. But what if I am wrong about this?

I am wondering now, for the first time, if I should abandon the retail model and take up a modified wholesale model - one where I can take what the other dealers and auction houses are doing and add more value for customers. God knows it would be a lot less labour intensive than what I am doing now. It wouldn't allow customers the flexibility to buy the exact stamps they want when they want, but then maybe there aren't enough collectors out there that want that flexibility anyway.

I just spent $6,000 on an accumulation of 30,000 covers from Finland that were sent from Nigeria and I did not particularly want to buy it. But I had made a commitment, 6 months ago to do so, and I cannot renege on my commitments. Don't get me wrong - it is an amazing group of postal history to the right collector. I think that, more than anything, this is what has me questioning this whole model. I know that there is no way that I can ever sell these covers one at a time: there are just too many of them and too much labour involved to scan them all and upload them all to e-bay. I didn't realize that six months ago, but I knew last week when I made the payment. 

So, I'm going to have to sell these in large lots of 100 or 500 different covers. Even if I do this, that will mean 60-300 lots, which is still a lot of work. So Steph and I are going to try it and see what happens. I have also discounted by prices by 20% across the board to see what the impact is until next Friday when the sale ends. It seems to me that if the discount does not cause a significant increase in sales, then it will suggest that lowering price is not the answer. 

Hopefully my next post will be more upbeat, but for now I am at that low point that I keep reading about other entrepreneurs experiencing. I am slowly coming to terms with the idea that maybe my survival depends on my willingness to deviate from running my business they way that I want to run it to do what the majority of professional customers want instead.

I just wish I knew what that was, instead of just thinking I know. 


  1. I really admire that you post about both the good and the bad. Know that EVERY small business owner has at one point in time gone through what you're going through. It's very normal & it's great that you're not just ignoring it, but facing it head on. You're a very passionate person & I believe you will find a way to make this work! :)

  2. Thanks Lisa, that is really kind of you to say. I agree with you - I think this is normal, healthy fear which will make me receptive to change.