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Saturday, March 25, 2017

Sales Pass $5,700 With A Week to Go In March, Keeping The Momentum Going & Effective Use of Credit

March 2017 is set to become our best month yet, with sales just passing $5,700 with a week to go in the month. Also, the business will have earned $1,200 from part time accounting work, bringing total revenue for the month so far to $6,900! In Toronto, that would not have been enough yet for the business to be self-sustaining, but here in Saint John, that is enough revenue to pay all the bills and re-invest $1,000 a month in inventory to keep the momentum going. I don't want to jinx things, but I predict that we may just hit $7,500 in total revenue for the month.

The local accounting firm that I work with here has just informed me that one of their senior managers is leaving for industry and they want me to take on more work. I eagerly agreed, but I have to watch that I don't take so much on that it cuts into my efforts in building the business. At the moment, I am burning the candle at both ends, working from 9 or 10 am to about 2 or 3 am every weekday. On weekends I kick back and relax with my fun stamp collection, or my writing or just hanging out with Steph.

So with things going well now, it is apparent that we have to keep the momentum going. We have customers that are engaging with us almost weekly, so the question becomes how do we do this? Well, we could simply list more material. But we don't know if the customers buying from us regularly now will be interested in the material we haven't listed yet. We do know right now that Newfoundland is selling amazingly well, particularly between about 1921 and 1949. Therefore, it would seem logical to reinvest some of our profit in keeping this area well stocked, at least until sales drop to a level consistent with our other store categories. This is true even though we have a 2 year backlog of inventory. However, it is critical not to add to the backlog, and to continue to whittle away at the backlog. Thus, my challenge is to juggle:
  • The extra accounting work that I am being asked to take on.
  • Listing the recently purchased Newfoundland material as soon as it comes in.
  • Continuing to list the other material.
  • Maintaining both the Nigerian and Canadian stamp blogs.
Fortunately now that I have published over 200 blog posts, I can always add to my earlier posts and re-publish them as updated posts if I run into a situation where I just don't have a full day to research and write two entirely fresh blog posts. In fact, I am thinking of doing just this in a few weeks. After realizing that I needed to buy more Newfoundland, I decided to focus on the 1937 Long Coronation set, which looks like this:

I had noticed as I was listing these, that I was finding differences in the sizes of the perforations around the edges that were not listed in any of the well known publications. I listed them on a lark, and found that my customers were buying them within minutes or hours of listing them. So it seemed to me that the logical thing to do now was to see how many of these sets I could purchase from other dealers with a view to going through them and looking for the different varieties, so that I could sell more of them to my customers who I know are interested in them. So with that in mind, I went through E-bay and Hipstamp and spent about $850 on 35-40 sets, or about 350 stamps in all. I fully expect that I will find more perforation varieties, paper varieties, interesting shades and so on. I had published a detailed post on this issue last month in the Canadian blog before I had found these other varieties that I am talking about. So what I can do now, once this material comes in and I have gone through it all, is to update the post that I published last month with details of the new varieties I have found, along with a list of all the varieties that are in my stock, with a link to the store. This is a perfect way to build on the interest I have already created with my customer base, without having to invest the time I had spent before. 

This actually applies to the business in general, in the sense that the toughest part about getting it established is listing the inventory and writing blog articles for each issue that I carry. Once I have completed this process once, I can use my old listings as templates to write new listings, which means that I will be able to list material in about 40-50% of the time it took me before, but it also means that I can start hiring other people to work on my listings with a minimum of training, since they already have something to work with that I built. Also, as I buy more material, and learn more things about each issue, I can keep updating my earlier posts, which will continue to build interest in my material. 

In addition to stamps, Steph and I have decided that we want to operate the house as a Bed and Breakfast again, which it was before we bought it. So Steph has been very busy acquiring items for each of our 2 guest rooms and the rest of the house in preparation to open for the Digby Ferry crowd, which comes in the summer and fall. This will be a nice added source of income as well, even if we get one booking a week for the six months that we are planning on operating. She has done an amazing job so far, and I will post new pictures when the house is ready. We are considering offering a special deluxe getaway package to stamp collectors where they can come for a week or two, bring their favourite stamps and work on them in quiet solitude, while they have their every need looked after. I think it is a fantastic idea that will attract guests from around the globe, as I do not know of any B&B that caters specifically to stamp collectors. Finally, I am also considering offering seminars in the dining room on Sundays, where I will give a presentation about one topic and serve tea and biscuits to my guests. That is a few months off, but we are both excited about all the possibilities. 

The last thing I want to talk about is the importance of establishing good credit facilities, and making effective use of them. One of the challenges that you will face when you start a business is fluctuating cash flow. Your lines of credit, and credit cards are your friend in this regard, as long as you do not carry balances for long periods of time. Our goal is to not carry balances at all, but we recognize that it may be necessary to carry a partial balance for a month or two if business is slower than normal, or if I have had to make an especially lucrative purchase. 

As you may be aware, credit cards give you a grace period for payment within which you pay no interest at all. The trick is to know your statement date, your due date, and to make sure that you pay at least the minimum and preferably the entire amount by the due date. For example, my Visa card has a statement date that generally falls between the 15th and 18th of each month. I get almost another month to pay this balance, which I have done in full, every month so far. Now, I have three credit cards, all of which have different statement dates. Because of this, I am able to increase our financial leverage by choosing to use different cards to pay for items depending on which time of the month the expenditure falls. Now I have to emphasize that I'm not robbing Peter to pay Paul here, as each and every card is always paid in full every single month. However, if it was necessary to carry a partial balance on one card in a month, the balances are small enough that it really isn't the end of the world. To illustrate what I am talking about, I will give you an example from this month:

1. Our oil deliveries for heat were on March 3, and there will be another one probably next week, and these are about $400-$500 a pop. The oil company gives us trade credit for 30 days from the delivery date, so I can pay for the March 3 delivery, with my Visa in early April, knowing that it will appear on my April statement, which won't be due until early May. The late March delivery next week will fall due in late April. As long as I make the payment for this after April 20, it won't appear on my Visa until the May statement, which won't be due until June. By the time I pay this, the weather will have warmed up to the point where we don't have to buy oil anymore, so there won't be any more charges of this nature until the fall. 

2. Our internet bill is usually due at the end of the month, so using the Visa to pay it gives us another month to pay it off. 

3. We use a different credit card for our groceries, which has a payment date that falls around the 20-25th of each month. 

All of these cards earn reward points as well, which we can eventually redeem for vacations when the time comes that we can actually afford to travel. It's a nice little quiet bonus ticking away in the background. We don't give it much thought, but it will be very nice when we are actually able to pay for airline tickets entirely with points that we got for doing nothing more than effectively managing our cash flow. 

The upshot of all this is that I usually make three payments a month: one at the beginning of the month for one card, one between the 10th and the 15th of the month for the second card, and one at the end of the month for the third card. The business generates cash in between each of those dates that is generally sufficient to fund the mortgage, the insurance and the required payments on the cards. As long as the cash flows are at least $3,000 a month, the cards give me leverage to handle about $4,500 worth of expenses without having to pay any interest, since the extra $1,500 can be paid with part of next month's cash flow. This would only be a problem if the cash flows suddenly stop altogether. However, between the business, the accounting work and the Bed and Breakfast, this is unlikely to happen. So while you DO NOT want to rely on credit to the point of getting heavily into debt, using it effectively to manage your cash flow, can really make a difference in your business. I used credit to buy the Newfoundland material I discussed above because I know that I can receive, sort, list and sell at least half of it before the payment date comes due. But understand that I wouldn't dare do that for any material that I wasn't absolutely certain I could process and at least partially sell by the time the payment came due. 

 I have to point out that I haven't mentioned taxes on this money. The reason is that I have a large shareholder loan, of about $60,000, which represents money that I lent to my company while I was working. Of course all that money was money I had already paid a substantial amount of tax on. Under the Canadian tax rules, I am allowed to take that money back out of the company tax free. So for at least the next year and a half, I can live on the money the business generates almost tax free. I may have to pay some tax at the corporate level, but it will be minimal. Then once the business is at the point where the inventory is all listed and cash flow is consistently over $6,000-$8,000 a month, I can draw a salary. 

So I hope you all find this tip to be helpful. You will find that your access to new credit will all but dry up the minute you become self-employed. So the trick is to apply for and establish your solid credit while you are working. As long as you are making your payments and the banks are making money from you, they aren't going to take your credit away. It is therefore critical that you use it very wisely, because if you don't, you will wind up destroying your credit rating. But if you use it well, you will be able to weather the storms that will hit you in the early years of your business, and you will emerge from them with a better credit rating than you had before. 


  1. maybe steph can do some standup as a 'value add' to the b&b guests...

  2. Well, I think Steph will be her usual humourous self anyway while the guests are here. Her warm hospitality will be enough of a value add I think. I have never seen a more attentive and kind host than Steph. I realize I'm not very objective of course, but I have been married three times and my first and second wives were not able to put people at ease the way Steph can. So I think she will make a fantastic B&B host.