Rocky Mtn Saver
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Post by Rocky Mtn Saver on Jan 14, 2014 12:17:42 GMT -5
Yes and no. I am trying to see why is everyone saying that Dark's business is successful after only few month. Also I want to say that I wish Dark's business was really going as projected and be all Dark wants it to be. I am just digging into for info for me the way only me can understand. Sorry. It's successful so far because he has been showing a profit every month. And we know that because he has provided revenue, COGS, and his overhead costs (including wages of the employees). With that information one can easily calculate that he has had a profit each month. Also, the amount of money in his business account and him not floating checks is another indication of so far being successful.
Revenues/total sales will tell you diddly squat about whether a business is successful or not. You could have $5000 in sales every day, but if it costs you $6000 in COGS and overhead you're losing money every day.
How can he be successful since his sales are not 100% profit? How, I ask?
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tloonya
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Post by tloonya on Jan 14, 2014 12:20:36 GMT -5
Can we stop using the word successful. That word carries too much baggage. It's a good start, in my opinion, but that's it. Still a long way to go before I'd call it a success or successful. tell nancy...successful self-proclaimed from FL.
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Deleted
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Post by Deleted on Jan 14, 2014 12:35:56 GMT -5
I said successful so far. I added a qualifier! Hope that decreases the baggage. Turning a profit on a toy store during the fourth quarter isn't much of an accomplishment. You put stuff on the shelves and unlock the door. ROFL. quiet down. No one asked you.
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justme
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Post by justme on Jan 14, 2014 12:43:48 GMT -5
I said successful so far. I added a qualifier! Hope that decreases the baggage. Turning a profit on a toy store during the fourth quarter isn't much of an accomplishment. You put stuff on the shelves and unlock the door. Fine, you were successful and doing a job a trained monkey can do.
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milee
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Post by milee on Jan 14, 2014 14:20:27 GMT -5
Those are actually more homogenous than I would have predicted.
Do you have any stats for what comparable businesses sell in different quarters? For example, do toy stores tend to do 40% of their business in Q4, 10% in Q1, etc?
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tloonya
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Post by tloonya on Jan 14, 2014 14:30:25 GMT -5
OK... It is actually more than I was bargain for. However I do not understand even more now.
I will start a new thread for this. I do not want to hijack Dark's...
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milee
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Post by milee on Jan 14, 2014 14:34:50 GMT -5
So you think you'd be closer to the other toy store owner and if you absolutely had to guess, you'd guess that most average months' sales would be December sales x 2/3? (Except maybe January, which we know stinks for the reasons you've listed.)
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reader79
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Post by reader79 on Jan 14, 2014 14:34:50 GMT -5
Have you re-stocked yet? I remember that you said you had held off some on this. We have people coming in already looking for ideas for Valentine's Day and Easter baskets, so I make sure to have new items in by mid-January. Also, we get goody bag shoppers (for birthday parties) in every week, so I rotate in new products for the pick-up fixture quarterly. If you have $20K in the business account, but empty shelves, it's time to spend some of that.
Do you have a better idea on what your actual customer demographic is now, after a few months in business. We have learned that no matter what we want it to be, we end up with a ton of pre-school kids because their parents/nannies need to find activities to take them to, and visiting a book/toy store is on the list. So we added a whole section of baby items, and now they shop for shower gifts.
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reader79
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Post by reader79 on Jan 14, 2014 16:11:09 GMT -5
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imawino
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Post by imawino on Jan 14, 2014 17:17:22 GMT -5
Nope, I hear they get that frozen white stuff up there. I try to avoid that. We're going to ToyFest in Las Vegas in March. HOw does that work then? Does Dark Inc pay for the trip? And do you close the store or will you hire someone to run it while you're gone? And how many YMers are invited out to Vegas
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tloonya
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Post by tloonya on Jan 15, 2014 11:07:13 GMT -5
It's successful so far because he has been showing a profit every month. And we know that because he has provided revenue, COGS, and his overhead costs (including wages of the employees). With that information one can easily calculate that he has had a profit each month. Also, the amount of money in his business account and him not floating checks is another indication of so far being successful.
Revenues/total sales will tell you diddly squat about whether a business is successful or not. You could have $5000 in sales every day, but if it costs you $6000 in COGS and overhead you're losing money every day.
I agree - Dark has a very good handle on what is coming in and going out and all the numbers. No month has had a loss since opening, so that is at least a positive. And - he entered the year with a small cushion..... So - a success a good start so far, and very interested to see how it goes from here. I would anticipate Jan and Feb to be down months - but hopefully - not too far down and pick up soon. And - kudos to dark for enduring this painful thread with grace Yep, we are, small business owners get that natural grace from dealing with wonderful customers. You should try.
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milee
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Post by milee on Jan 15, 2014 12:21:33 GMT -5
That's one of the nice perks about having a business like a toy store - generally fun atmosphere.
I always feel very bad for the people that work at the Emergency Vet Hospital. They only get to see the really bad cases and so many of their patients die. It's got to be a tough job emotionally. At least the normal vet gets a mix of sad stuff and also puppies, kittens and nice, healthy pets.
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Lizard Queen
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Post by Lizard Queen on Jan 15, 2014 12:32:09 GMT -5
Milee, You're either underestimating or over estimating the cost of a swingset. A wooden one is going to start at $3K, I'd guess and a metal one runs a couple of hundred. Sorry, my ignorance is due to being both old and a hick. We built our swingset about 10 years ago and did most of it ourselves. See? Old and hick. Actually, DS1's grandparents got him a wooden swing set for his 3rd birthday. It was $300 from Walmart. I'm not sure how long the thing will last, but seemed unnecessary given there's a beautiful playground just 4 doors down the road...
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Deleted
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Post by Deleted on Jan 15, 2014 13:44:19 GMT -5
I bought a $300 wooden one as well (on sale at Toys R Us). My thought was that the kids are going to outgrow it in less than 10 years so why pay thousands of dollars for one with a 30 year guarantee?
ETA: WHOOPS! I paid $449.99, not $300. My bad!
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Deleted
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Post by Deleted on Jan 15, 2014 13:53:10 GMT -5
My 15 year old still loves to swing. And its nice when kids come over to still have a playground...
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Virgil Showlion
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Post by Virgil Showlion on Jan 15, 2014 17:42:19 GMT -5
Those are actually more homogenous than I would have predicted.
Do you have any stats for what comparable businesses sell in different quarters? For example, do toy stores tend to do 40% of their business in Q4, 10% in Q1, etc? Wow. I was going to say exactly the opposite. The difference between December and January averages is a factor of 8. I would've thought maybe 1.5, 1.8. What kind of swing would you consider "inhomogeneous" if a factor of 8 doesn't cut it?
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Deleted
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Post by Deleted on Jan 15, 2014 18:28:40 GMT -5
I think she meant day to day within the month.
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justme
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Post by justme on Jan 15, 2014 18:29:54 GMT -5
Plus, any retail place will see a huge dip in sales in January. Returns/exchanges + cc bill shock = no spending.
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Deleted
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Post by Deleted on Jan 15, 2014 18:34:37 GMT -5
Plus people spending on gift cards which were technically prior purchases (I guess that is how they would be logged? We don't exactly sell gift cards...)
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Deleted
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Post by Deleted on Jan 15, 2014 18:47:57 GMT -5
Right, meaning you got the money in December and more of the gifts walked out in January, right. I would guess that also impacts the figures. I mean, even if someone came in and bought something, it counted as a sale in December, right.
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Rocky Mtn Saver
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Post by Rocky Mtn Saver on Jan 15, 2014 19:00:23 GMT -5
Plus people spending on gift cards which were technically prior purchases (I guess that is how they would be logged? We don't exactly sell gift cards...) This is similar to how I was taught to handle the accounting for advance purchase items like event tickets. Until they're redeemed for goods/services, they're technically considered a liability to the seller. www.accountingcoach.com/blog/sale-gift-certificatesThe sale of a gift certificate should be recorded with a debit to the asset account Cash and a credit to the liability account Gift Certificates Outstanding. (Revenue is not recorded until merchandise or services are provided to the customer.)
When a customer presents the gift certificate for merchandise or for services, the liability account Gift Certificates Outstanding will be reduced with a debit and a revenue account will be credited. If the revenue is a sale of merchandise, the income statement will match the cost of goods sold and other expenses with the revenue.
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Virgil Showlion
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Post by Virgil Showlion on Jan 15, 2014 19:02:27 GMT -5
I think she meant day to day within the month. I considered that too, but the day-to-day revenues vary over a factor of 10. I was living in a land where the difference between a Monday haul and a Saturday hall might have been 50%. Swings of 1000% just blow me away.
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Virgil Showlion
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Post by Virgil Showlion on Jan 15, 2014 19:07:33 GMT -5
Plus people spending on gift cards which were technically prior purchases (I guess that is how they would be logged? We don't exactly sell gift cards...) This is similar to how I was taught to handle the accounting for advance purchase items like event tickets. Until they're redeemed for goods/services, they're technically considered a liability to the seller. www.accountingcoach.com/blog/sale-gift-certificatesThe sale of a gift certificate should be recorded with a debit to the asset account Cash and a credit to the liability account Gift Certificates Outstanding. (Revenue is not recorded until merchandise or services are provided to the customer.)
When a customer presents the gift certificate for merchandise or for services, the liability account Gift Certificates Outstanding will be reduced with a debit and a revenue account will be credited. If the revenue is a sale of merchandise, the income statement will match the cost of goods sold and other expenses with the revenue.
So I can sell a billion dollars' worth of gift cards and still have no revenue? How does that make sense? Why do it like that?
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Sum Dum Gai
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Post by Sum Dum Gai on Jan 15, 2014 19:11:38 GMT -5
Cause accountants never do anything in one or two steps if it's possible to do it in four or five and make it twice as complicated as it needs to be. It's like job security or something.
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Rocky Mtn Saver
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Post by Rocky Mtn Saver on Jan 15, 2014 19:17:09 GMT -5
This is similar to how I was taught to handle the accounting for advance purchase items like event tickets. Until they're redeemed for goods/services, they're technically considered a liability to the seller. www.accountingcoach.com/blog/sale-gift-certificatesThe sale of a gift certificate should be recorded with a debit to the asset account Cash and a credit to the liability account Gift Certificates Outstanding. (Revenue is not recorded until merchandise or services are provided to the customer.)
When a customer presents the gift certificate for merchandise or for services, the liability account Gift Certificates Outstanding will be reduced with a debit and a revenue account will be credited. If the revenue is a sale of merchandise, the income statement will match the cost of goods sold and other expenses with the revenue.
So I can sell a billion dollars' worth of gift cards and still have no revenue? How does that make sense? Why do it like that? You have only sold the promise to give the customer some goods/services in the future. Until they receive something for your promise, the transaction isn't completed. info.milestoneadvisors.net/blog/bid/185500/How-Do-You-Handle-Accounting-for-Gift-CardsThe basic rule is that sales of gift cards result in a liability on your books, not income. For accounting purposes, you do not have income until “the transfer of a product or service is complete”. In the gift card situation, the transfer of the product is not complete until the gift card is redeemed. So, instead of recognizing income, the business must show a “deferred revenue liability” on its books. By recording it this way, the company’s obligation to provide the service is clear. When the consumer redeems the card for a product or service, the company recognizes income, and the liability is decreased accordingly.
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Rocky Mtn Saver
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Post by Rocky Mtn Saver on Jan 15, 2014 19:17:53 GMT -5
Cause accountants never do anything in one or two steps if it's possible to do it in four or five and make it twice as complicated as it needs to be. It's like job security or something. It's never easy being the financial rule police.
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Sum Dum Gai
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Post by Sum Dum Gai on Jan 15, 2014 19:20:16 GMT -5
I don't know what Quickbooks does with my gift card sales, and frankly don't care. What I do know is that when I sell some I get cash that's just as spendable as any other cash. I deposit it in the bank, write checks, pay myself, etc. It sure looks and acts like revenue to me. I've never had a check bounce and the bank tell me I have no money left in the account, just deferred revenue liabilities.
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Rocky Mtn Saver
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Post by Rocky Mtn Saver on Jan 15, 2014 19:21:32 GMT -5
That's between you and your accountant and tax person. I can only say what the correct method of accounting for them is.
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Rocky Mtn Saver
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Post by Rocky Mtn Saver on Jan 15, 2014 19:23:46 GMT -5
Just out of curiosity, when the customer comes back in a few weeks and buys a bunch of board games with his gift card, do you record that transaction any differently than the guy who pays cash?
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Virgil Showlion
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Post by Virgil Showlion on Jan 15, 2014 19:40:58 GMT -5
So I can sell a billion dollars' worth of gift cards and still have no revenue? How does that make sense? Why do it like that? You have only sold the promise to give the customer some goods/services in the future. Until they receive something for your promise, the transaction isn't completed. info.milestoneadvisors.net/blog/bid/185500/How-Do-You-Handle-Accounting-for-Gift-CardsThe basic rule is that sales of gift cards result in a liability on your books, not income. For accounting purposes, you do not have income until “the transfer of a product or service is complete”. In the gift card situation, the transfer of the product is not complete until the gift card is redeemed. So, instead of recognizing income, the business must show a “deferred revenue liability” on its books. By recording it this way, the company’s obligation to provide the service is clear. When the consumer redeems the card for a product or service, the company recognizes income, and the liability is decreased accordingly.No wonder stores love to sell them, then. You pocket a wad of cash, set aside a part of your inventory (that may or may not be claimed), tell the tax man that your revenue is zero and you've run up huge liabilities, and laugh it up all the way to the bank come tax day. And if 30% of your gift cards happen never to be redeemed at all, and another 30% happen to never be fully redeemed, well the tax man don't have to know that, does he?
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