Week 10 - Discouragement. Where do we go?
Action Items From This Week:
- Order Zap Banner and Apparel - A little floored by how expensive these zap banners can get. I started looking into alternative methods. I don't think it is wise to spend that much money on a solution that can be solved in a different/cheaper way.
- Make an outline for Vancouver Select Winter 2018 - Started but have not completed a perfect outline of many of the things that I need. I have been going through my competition checklist and ensuring that all guidelines are met.
- Prepare for Black Friday/Cyber Monday - As discussed in the last mentor meeting, I was to create a plan for Black Friday.https://drive.google.com/file/d/125NvXlJZvaoKafkt-JxtUpjJsaUOwCn9/view?usp=sharing I've outlined the dates that I'd like everything to be done.
Problem & Challenges:
This next paragraph will be a bit of a ramble, but this is where my thoughts have been. Trying to figure this out.
This week has been really tough on me in terms of discouragement. The past year has been really good for my business (or it felt that way at least) and I felt like I was doing a lot of good things. Running plenty of competitions, the first corporate deal, and a double in online sales. But taking a long hard stare at the numbers recently has made me second guess the business. Right now, e-commerce is the primary source of revenues. With this model, I think I've done a great job at capturing the Canadian market and growing the business this year. But when I look at the business from an outside objective lense, I find it hard to not be discouraged. On the World Cube Association website, there are 3840 registered Canadian speedcubers. They are not necessarily active, just that they have signed up at some point in the last 10 years. These are my businesses primary cash cows and target customers, yet there are at max 3840. Realistically, it's more like 1000-2000. On top of that, I'm selling a comodotized product that my competitors sell as well. And I'm selling these products to customers that don't have credit cards, don't have jobs, and are incredibly tech-savvy and able to find discounts and more competitive pricing elsewhere. With my current gross margins at ~25%, CANcube would need make $160,000 in revenue in order for me to pay myself $40,000. And that's gross margins, not net, so it's completely unrealistic. That means that I would need to at minimum double CANcube's revenues (again) without hiring anyone else. That might be doable in the context of a SaaS business when marginal costs of labour are low but not with this business. I think that a similar fate faces the competition revenue streams. A model that is fun as a hobby but not scalable at size. With e-commerce and competitions not being viable sources of scalable profits, this leaves custom corporate puzzles as the last standing leg. This stream has gross profit margins of 50%, a considerably larger market size, and the customers have much larger wallets. They'll be paying with bank transfers instead of credit cards.
I love cubing, I love running competitions, I love the community, but it's hard to spend my time and mental energy focused on a business model that seems doomed to take me nowhere.
I think this requires me spending a considerable amount more time on the corporate side of the business. Test the waters and see if there is an appetite out there for custom Rubik's Cubes. I haven't condemned the other sides of the business quite yet, maybe I'm missing something, but right now I think the market and margins are simply not large enough.
Action Items Planned for Next Week
- Finish planning everything for Vancouver Select - I really want this to be the best competition that I've ever run. By the end of this week, I want everything wrapped up and planned.
- Everything Black Friday/Cyber Monday - Make the stock order, design the ads, post the ads on Facebook. I'm interested to see what kind of audience we can really draw.
- Further financial breakdowns - I really need to determine what the true margins are, where the money is going, and whether or not the future is viable
- CANcube Custom - Work with Michael to develop leads for CANcube Custom.