Flipping A Store [A Challenge]

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Topic created : 29.09.2010, 01:21

Last time edited : 29.09.2010, 01:48

austenbosten

Hey, I was bored with being a billionaire and I longed for something exciting (codeword for stressful), so I decided to do something interesting.

I figured hey if people could flip houses for profit...why not do the same for businesses. So I have decided to purchase a store and see if I can turn this dying thing around.

[This may or may not be a guide. It is not meant to be a guide, more or less a journal to see how I do/did]

So on to the CHALLENGE

When I first saw this store, she was in a real mess. Hardly any customers, barely any goods to sell and constantly losing a profit of $30,000 a week. Also the store had 2 departments and no idea what it wanted to be, a clothing store, or a grocery store. The only good thing about this store is she was dirt cheap to purchase (around $12,000)

First thing I did was slash the wages to the bare minimum to cut costs and got rid of the canned goods dept. Then I began to stock the shelves with goods, and review my weaknesses and strengths.

A basic view of pros and cons regarding this Challenge

Pros

* Very cheap to buy (chance for a high profit)
* A decent availability of clothing goods
* Moderately low wages
* Good Location
* A large supply of cash reserves (however I will try to avoid spending over $1m)

Cons

* Not the strongest market
* Mediocre Store Management Experience (I really don't know what I'm doing with stores)
* Not all goods are available/profitable
* No one shops at this store and the ones that do hate it

So I have a few challenges but I will buck up, watch Kitchen Nightmares for inspiration and do my best!

Stay Tuned!!!

http://virtonomics.com/mary/main/unit/view/2635983 <- The store I bought and will revive and flip.

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29.09.2010, 21:28

austenbosten

WEEK 2

So we are on week two and the store has dipped deep into it's pockets (it's parent) to try and revive itself. The old saying "you gotta spend some money to make some" and this is my plan. I have done very well so far as to keeping the budget below $1m (<$750 to be precise).

Now we have a store filled with goods that needs to be sold. Salaries have increased as a result to handle the new influx of wares and some of the veteran store employees are happy to see their old salaries come into being once again. My status is "Elite" simply because we understand that the prices in our store require a little more finesse from store associates and our store needs to be a little more upscale than your average Target, in order to hope any sales since our prices due to the market are highly inflated locally.

However we still have goods for sale and some nice ones at that. Although we have a few cheap quality goods on display (in case the high quality big ticket items don't sell) most of our products are of higher-end quality. As a result we began unloading $45,000 in radio advertising in hopes of bringing in some customers, As we officially re-open Tienda's doors to the public again next week.

Summary

Pros

* Spending did not go over budget, in fact spending stayed over 25% below budget
* We have an "Elite" status already which will be very helpful in bringing in some high-end customers
* We have something like a store now! (I have no idea how the store was ever going to hope to be lucrative by selling canned goods along a few cheap articles of clothing. The place looked more like an evicted Second-hand store than a retail clothing store.)
* Because we stayed under budget we can advertise a little bit (I want to try and keep my weekly budget <$750k)
* Employees are happy to see their old salaries come back, and we no longer have the lazy ones (they were fired last week)
* We have some really high quality goods, which should help with our status and bring in some customers that can afford our prices
* After our initial big purchase, we have made some cutbacks and now our weekly expenses should hover around ~$270k instead of ~$700k

Cons

* WE'RE STILL LOSING MONEY!!! (Now the losses are ~$700k and will be ~$270k instead of $30k, however the store wasn't going anywhere and wasn't going to last long losing $30k pwk. Hopefully we can start selling some goods and start making a profit)
* The high price of our goods still makes a high sales volume unlikely
* The high prices may turn off a lot of customers
* Even if sales reach maximum the profit margins will be minimal on the higher end goods.

Stay Tuned!!

5.10.2010, 02:01

austenbosten

Week 3,4,5,6,7

I decided to combine a couple of weeks since to show what happened and do a brief summary.

Week 3

This was a very good day, as I slashed my purchases after my initial big purchase, I began selling a lot of my goods (and sold much of the store out) on my first day. I have to thank my advertising for bringing in the customers. I made a profit of over $700k my first day and am almost breaking even for the year within 1 week!!!! So I decided to ramp up purchases of goods for the best sellers

Week 4
Well knowing my first day was too good to be true, I ended up getting a loss of over $500k. This was the result of weak sales and increased expenses due to more purchases

Week 5 & 6
I actually took a vacation (which was why I hadn't updated in awhile). It was actually a great couple of weeks. Revenue managed to exceed Expenses and my profit was around $250k for the 2 weeks I was out

Week 7

Okay so the store is staying afloat, but it is barely. These past weeks were good, but the sales were getting weaker with each week. Now we are losing over $300k for this week and drastic changes are needed. I decided to increase purchasing on sellout items and cut purchases on the weaker selling items

I also need to make my products more profitable. Some items in the store have <1% profitability...that is simply unacceptable. It's a tight-rope to walk because high prices=less buyers...but it's a risk I have to take.

Also my advertising is starting to wane so I need to reduce my spending there. The good news is my expenses will be reduced by $10k. The bad news...less advertising=less potential customers

On the good news the store is now worth over $500k as opposed to the $14k when I started ($12k if you consider how much I paid for it). I could sell it now...but I'm going to wait until I break even for the year before I flip...otherwise there's no point to this thing.

Stay Tuned!!!

7.10.2010, 22:42

Last time edited : 7.10.2010, 22:49

austenbosten

Week 8, 9, 10

Week 8

Profits improve, expenses go down....but still losing over $100k

Week 9

Profits improve, expenses go down...but now we're making a profit again! we made over $250k which helps make up for the last week, but still not enough to make up for the week before. I've noticed that I cut too much in purchases and the sales continue to grow, and a few vendors decided to end their business relationship with me, so I have to find new vendors which is always fun (sarcasm). So now I'm going to have to ramp up purchases which is going to seriously hurt profits.

Weeks 10

Had a lost of over half a million (Ouch!) but it was not much of a surprise. Revenue fell, because of falling sales, because of weak inventory. My massive purchase has hopefully been enough to supply demand and bring back sales. So while expenses may be down again, it will probably take 2 weeks before I see a positive profit since it will take time to get those customers back. The status is still "Elite" (I'm taking no chances) and I'm keeping it that way. I had to drastically cut advertising, but I know this is not helping me and I desperately need to get customers in the sale. Despite the fact that my efficiency in advertising has been dwindling despite sever cost cuts. I've decided to ramp up the advertising budget to drag people in. It's a risk, but this whole project is one, so what's the big deal?

Speaking of my project, I would like to say that as of now I have exceeded $1m in costs, however if you count that the store is now worth over $800k, then I've actually still kept my total costs well below $1m. I don't plan on selling the store until I have at least broke even for the year.

Stay Tuned!!!

P.S. To also note, my corporation as a whole has been struggling a bit with weak markets, so Tienda has become more of an annoyance than a project.

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List of forums -> Main forum of the online business game "Virtonomics" -> Flipping A Store [A Challenge]

List of forums -> Main forum of the online business game "Virtonomics"-> Flipping A Store [A Challenge]