It’s February, so this is a rather late ‘year-in-review’; but between the Con and getting our books in-order, I haven’t had time to really analyse the year. For obvious reasons, I’m not discussing our actual revenue figures. However, now that we’re 98% done with the books for 2010; I am able to review how the year went in more detail.
2010 was a rather disappointing year once we had the numbers down. While it seemed our cash position was better, it was in large part due to the introduction of the HST. We collected a lot more taxes this year than we had paid out, which means we were carrying the taxes as a nice ‘loan’ from the government. We have to pay it back now, though our cash position has plunged back to it’s normal level.
In addition, while our sales had gone up, so had our costs. In fact, we ended up making $100 more than we in 2009 (excluding salary for myself).
There’s a few factor’s playing into our financial results this year. Firstly, the type of sales we were getting was significantly different – our cost of goods sold had gone up significantly to nearly 70% in some months (and I’m not even talking about our Sale months). A quick review has shown that our costs of goods for certain products have bee higher than we are comfortable with; specifically two big sellers for us this year – Castle Ravenloft & Heroscape have to be sourced from a very expensive distributor. In addition, the Rewards Program also chipped away at our margins.
Secondly, we had an increase in our on-going operations fixed cost. Rent, insurance, heat, hosting & internet bills all rose between 20 – 200% last year. Over time, as we grow into our new space, the proportion of these costs should go down; but for now, it’s a significant hit.
Thirdly, and this is a pure accounting issue; but we ‘booked’ a lot more shipping expenses this year than last year. Normally, we are on terms with Canada Post; but due to some issues with their accounting process; most of our December expenses for this year showed up in December instead of January. Of course, 2009’s December’s shipping showed up in January 2010; so our books are reflecting shipping expenses for two XMas’.
Fourthly, outsourcing and hires occurred in 2010 as well. We had others do our bookkeeping for most of the year and of course, we had a few people in to help with shipping. Both significantly increased our expenses here, something which we hadn’t really had to pay for in 2009 compared to 2010.
Lastly, we had a series of one-off charges happen last year as we transferred control / directorships from Alison to myself. This involved a number of legal fees and filings, which again impacted profits. Also, the expense of the move has to be factored in including the new shelves and the new warehouse equipment we bought.
The Silver Lining?
Other than Canada Post & the Cost of Goods Sold, most of those changes and costs were necessary for our next growth phase. Hiring others to help with the bookkeeping and shipping meant I had time to tackle projects that had been on the plate forever. The new space was necessary to keep growing, and we’re definitely not going to need to move for at least another year or two. So if we manage to grow a little this year, we should be able to actually post a higher profit.
The Industry & Gaming in General
I’m always wary of speaking about the gaming industry or the board gaming industry because there is so little data out there. In addition, we’re in year 3 going on 4; so we’re still in that growth phase. Each year, our revenue numbers are going to be higher. Now, when we hit year 5; I’d expect a leveling of – but till then it’s hard to correlate our growth with that of the industry.
However, we’ve seen a lot more games released this year compared to previous years. A lot of good, strong games were release; some of which just haven’t done the sales that we had expected. Some of the larger game companies (e.g. Wizards) have re-entered the board game market seriously while a ton of small press publishers have released some solid games (e.g. Summoner Wars, Alien Frontiers & Catacombs).
On the other hand, all these new releases seems to be squeezing the classics even harder. Sales of some of our classic games have dropped significantly (e.g. Puerto Rico, St. Petersburg, San Juan) especially when you factor in our growth.
Lastly, deck-building games were the major story of this year. Dominion continues to be a roaring success, outselling the other deck-building games by at least 3 to 1. I expect we’ll continue to see a flood of deck-builders in the market, and I’ll be interested to see where this category goes.
2010 was a transition year and I expect 2011 to be another one. We’re going to have to hire again sometime this year, there’s no doubt about that. For now, the workload is manageable by myself but as sales continue to increase; I’m going to have outsource more and more as the hours needed to manage all the sales continue to increase. Outsourcing and hiring is going to be another major cost, one that I’ll have to be carefully budget for.
On the other hand, 2010 has shown that this business is viable. I’m no longer putting money into the company to keep it floating, and I’m now drawing a regular salary. I’m not buying a Yacht yet; but there is no danger of me quitting to pay the bills.