Expense Pie Chart for 2012

Before we start, I should post a few explanations on the chart.  Firstly and most importantly, this is one business, structured in our own particular way so take it with a grain of salt.  I’ve also compiled the various expenses into categories that make sense to me, but I’m sure can be confusing.  A few of the more / less obvious ones:

– Bank & Credit Card Fees including credit card processing fees, bank & credit card interest

– Exchange rate costs are basically losses due to the fluctuations in the exchange rate.  It’s pretty much a COGs expense (sort of, it’s calculated and fluctuates based on the exchange rate at the point that we sell the item).

– Import & Logistics Costs are mostly costs resulting from bringing the games over the border.  Again part of the Cost-of-Goods-sold realistically speaking

– Accounting, Legal & Insurance costs are so high due to the fact that we hire a bookkeeper; so their fees are included here.  In another company, that might be slotted under Payroll.


Financial Expenses Pie Chart 2012
Expenses Pie Chart 2012

As a comparison (of sorts); you should check out Black Diamond Games Blog Post on Game-o-nomics for a B&M store.  Note, our pie chart is based off expenses while theirs is based off revenue; so expect some differences.  Overall though, you can see our payroll expenses and COGs are much higher while our Rent costs are significantly lower.   Of course, our IT expenses are much higher and to make up for the shortfall in walk-in traffic, our Marketing Expenses have to be higher too.

Commercial Leasing – Some Tips

So , as many of you know we’re in the process of moving to a new location.   This isn’t the first commercial lease we’ve ever signed, but I certainly would not call myself an expert.  Still, here’s a few things that I’ve picked up on in my time.

Let’s start with the basic common sense advice:

1) Read and understand it all

Any legal document that you sign should be read, in detail.  This includes the ‘Offer to Lease’ (the document you sign and send to the landlord as your offer) and the actual Lease.  If there is a portion of either document you do not understand, ask your lawyer.

2) Hire a lawyer

Do not skimp on this.  Get a good realty lawyer and use them.  The lawyer will be the only individual in this entire process who is entirely on your side.  Their experience and ability to read the obtuse language of the lease could easily save you a lot of money.

Alright, now let’s talk about tips during the process itself

3) The Search

  • Craigslist is a start – you’ll often end up working direct with landlords in Craigslist which can offer you more flexibility and better pricing.  Commercial realtor websites are the next step, with CLS another option (not as good for leasing, but still okay).  Loopnet can occasionally be okay.

When contacting a location, if you are working with a commercial realtor; you need to (in BC at least) contact your realtor to contact their realtor.  Otherwise, your realtor will not get involved which means you end up with their realtor working for you and the landlord.  Which brings us to…

4) Understand Motivations & Interests

Remember how I said the lawyer is the only individual with interest that coincide with yours? Going into the negotiations, you need to understand the motivations and interests of each party in this deal.  In a typical commercial deal, you have:

  • Yourself – looking for a great space at cheap rent with low to no obligations
  • Your Lawyer – paid by you directly at a per hour diem, obligated by law and his professional association to do the best job possible.  His goal is to provide good advice to get paid and potentially referrals in the future and/or additional business from you.
  • The Realtors – to find you a commercial space as quickly as possible and to have you sign off on the deal.  Realtors only get paid when the deal is done, and they get paid on a % basis.  As such, their motivation pushes them to close the deal at a higher price rather the lowest price possible.
  • The Landlord – to rent his location(s) out at the highest possible revenue.  In particular, you want to watch for the number of additional spaces available in the building and if it’s empty currently or not.

Understanding what the goals of each party will help guide your negotiations better.  While not every individual will likely be rational and/or push for their best interest, it is always worth knowing what potential motivations they have.

5) The Offer to Lease

  • Generally first drafted by the realtor
  • Your first official ‘offer’ for negotiating lower rates.
  • Things you can ask for include:
    • Lower price per square feet
    • Shifting from NNN (i.e. you are liable for all cost associated with setting up the building barring certain exceptions as per the lease; thus your rates can vary) to Gross Rent (i.e. you pay a fixed amount for the total rent and the landlord covers any overages)
    • Free rent period (also known as a fixturing period)
    • Tennant Improvements (aka building out the location for you)
    • NNN fees (Common Area fees) can be fixed and/or set to go up at a fixed rate
    • Exclusivity Clauses (maybe,  more for retail really)
    • Delay in construction terms (i.e. if the location is not ready as per the lease, what you may be able to get)
    • Term of the Lease and Renewal period
    • Sub-lease clauses (if you can sub-lease or not)
  • Things to watch out for at this stage:
    • Whether it’s NNN or Gross
    • Your subject clause includes the requirement for proper licensing (in case the government gets problematic) and that it is subject to an agreement on the lease.
      • be certain it says subject to an agreement on the lease, and not that the offer to lease items are included in the lease.  As leases can be over 30 pages long and your offer to lease is likely only 2 to 3 pages; you could be accepting a slew of unknown conditions
    • The landlord’s clauses for rejection
    • Percentage rent clauses – basically a clause that takes a % of your gross sales as part of your rent.  This is more likely to appear with large coronations in shopping malls and the like rather than single roadside agreements
    • Actual size of the space.  Do NOT trust the landlord to get it right, take your own measurements of the area; but don’t forget to factor in the Common Area (ask them how much they are adding to your lease ‘size’).  You can expect some variation between your numbers and theirs since you’re likely not doing it very well; but it should be in the ballpark.
    • If you are on NNN, make sure to see the last few years NNN fees to look for increases / etc.

Once the initial negotiations on the price per sq ft, etc have been completed; you’ll be at the actual lease stage.  This is when the lawyer should come in (unless you’ve brought him in to read your Offer to Lease, which is fine too!).

6) The Lease

Things that I’ve seen in commercial leases include:

  • Kickout Clauses – what, if any, options do they have to remove you from the premises?
  • Insurance Amounts – how much are they asking for? $2 million? $5 million? It can make a big difference in your final insurance rate
  • Arbitration – make sure any arbitration should be shared costs
  • Operating Cost / CAM fees – check for the Management Fee %, what your % is of the building cost is and how it is calculated and set out in the agreement. Also, make sure you exclude things like plumbing and roof repairs from the Operating Costs.
  • Overholding – or what happens if the lease expires and you need to stay in the place anyway
  • Accelerated Rent clauses
  • Sale of building clauses – does your lease survive the sale of the building? If not, are you sure you want this?
  • And remember, whatever you sign is whatever is finally agreed upon – NOT whatever verbal assurances you might receive

Last Thoughts

Overall, the most important thing is to educate yourself, make sure to read your lease agreements in detail and get professional help.  Don’t do this alone – the few thousand dollars you pay the lawyer is nothing compared to say, getting kicked out of your leased location early and having to move your business again.

The Big Moving Announcement

As you’ve probably gathered from the title of our Anniversary and Moving Sale, Starlit Citadel will be moving to a new office and warehouse location very soon. We’ve now gotten our hands on the keys to the new space, which means we can officially announce our schedule for the move!

We are closed on April 16th and 17th, 2013 for the move to our new location at 61 West 7th Avenue, Vancouver.

View Larger Map

We’re very excited about this new location. It’s still central enough to be easily accessible by transit and convenient for customers who live and work in the core of Vancouver, but offers a much better space. Our warehouse will be expanding to about 3x its current size, and there’s a separate office with a proper front entrance — and windows. We will have a single dedicated parking space at the rear of the building, and there is ample street parking in the area as well. It’s also within a 5-10 minute walk of the Broadway/City Hall (Canada Line) and Main St/Science World (Expo Line) Skytrain stations, and near major bus routes along Broadway, Main St, and Cambie St.

How will the move affect mail orders?

Very little. The website will be fully functional during the move, and you should be able to place new orders as usual. We will not be shipping over the two days of the move, however, so any orders placed between about 12:00pm on April 15th and 10:00am April 18th will not be processed and shipped until the afternoon of April 18th. Please factor in this delay when choosing your shipping method.

How will the move affect Local Pickup orders?

Any customer wishing to pick up their order at our current address (311 Rear W Cordova St, Vancouver) must pick up their order by 6pm on Monday, April 15th. Any Local Pickup orders remaining in the warehouse after that time will be transported to our new location. We will be closed for pickups on April 16th and 17th, which means that the first day for picking up orders at 61 W 7th Ave will be Thursday, April 18th.

We will continue to provide the option of Local Pickup service for all customers wishing to pick up in Vancouver, from 12pm – 6pm, Monday to Friday.

What about backorders and restocks?

We intend to maintain our weekly restock schedule throughout the period of the move, bringing in new items on Friday, April 12th, and again on Friday, April 19th. All orders waiting for backordered items to arrive will be transported to the new location and set aside for shipping when they are completed.

Will customer service be disrupted?

We will have limited access to email over the 2 days of move (April 16th and 17th), and will check and answer messages in batches, when we are able. If you have urgent questions or concerns, we will still be reachable by telephone at 1-888-805-1737 during our regular office hours of 10am – 6pm. If your question can wait a day or two, we’d appreciate if you hold it until we’re fully operational again on Thursday, April 18th, as our entire staff will be occupied by the move on Tuesday and Wednesday.

As always, feel free to contact us in the days leading up to our move with any questions you may have. We look forward to seeing you (or at least shipping games to you) in our new space!

Video Review: Android Netrunner

Our latest review is for Fantasy Flight’s hit re-release of Richard Garfield’s classic card game, Android: Netrunner. This Living Card Game provides an engaging mix of deck-building and tactical, asymmetric gameplay, all tied together with an immersive cyberpunk theme.

Server Down! Server Down!

As many of you know, the site went down on Monday when the sale went live.  The load on the site tripled and a number of poorly coded portions started acting up.  For that, we do apologise to everyone, especially those who missed out on  games they wished to purchase because of the site going down.

We’ve now fixed numerous issues and have highlighted some of the other problems for fixing as well as introducing some new features to distribute the load.  It’s actually improved the overall site performance, even with the increased load we’re still seeing.

With that said, I’m going to get (mildly) technical about what happened.  If you are not interested in things like that, you should stop reading now.

Continue reading “Server Down! Server Down!”

The Quiet Truth

There’s something we don’t talk about a lot, the quiet truth about the game business. Everywhere you go, every time someone even mentions wanting to start a game store or be a designer or a publisher, we talk about failure. About how hard it is to succeed, the difficulties and challenges, the need to understand our motivation, heck, even the drop in our lifestyles.  And that’s all true, but it’s the truth that everyone tells you. Here’s the quiet truth that no one wants to say, but frankly I think a lot of people already know this.

It’s possible to succeed.

Look around – there are individuals at every level of the game industry who have succeeded at making gaming their livelihood. Just to drop a few names that seem to be doing pretty well in this business:

Designers – Reiner Knizai, Martin Wallace, Friedman Friesse, Alan R. Moon.

Publishers – Steve Jackson Games (designer too!), Zev from Z-Man Games (before he sold his company and probably now…), Jay from Rio Grande.

Retailers – Ray from Black Diamond Games, James Mathe from Games Universe, locally here – Drexoll Games which has been around for 20+ years, Sentry Box in Calgary, etc.

Some of these individuals have done very, very well – Reiner Knizai, Alan R. Moon and Steve Jackson come to mind.  Others are probably doing decently well.    You too could be one of these lucky few…

It’s just not likely.

It’s that not likely part that everyone stresses though, the improbability of you being the success story.  Sometimes it’s an honest desire to save the individual some pain, other times it might be a selfish desire to see less competition.  All too often, people wander up without the slightest notion about what it takes to be a success in the gaming industry; and everyone piles on to tell them they have no business in the industry because they haven’t done their research.  That’s true too…

Yet it doesn’t change the fact that it’s possible to be successful.  At every level, both new and older individuals have made a success of their lives in the gaming business.   It’s likely you won’t be supping with Warren Buffet but there’s no reason you can’t make a living, even a decent one, if you are willing to put in the work.

It’s just likely to be a lot less likely and a lot more difficult than you thought it’d be.

But it’s possible.