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Tuesday, January 2, 2018

Regrowth

So the holidays did us no favors, and the week afterward was suitably lucrative at the expense of a lot of discount dumping.  I didn't enjoy doing that because it was tremendously inefficient.  You've already seen that discounts beyond 10% are basically straight-up loss, so you can imagine what a 40% to 90% clearance does to the asset ledger.  At least it worked as intended.

What, then, for 2018?

The year 2017 was the most difficult in my professional career, and that's a career that has thus far included such non-running-my-own-business events as finishing law school, passing the bar exam, and working for over seven years as a senior rules analyst for the Arizona Department of Health Services.  That job had me presenting legal analyses of the Arizona Administrative Code in front of the Governor's Regulatory Review Council on an ongoing basis.  Meanwhile, I also worked on the team in the Office of Administrative Rules and Counsel that developed and revised code chapters to adapt to ever-changing statutory requirements and political prerogatives.  This ranged from untangling the hellish skein of the 2003 version of 9 A.A.C. 21 -- a rulemaking so exacting that it wasn't finished until two years after I left the Department -- to writing the Medical Marijuana regulations in 9 A.A.C. 17 from the ground up, meaning our office began with a blank screen and a blinking cursor.  We had a mandate from a 2010 voter initiative that a registration system for patients and a certification system for dispensaries each had to exist on the double, where neither existed before, and it was upon us to manifest them.  And I'm saying 2017 at DSG was more difficult, at least for me specifically.

Imagine you have a business model that is functional, but depends on a certain amount of owner expertise.  For whatever reason, it has not scaled up to the point where process mastery takes over, and there are managers and crew who are purely on payroll and are capable of operating the business in its entirety with no other oversight.  Instead, the managers and crew are able to perform all the day-to-day internal work, but an owner is needed for infrastructure, banking, payroll, HR, and so forth.  That's DSG, obviously, as it operates even today.  Now imagine that owner is unavailable for half the year.  And that was 2017.  I was effectively out-of-office for huge swaths of time, working on the move, often physically on site operating construction equipment.  I had to do it.  Nobody else was available, aside from some spot assistance I got from some people who may not realize just how badly I needed it and how grateful I am.  But in any case I could not readily deploy the employed staff to do this work, as most of it involved move-specific deliverables that will not recur.

"Wait a minute, not recur?" you may ask.  "What about when this lease ends?"

Yeah, about that.  If there's one lesson the year 2017 hammered completely into my skull, with blood and bone fragments scattering everywhere as it pounded mercilessly, again and again, it was this: A store needs a staggering cash reserve to move, and if that cash reserve is unavailable, borrowing to make up the remainder is not a viable play.  The viable courses of action are: (1) Stay; (2) Move to a smaller or cheaper location where the cash reserve needed is lower enough that available funds are sufficient; or (3) Wind up operations and shut the business down.  As it happened, we did have some money available.  Operations provided some, our moving sale back in June provided a lot, and we let a few categories lie fallow to free up additional dollars.  But costs quickly spiraled out of control and we had to borrow the rest.  The result is the situation we have today, where the store has awesome long-term advantages but we're stuck tightening our belts as we enter the new year.

One of those three courses of action will occur in September 2022, when our lease ends.  We will either renew in place, we will move to a location we can easily afford, or we will close.  I have a health condition that gives me only about a 50/50 chance of being alive by then, so this might be someone else's problem when the time comes.  But assuming I am involved, by far the preferable scenario is going to be staying open in place.

And that means our way forward is clear.

No more worrying about how I'm going to leverage into the next thing.  No more, at least for now, dithering on whether it's time to put in a coffee bar -- that will be a question for years later, depending how fast our bankroll refills.  I'm not even going to put any attention into reopening branch locations until we've paid for the opening of the main location, which with any luck won't take long.

The order of the day is not expansion, it is regrowth.  The year 2018 will be the one where we take what we've learned, how we discovered to do it optimally and efficiently, and then apply that knowledge to the business we had to take apart last year, and build it better than it was before.  We have the materials.  We have the location.  We have most of our existing customer base, and every day we meet new faces.  We'll skip past all the steps that didn't work since 2012 and build the same amount of muscle mass in half the time or less.
The Magic card "Regrowth" translates into German and Italian as "New Life."  Standing here at the beginning of this vast undertaking, it does sort of feel like that.  New life, with a newer and greater adventure.  Come join us if you like.

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