Pretend I didn't ghost you for 3 months

A return to writing even if there's no return to profitability.

The golden sunlight at Fernseed’s South Tacoma Way location. Have I thought about closing it? Of course! But it doesn’t make sense financially.

Hey, friends. I swore I would never write the circa-2006 blogger heyday apology post that went something like, "Sorry for the radio silence. Life got busy." Because I thought I would be able to adhere to at least a twice-monthly posting schedule? But then life got busy.

Did life get busy, or did I deprioritize this newsletter? I deprioritized it. I made a conscious decision to put this project on the back burner while I figured some stuff out.

Is that stuff figured out now? Not at all.

That’s why this newsletter got even more postponed. I thought for some reason I was going to figure out how to solve this looming problem of sales being down 20-25% from what they were last year and how to run a profitable business in spite of a looming recession and then pop back in here with an update.

Truthfully, I think we’re entering into a recession. I can see it in the numbers. Our average cart value is staying about the same, but the gap between cart values is widening. I see a lot of sales under $15, fewer sales close to our typical average cart value (around $48), and yet still see $100+ sales consistently. After doing this for 4 years I feel like I know what that means: people with money still have money, and people with less disposable income are limiting their discretionary spending.

A quick aside on how I’m dealing with this issue alone:

Before I opened the shop in 2019 I asked one of those trade show line reps how boutiques dealt with the 2008 recession and what their advice would be if we face something like that again. (How I had the foresight to ask this 18 months before a global pandemic is a topic for another post about how entrepreneurs are curious people and always collecting data points for future decision making. Not everyone has this skill, so if you do, honor that part of you. Some people call it “gut instinct,” but in recent years I’ve decided we’re just better at recognizing patterns. We’re like that disturbed psychic rabbit, Fiver, in Watership Down. The foresight is both a blessing and a curse.) The line rep said the successful boutiques changed their approach from selling all-high-end-all-the-time to offering $20 “self care” items like cheap jewelry and candles. People still wanted to spend money on themselves, they just couldn’t spend as much. So Fernseed is leaning into lower cost inventory while trying not to compromise our values. I won’t buy a cheaper, factory-made version of a plant pot that looks like it’s handmade. Instead, we’re showing our customers how amazing different styles of cheap terra cotta plant pots can look when paired with glazed saucers. We’re also holding off entirely on restocking high end items with high vendor minimums. I can’t afford to hold $4k in inventory that sells one $180 planter at a time. I need that cash right now to pay rent and make payroll.

My real issue—the one that I haven’t figured out yet but I’m jumping back online to tell you about it anyway—is that we still can’t cover our total monthly expenses based on our current monthly sales, even as I have continued to slash expenses. I have spent the past year making cuts to our expenses, even when those decisions were dramatic and difficult, and it’s not making a difference because as fast as I cut them, sales continue to decline. Every month we post a loss between $9-15k, and I’m running out of ways to finance that debt.

I have cut:

• Rent expense by getting rid of our private office

• Payroll by not hiring to replace positions after a couple people left

• Software expense by deciding we can do that in a spreadsheet

• Interest expense by consolidating most of our short term debt into one “easy” low monthly payment

• Supplies expenses by limiting spending on things that are nice to have, but ultimately not needed to run a functioning business

• Dumb shit I buy when I have a new idea that isn’t part of a strategic plan (let’s be honest here), like vinyl samples (why?)

In addition to all that, I’m working with our inventory manager to raise prices on key best selling products by $0.50 here and $4.00 there. We’re lucky to stock lots of product that doesn’t have a standard MSRP, so as far as I can tell our customers have been just as eager to purchase a Christmas cactus for $12 as they were to buy it for $8.50. Every dollar helps! This has decreased our cost of goods and helped margins, but it’s still a relatively new initiative, so I’m not sure by how much yet.

I’ll just throw in that I haven’t paid myself on a regular schedule any amount that could be considered a living wage since March of 2022. I’m lucky to live with a partner who can pay for literally every expense in our household while also holding down a stable job that pays the mortgage that served as collateral for that loan consolidation I mentioned earlier.

In other words, I’m working 40-60 hours per week for no pay, and I’ve now mortgaged my house—which I can’t pay for anyway—against the value of a business that is continuing to incur debt despite me spending the last year slashing every line item in the budget that wasn’t absolutely necessary.

Should I be worried? (And also: Hi, how are you? How are YOU doing? It’s been a while. Oh, I love that sweater on you, very lovely.)

The only thing I’m really worried about is how long this dip in spending is going to last and why it’s happening. I’m trying to read the tea leaves, but focusing on big picture trend watching is difficult when we’re understaffed and I end up working a lot of retail shifts to cover last minute call-outs, and also I’ve got two young kids who chatter over my shoulder any time I try to look at a spreadsheet or read a New York Times article about Black Friday consumer spending.

Me: is the house plant trend over?

Magic 8-ball: Better not tell you now.

Is it a recession?

Outlook good.

How long will the recession last?

Concentrate and ask again.

Will I have enough money to finance $5k in loss for 18 months if the recession lasts 18 months? But then coming out of that, will I have enough in profit to pay back that additional debt on top of the quarter million in debt I already have?

Reply hazy. Try again.

(Meanwhile my kids are asking me, “What’s the difference between a coffin and a sarcophagus?” “What does ‘eventually’ mean?”)

The thing about running a business that’s in financial trouble is that everyone seems to think they know how to fix it. Wreath workshops! Online terrarium building courses! Dry flower arranging kits and online classes! It’s like we’re the friend with the bad back; everyone has a chiropractor.

I want to get real about that for a moment. If you run a retail business, I’m sure you’ve had these conversations. You’re telling someone, “Sales are real bad right now,” and they think the solution is a paint-and-sip class.

It very much is not.

No independent retailer is going to paint and sip their way out of a global pandemic, supply chain and inflation woes, followed by a recession. This is not a situation where we need to get clever and find money in the couch cushions.

As independent retailers, we’re taking on a considerable amount of risk in order to build a business that has tremendous value to our communities but very little financial value (if any) in the larger marketplace. We are operating businesses that generate thousands in state tax revenue and employ people. Many of us are likely giving back to our communities in the form of donations to school actions and the like. But at what personal financial stake? Financing occasional sustained loss resulting from marketplace volatility (pandemic, recession, industry disruption due to the emergence of new technologies) requires personal collateral. If the business goes bankrupt, I’m still personally responsible for most of the debt. While this is true of most businesses (personal guarantees are par for the course, really), independent retailers face the additional cocktail of enormous challenges that include reliance on foot traffic (weather, street construction), reliance on supply chain, low wages leading to constant turnover, and local competition from powerful chains with seemingly unlimited financing. To add to that, most local retail businesses have a high degree of owner involvement coupled with low owner compensation, which makes this type of business hard to sell to an interested buyer, most of whom are looking for turnkey operations with predictable profit where they don’t have to drive floral deliveries every time it snows or actually run the quilting workshop.

The conclusion I’m coming to is that the job of running an independent boutique is like so many jobs that require immense personal sacrifice for low compensation, but unlike jobs like nursing, teaching, social work, and nonprofit management, we are also running a business that requires even more financial risk and creates the assumption that we are somehow okay just because we still exist.

In Fernseed’s salad days, I was pulling $30k in salary and doing most of the managerial jobs myself. Nobody wants to buy a business for that kind of commitment and compensation, and yet that’s the situation I hope to return to one day! Don’t get me wrong, I’m not looking for an exit here. I would love to keep doing what I’m doing, I would just like to get paid for it… or at least not go deeper into debt to keep doing it. I’d like to pay myself a small salary and continue to operate under the delusion that when I really am ready to step away, someone would pay half a million for this enterprise. Or maybe $350k? Because that’s supposed to be my retirement, or at least a partial retirement plus initial investment in a new venture. (I have this great idea for a furniture company, let me tell you about it.)

Maybe I’ll get there if Fernseed can get back to a place where we don’t have short-term debt on the books and we’re reporting annual earnings (before interest, depreciation and amortization—EBITDA!—hey, who went to business school?) of $25,000 or more. In order to do that, according to my spreadsheet, I need to hit an average monthly revenue of $68,000 for 40 months so I can pay back the short-term debt, then maintain that for two additional years while keeping expenses exactly the same (hah) to get to an annual profit of $60,000, out of which I will need to pay myself some kind of a “reasonable salary,” and if I want to keep $25,000 in profit in the business, that salary is looking like $30,000 when you account for payroll tax.

It’s not like we haven’t had $68,000 months! We have. In 2022! It’s mid-December as I write this, which means we’re coming out of our darkest month. November is bleak in this business, and perhaps that’s coloring my every thought at the moment. But the last $68,000 month we had was in May, 2022. The last 6 months our sales have averaged $51,000. Will we ever see $68,000 again? If it’s not looking like it, when do I make that call? And what exactly does “making that call” look like?

“Have you thought about closing one of your locations?” is something some of my friends have asked.

I have to laugh when someone close to me whisper-suggests something drastic and maybe inevitable like this, as if my brain hasn’t rounded that corner yet.

(Closing one of the locations actually doesn’t make sense spreadsheet-wise, and I’ll spare you the details why, but yes, I’ve thought about it.)

Friends, my brain has rounded literally every corner that might keep this business afloat. I swear it’s running background programming, going through possible scenarios without me even being conscious of it. Have I thought about closing one of the locations? Yes, about 4,624 scenarios ago! We’re now on scenarios that end with, “I’m pretty sure that’s illegal… but is it really?” or “I’ve always hated Rae Dunn, but I’m willing to do what it takes.”

I need $25k at least in operating expenses each month to keep the furnace running here. O-P-E-R-A-T-I-N-G E-X-P-E-N-S-E-S. That doesn’t include cost of goods. If we keep ringing $51k, even on miracle margins (60%), I’m going $5-8k more in debt each month.

Can we turn it around? Can I get it back on track? Or am I swimming against consumer buying habit currents? Will anything I do—assuming I have gas left in the tank to think and execute after working 60-80 hours per week trying to avert disaster since March of 2020 all while my kids are watching twitch streams in the next room—have the measurable impact I need to overcome a $17k monthly deficit? Where did all that revenue evaporate to? (Also, was this all caused by the Instagram algorithmic change? Why have we had exactly 10,948 followers since November of 2021?)

I know I’m not alone here, and I guess that’s comforting. I’ve seen so many small businesses post on Instagram recently saying things like, “Hey, it’s pretty bleak over here wrapping up 2022. See you in 2023 maybe but get in here and shop please SALE SALE SALE SALE SALE.” I love the transparency, but hate that business owners feel the pressure to open up our ribcages and offer our deepest fears as collateral for a wave of sympathy revenue that may or may not come. I don’t want to use my personal voice as shark bait for the Instagram commenters anymore.

So I’ve given up for the time being on faux-nerability as a marketing tactic. I don’t need that level of anxiety in addition to the anxiety I’m already carrying around. And in truth I don’t want to share this information with all our customers and the internet at large, because I’m not looking for sympathy or solutions, and I can’t emotionally handle the potential for backlash.

Here, in your email inbox or however a person reads this, I’m sharing my slice of terror pie with a community of people who either own a business or have for some other reason opted in to hearing about my experience running one. This format makes sense to me for that reason.

I started this writing venture “slowly, and then all at once,” by thinking about doing it for years and then finally ripping out a post on my laptop in the Atlanta airport 11 months ago and hitting “send.” I had zero goals for it other than to write about my experience running this business, because something about the writing of it gives it meaning for me. On the eve of the almost 1 year anniversary of this newsletter, I want to say thank you to all of you for subscribing. (There are more than 100 of you now. More than 100!)

I promise not to sell you e-books and online courses. Unless it really comes to that. Honestly that could be scenario number 4,625.