Each week, we seek out expert advice to help a small- or medium-sized company overcome a key issue.
Andrew Goldfarb was expecting December to be one of his best months, but, thanks to the NHL lockout, it may be one of his worst.
Mr. Goldfarb is the founder and owner of AJ Sports World, a Vaughan, Ont.-based company that sells signed sports memorabilia, including jerseys, photos, helmets and other sporting goods autographed by current and former athletes. His sales are made in his store, online and through auctions at arenas and on NHL.com. About 95 per cent of his business is hockey-related.
Because of the lockout, Mr. Goldfarb hasn't been able to hold any arena auctions and his NHL.com sales have dropped by 50 per cent.
He also hasn't recruited any active players to sign items – they usually account for about half of the signings, with retired players accounting for the rest.
Overall sales have also been affected because people just aren't paying attention to hockey, he says.
"Sales are generated by interest in the sport of hockey," he says. "If people aren't watching the players play, they're not buying product."
Next month could have been his best of the year. The Winter Classic, a popular outdoor NHL game, which was supposed to feature the Toronto Maple Leafs, would have meant a big jump in sales for Leafs-related gear. But the game has been cancelled.
"We pre-ordered hundreds of jerseys that we planned to get signed by current and legendary Maple Leafs," he says.
While Mr. Goldfarb won't reveal how much his 10-employee operation brings in, he does say that, if there's no hockey in 2013, he'll lose at least 50 per cent of revenues through June next year, representing about a third of annual revenue.
He is trying to cut expenses. He is negotiating lower signing fees with athletes, reducing his advertising budget and, he says, if hockey doesn't come back by the end of the year, he'll likely have to lay off staff. However, nothing will really stop the bleeding until hockey comes back.
The Challenge: What can AJ Sports World do to stay afloat as a result of the lockout?
THE EXPERTS WEIGH IN
Steve Power, Toronto-based partner with Ernst & Young
He needs to look at revenue on both a long-term and short-term basis. For short-term survival, he might want to look at doing auctions in AHL [American Hockey League] and CHL [Canadian Hockey League] arenas. People are still going there and more fans are attracted to that level of hockey.
Longer-term, he should look to the NBA [National Basketball Association]. There's quite a bit of cross-ownership in teams and a lot of teams share the same arena. If the model works for hockey, it should work for the NBA.
He mentioned laying off staff. He may want to consider adjusting his hours instead and not be open quite as often. He can still give employees some of the hours they need. That gives him a better chance of retaining his employees while saving staffing costs.
Another way to reduce costs is to try and get more business online. It's a low-cost model compared to having someone at an arena. How does he do that? Hand out cards at events encouraging people to move online. Also, be honest with people. Tell them the situation and that it would be better if they shopped online.
Dave Zimmel, Calgary-based vice-president of private enterprise for MNP LLP
Having 95 per cent of his business tied into one sport is too high. There are successful business models where 50 per cent of the business is tied into one product or client; once you get past that, the whole concept of economic dependence comes into play.
Now's a good to rebuild and redefine his business model. He needs to see what other sports leagues he can get into. The Grey Cup is coming up, there's the NFL [National Football League] and the Buffalo Bills. Whatever he does, he needs to get that 95 per cent down.
If he doesn't want to lay off staff, he'll have to put personal money into the business to get through the slow time. The lockout will come around and the business will get back to normal. But it depends on how much he can absorb himself.
Justin Bobier, owner of Calgary-based Crystal Creek Homes Inc.
During the recession, in 2008, there were times when we had not a single person come into our show homes. Many people in the industry lost 50 per cent, but we increased revenues by 100 per cent.
We got creative and focused on customer service. When people came into one of the homes, especially with kids, we said that they didn't have to stay and that we would come to their house later in the evening. People were blown away by that. It's about being customer-friendly and going the extra mile.
He should go to his customers. Maybe do auctions at corporate events. Make it easy for customers to get his product.
He should also reconsider cutting his advertising spending. When business is good, what do you need to advertise for? I was one of the few companies that decided to market myself in bad times. It's when you're looking at a possible loss of revenues and customers that you want to bring people through the door. That's when you have to spend money on advertising.
THREE THINGS THE COMPANY COULD DO NOW
Find new markets
Use the downtime to broaden into other sports and events. Don't put so many eggs into one basket.
Encourage more online shopping
Get people to buy more online, instead of in the store. Hand out cards bearing the website at events. Be honest about the situation.
Instead of cutting the ad budget, spend more. Market more to try to bring more people in the door.
Special to The Globe and Mail
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