HELP SAVE OUR FURNITURE BUSINESS

A little background. I'm 36 years old and have been working in furniture retail since  was 24.  I worked for at least 10 different furniture stores all across NYC.  I worked for the chain stores and the independent family owned stores as a salesman and store manager. I worked in low end and high end.  I have seen it all.  About 6 months ago, I started working for this new independent furniture store in Manhattan. The store opened in January of 2015.  We mainly sell futons and sofa beds for small Manhattan apartments.  The owner ran a successful furniture store before he opened this one, which was located in the suburbs. Unfortunately, there was a fire and he had to close that location.  His dream was to open a store in Manhattan because he thought that he would make 100k in sales/month.  The current store is in a good location and is about 2,500 square feet.  I worked for the owner's competitor for nearly 3 years.  Our competitor has a much smaller showroom and is in a worse location than we are.  When I worked for our competitor not too long ago, that store was bringing in easily 90-100K in monthly sales. We have very little competition in Manhattan except the competitor I used to work for. 

 Here are some general problems that I noticed about furniture stores in Manhattan:.
1. The close ratio is much much lower than the suburbs.  Main reason is because we get so much pedestrian traffic passing by which attracts a lot of browsers.
2. Unless you are located in a mall or shopping plaza in the suburbs, the closing ratio is much higher because the foot traffic coming into the store are there as a destination shopping place rather than the people just passing by in the city.
3. Because there are so many different blocks and streets in the city, and most people don't have a car, it's much harder for your store to be noticed in the city, unless you are located in a very central area which attracts people from all neighborhoods.
4. Over the years as people started shopping and researching furniture online, I saw quite a decline in sales and many furniture stores closed.  THey simply could not rely on the local neighborhood market because it would dry up fast.

The competitor I used to work for did a lot of business online.  As a matter of fact, I would say more than 70% of the sales in that store were from customers that researched their website before coming into the store.

When I started working for the new furniture store 6 months ago, I began to notice something was really wrong.  The store traffic was horrible and almost nobody came in from the website, rather they were just passing by or lived in the neighborhood.  I took a closer look at the website and realized that it was awful and bland.  He had hired and fired some web developer before I started working there who completely messed up the website and wasted thousands of dollars on ineffective google adwords.

The owner is paying $20K/month in rent.  The best month in sales was 50K.  The rest of the months, we barely are pulling in 30K.  Factor in the cost of goods sold, and we are pretty much in the negative. 

By  mid October of 2015, I got so frustrated because we were doing so poorly and we were lucky to get 5-10 people coming through the door on an average day, compared to 20-30 people per day is what a typical urban furniture store should attract.  I took it upon myself do create another website and focus everything on ecommerce marketing.

It took me 6 weeks to finish the site.  I took all my 11 years of furniture sales experience, plus writing blogs and created a really great niche website specializing in futons and sofa beds for small spaces. After I completed the website, it was now time to promote it using google adwords.  Since our cash flow was drying up, the owner could only afford to do a $50 daily budget for adwords. 

Now everything comes crashing down:
1. We lost $15,000 from a fraudulent charge from a customer using a fake credit card.  We could not get the lost money back.
2. Our old website was hacked into and was down for 3 weeks
3. We got an eviction notice from the landlord 2 days before Christmas because we were two months behind rent.
4. We tried to get several working capital loans, but we were denied.

The owner simply could not understand what was going on. He has owned a couple furniture stores in the past and he never imagined he would be in this situation.  He sank nearly 300K into this store than was not producing any profit.

Naturally, I panicked  and was trying to figure out a back up plan. 
I thought about different options. We can't move to another store front that's cheaper because we would have to sign a lease and put 3 months rent down and because of the eviction, no landlord will rent to us.

Keep in mind we have very limited resources and capital. We were fortunate to get a loan of 20k, even though we were aiming for 40-50K.  I then came up with the idea of renting a large storage space in those self storage facilities. We would put most of our money into online and marketing and customers would come by appointment to the showroom/storage space.  The storage facility is $2,500/month for 650 square feet.  This is just enough room to display the main types of pieces we feature on the website.  The rent is month to month and we can easily scale the business and rent out more storage rooms if needed.

We are currently in the process of closing the current store location and will be moving to the storage facility some time within the next two weeks.  The storage facility is in a good safe location and they have a nice lobby and it's climate control in a big secure building. Fortunately, it's not located in some industrial area outside Manhattan.  I firmly believe that if we set up the showroom really nicely and pump some money into the google adwords campaign, we will do okay. 

Here is the big question.  How much money should we allocate monthly to google adwords?  I was thinking $4,000-$5,000/month.  Our goal is to get at least 3-5 appointments a day to the showroom as well as 3-5 online daily sales from the website.  Given that our main expenses are online marketing and rent plus paying the delivery guys when needed, we are looking at about just under 10K month in overhead.  Therefore we would need to sell about 17K-20K a month to break even (factoring the cost of the merchandise which is marked up double. 

Please give me any input, or encouraging advice to make this business work. 
Thanks,
Benjamin

Posted By Benjo21, 2/21/2016

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