The Business of Show Business
Part II: Doing Good Business

In Part I, I shared some of my ideas about what dealers can do to make their shows as successful as possible. In Part II I turn my thoughts to the promoters, and to the more general problem of what a show has to deliver in order for me to judge it Good; not just OK, but Good.

How has the Promoter Spent my Booth Rent?

Obviously, most of my booth rent goes to pay the rent of the facility. But some is discretionary, and that’s what interests me.

I like shows where there is a big bulletin board of local publicity in the dealers’ room (I like a dealers’ room, too). On it dealers can read clippings of ads in local papers, news reports and stories about the show, accounts of ads on local radio stations, numbers of flyers printed and distributed locally, and so on. We all read the trades and see the show ads in them, but we don’t see the local press, and that is what the retail customers read. The local publicity should include posters in shops, a banner or two, good highway signs, and fliers in the motel where I’m staying. If we dealers don’t see local publicity for ourselves, we will always grumble about how bad it is!

I also like shows where the promoter has spent imagination and effort, as well as money, to make the facility as consumer-friendly as possible. Publicity gets customers through the gate, but once there, they must be tempted to linger. The longer a customer stays on the floor, the better my chances of turning him or her from a looker into a buyer.

I look for good food, and a comfortable place for customers to sit, eat and talk. I look for customer rest areas dotted around the hall. Show-going is hard on the feet, particularly older feet, and I don’t want him saying to her that he’ll wait in the car because that’s the only place he can sit in comfort. If the non-buying spouse is uncomfortable, his or her antsiness will put pressure on the buyer in the family and will decrease our chances of making a sale. Once a customer leaves the show to get something to eat, or to sit and discuss the purchase, the sale is more than half lost.

I like shows where the ambience enhances the value of the antiques I have brought. Are there flowers greeting the customers in the entrance? Are the ugliest bits of the facility hidden by drapes? Are there clear signs that the promoter has made an effort to make a cold, impersonal facility warm, homey and friendly. Has he or she managed to make the venue look the sort of place where good things are sold, does it look classy and not cheap? Customers have to be in the right mood to buy, they have to feel at home, comfortable and welcomed. Ambience is intangible, but it matters, and I like to see some of my booth rent being spent on it.

Even if I’m not having a good show, I need to see that the promoter has brought my sort of customers through the gate. I can tell this if other dealers are selling stuff comparable to mine, even if I’m not. I can tell this by the sort of conversations I have with customers, even though they don’t want anything that I happen to have brought this year. Anyone can have a bad show at a good show, and we should not let that distort our judgment of the show itself.

I like to see a promoter who knows the truth in the old farming adage: the best fertilizer is the sole of the farmer’s boot. Is the promoter or benefit committee in constant evidence throughout the show? Are they walking up and down the aisles, talking to dealers and customers, trying to find out what’s working well and what isn’t? Are they willing to listen to dealers, even if we’re complaining (as every now and again one of us will)?

I also like shows that offer good buying, both on the floor, and in the locality. The old saying that you can always buy your way out of a bad show is actually true. Obviously I don’t expect the promoter to provide me with good buying, but I will continue to do a marginal show if I can buy well there.

The Business of Show Business

All these factors help me sell well. But when all’s said and done, we have to get down to the business of the business, and that means getting down to the numbers.

To my mind, the most important basic number is the gate:dealer (or G:D) ratio. This is the one issue where the interests of promoters and dealers diverge most sharply, and it’s therefore controversial and rarely discussed. Last time I raised it in this magazine I caught flak from promoters and gratitude from dealers. I learnt from the controversy, and have refined my views a little. So here they are.

The more expensive your antiques, the higher the G:D ratio you need. For middle-of-the-market merchandise, I believe you need a G:D ratio of at least 25:1, preferably 30:1 (that means 30 people through the gate for every dealer on the floor.) For the pricier stuff, you need 50:1. Anything below those ratios and you have slim chances of achieving a gross that is ten times your booth rent, and that remains my base criterion for a good show: it also is one that some promoters have told me is unreasonable. Now, I can live on seven or eight times booth rent, but I don’t have a good show till I reach the magic ten.

My definition of a good show, then, is one where at least one half of the dealers do 10 x booth, and the majority of the rest do seven or eight. This is only possible with a good G:D ratio. There are only two ways to improve the G:D ratio – increase the gate or reduce the number of dealers. Promoters have every incentive for the former, but none for the latter, for their income comes from both parts of the ratio. The fact that dealer’s income comes from sales only, and the promoter’s from gate and booth rents is the root cause of the divergence of interests of the two parties: promoters want more and larger shows (more gate money and booth rents); dealers want fewer and smaller (better G:D ratios, better sales). Certainly, the best promoters will try hard to keep their dealers happy, but their efforts are all too often concentrated on the factors in the first half of this article: rarely does a promoter cap, let alone reduce, the number of dealers. Some do, I’ve worked with two of them in the past year, but they are the exception.

If we want a smaller show where the pie is sliced less thinly, we dealers must be prepared for higher booth rents. We then have to make the business decision of whether the increased booth rent and higher G:D ratio are likely to produce an increase in sales that is large enough to justify the increase in rent. Put it simply, will a 10% reduction in the number of dealers and a $100 hike in booth rent produce an extra $1,000 in sales? In most cases I believe that it will.

While booth rent is the largest single component of operating expenses (expenses excluding cost of goods), it is still only between 50% and 66% of them – let’s say 50% to keep the math simple. A 10% increase in rent will therefore produce a 5% increase in expenses. If that 5% buys a good chance of increasing sales by 10%, it’s worth it. It’s worth it, whether it buys you a 10% reduction of the G:D ratio, or a 10% increase in booth size. Booth rent is the only expense that can correlate directly with sales, and it is therefore the only one that is worth voluntarily increasing. If we include the cost of goods in our expenses, booth rent becomes an even smaller proportion of the whole – see the table below.

Show Clusters

The G:D ratio should be calculated for a cluster of shows as well as for a single one. These days it is common for a successful show to attract others. If the core show attracts two tailgates, the resulting cluster must attract three times as many customers as the core show alone. If it doesn’t, the dealers will suffer, but the promoters won’t: people will likely visit all three shows, so the promoters will get their gate money, but won’t buy at all three. What customers spend on gate money will increase: what they spend on antiques won’t.

A developing cluster will take time to enlarge its customer base adequately, at least three years, and maybe five. So dealers should watch carefully to see how that base is building and to figure out if it’s growing fast enough by the third, or at most, the fourth year. Antiques Week in New Hampshire and Brimfield are the two most successful clusters, successful for dealers, promoters and public. The spring Nashville may be another. Other developing clusters (Philadelphia, York etc.) are still, in my opinion, too young to judge.

Calculating the Business

Figuring out if we’ve reached 10 x booth is an easy calculation that we can do on the spot. It’s the first stage of figuring out our overall margin, which is also easy – we just add up our expenses and subtract them from our gross, right? Well, yes, but only sort of. Not all expenses are clearly defined, and what to charge them against is not always obvious.

Expenses

Clearly, booth rent and cost of goods (i.e. what we paid for what we sold) are the core of the expenses column. So, too, is travel. 33 cents a mile is what we should figure because that builds in the overheads of our van – charging gas money alone seriously undercounts travel costs. Lodging is another obvious cost, but food is less clear. Do we count all that we spend on food, or only the half that the IRS allows us to deduct? In general, when in doubt, take the higher expense figure – it’ll give you a more accurate picture in the long run.

Should we charge a percentage, say 5%, of our general overheads to each show? Probably not: overheads are part of the cost of doing business that our annual margin must be large enough to cover. I may be a bit inconsistent here in charging vehicle overheads, but not general overheads to each show, but I think wear and tear on the van is more directly attributable to each show. You may decide differently.

And none of us ever charge for our time. Oh well, that’s our problem.

Net Margin

At the end of all this adding up and subtracting, I need to see a net margin of 30% for a show to be good. This means that what is left when I deduct my total expenses from my gross takings must be 30% of the gross. If I gross $10,000, and my total expenses including cost of goods are $6,600, then my net is 33% and I’ve had a good show.

If one third of my shows yield me net margins of 30%, then I have a good chance of ending the year with a net margin, or profit, of between 15% and 20%, which is what I need if I’m to stay in business. And there’s no way that a margin like that will support the bad habits I’d love to acquire.

It’s hard to get a 30% net margin with a gross of less then 10 x booth. Let’s do the math for a hypothetical show in which the booth rent is $750, and our out-of-pocket expenses are the same. This means that our operating expenses, excluding our cost of goods, are $1,500. Let’s also assume that we sell with a 50% gross margin – i.e. that we double (the margin is the percentage of selling price, not of cost.) The following table tracks our net margins as the show moves from a disaster, to good, to a barn-burner. You’ll see where my satisfaction point is reached, where’s yours?

Gross Sales ($) Cost of Goods ($) Operating Expenses ($) Total Expenses ($) Net margin (in $) Net margin (in %)
3,000 1,500 1,500 3,000 0 0
4,000 2,000 1,500 3,500 500 12.5
5,000 2,500 1,500 4,000 1,000 20
6,000 3,000 1,500 4,500 1,500 25
7,000 3,500 1,500 5,000 2,000 28.5
7,500 3,750 1,500 5,250 2,250 30
10,000 5,000 1,500 6,500 3,500 35
20,000 10,000 1,500 11,500 8,500 42

So at this show, where we’re selling everything at double its cost (and how often does that happen?), we only get to a margin that will sustain our business when our sales are ten times booth rent. At four times booth rent ($3,000 gross) we have made nothing, every cent of our gross has gone to someone else. At $5,000 gross (6.6 x booth) we’re starting to creep into the range of the acceptable. But it’s not till $7,500 gross (10 x booth) that we’re on track for a profitable year. The sad thing is that few dealers actually achieve 30% net/10 x booth, and there are few shows that offer them a reasonable chance of doing so. I believe that this is because, in general, the G:D ratios of our shows are too low – i.e. our shows are too big and too numerous. But there is one other important reason: the changing nature of the industry.

Why Is It Hard to Make a Living at Shows?

If the amount spent annually on antiques (which nobody knows) were divided by the number of antiques dealers (which nobody knows) we’d end up with a dollar amount that is impossible to calculate. But I’ll bet the farm that it would show us that an industry-wide annual net margin of 20% is unachievable. No economist would call us a viable industry.

The show business keeps going because the hobby dealers (i.e. dealers whose antiques business is a profitable hobby, but not their livelihood) now outnumber the full-timers who rely on the antiques trade to put bread on the table and the kids through college. Hobby dealers, by definition, can live with net show margins of less than 30%. If they’re really having fun, and if they really love the antiques they’re handling, they can be happy grossing as little as $4,000 out of a booth that costs $750.

The dominating presence of hobby dealers distorts the economics of the antiques business. They subsidize their businesses from other income, so their businesses survive when, by the laws of economics, they ought not to. Their presence means that the industry carries more individual businesses than its total size can support.

Their presence makes shows viable that, in strict economic terms, ought not to be. Their presence makes shows larger than, in strict economic terms, their gates can justify. Their presence makes it possible to put on more shows than, in strict economic terms, the industry can support. They make show promotion more profitable than show dealing, and they make it harder for full-time dealers to achieve the margins they need.

I assume that you will have deduced from my tone of voice that my sympathy lies with the full-time dealers. But then, I’m a sentimental old dinosaur.

Change Hurts

The future of the business, I’m afraid, lies with the hobby dealers. Let’s make no bones about it. And the best of them are terrific: they have a passion for their merchandise, a deep knowledge of it, and they’ve been impatiently waiting for their real careers to get to the point where they can indulge their passion.

They are happy to spend the time searching out that special object. They are happy to keep that special object for show after show until the one special collector steps into their booth and buys it. They are tipping the balance of the industry towards small, specialized dealers, and I think that’s the way we have to go.

The antiques business used to be anchored by general-line dealers who carried a range of antiques that appealed to a variety of customers. They made their living this way, and they needed a broad customer base to sustain themselves. They also needed to turn their inventory more than twice per year. Around them, on the margins, were a few specialist dealers with a narrow, but passionate, customer base and slower turnovers.

Today, the margins and the center are changing places. We are becoming a business with more specialist, and fewer general, dealers. In an age where niche-marketing has replaced mass-marketing, that is an unavoidable, and laudable, response to market forces. But it means that the hobby dealers are displacing the full-timers.

My heart bleeds for the long-time, full-time dealers, many of whom are personal friends, who are struggling to keep going with reduced margins, when those same margins are making hobby dealers as happy as larks. The full-timers’ need for higher margins means that they have to look for shows with higher G:D ratios. And G:D ratios are kept low by the presence of hobby dealers. Their lower margins and narrower customer bases enable them to thrive in shows with low ratios, and thus to make those shows viable, even though they are bad for the full-timers.

Change always hurts. There’s a lot of pain being cased by the changes we’re currently going through. And, let me add, the changes and the pain are being felt by single-owner shops as much as by show dealers. Economically viable margins are as hard if not harder to achieve in shops as in shows. We are seeing more shop owners moving onto the show circuit, and that’s probably a wise move, even though it may seem like moving from a rock to a hard place – more and more of the business is being done at shows rather than in shops. Shows can bring a variety of specialist, or tightly-focused, dealers into one place, and that’s what today’s buying public wants.

So, at the end of all this I reach a conclusion that I wish I didn’t: the twenty-first century antiques dealer needs a specialist niche – and a second income.