How to Get Out
of the Comics Business

In this column, I frequently provide some measure of business advice for those seeking to enter the business of comics retailing. Up to now, my primary emphasis has always been on whether, or not, an individual has the basic mindset and skills to be a comics retailing entrepreneur, and how then to convert that desire to enter the comics retailing business into reality. While I think I've covered most of the topics related to getting started pretty well, I had the sudden realization the other day that I have done little to express how to get out of the comics business. Since successfully getting out is even harder than getting in, I figured it was time that I touched upon this difficult topic.

While it may seem somewhat premature to write about getting out of the business to those who have not yet even managed to get in, it is actually very basic financial planning. In the big time investing world of venture capitalism, the number one consideration when evaluating risk is first clearly defining the proposed "exit strategy" of any given commitment. Before dime one is invested in any project, the fund managers first define how they are going to retrieve their working capital and profits. For venture capitalists the preferred methodologies are taking a company public, selling off to a long-term private equity fund, or merging in with another company in the same field. If none of these options seems easily available, the odds that the investment will be made by the fund managers is almost zero. Simply put, if you can't ever get your money back out, then what's the point of making an investment?

Applying that theory to the world of comics retailing, I am often dismayed to discover that even the most successful of my contemporaries have not bothered to consider their own personal exit strategies. There seems to be this prevailing thought that we'll all work in the comics biz until we die. While that may be true for a lucky few of us, debilitating long term illnesses and other personal tragedies will inevitably force many of us to retire long before we actually pass away. Unless some concrete plan is in place to maximize asset retention upon such an eventuality, the odds that our earnings from our years of efforts will be salvaged are almost nil.

The above having been said, active buyers for comics retailing business are very scarce. I do know of a few astute retailers who managed to extricate themselves from the business by selling their companies intact, but the harsh reality is that at the end of the day, most comics business are liquidated for pennies on the dollar. I know this to be an absolute fact, as I am frequently called in to help with estates and other unplanned liquidations, and the ultimate outcome is almost inevitably far below the actual value of the ongoing business. Capitalism's underlying methodology of "creative destruction" is particularly hard on collectibles retailers, as when comics dealers consume their crippled and dead, they seek to pay darn near nothing for the privilege.

To avoid this trap, I would highly recommend implementing several financial strategies. I would start with the simplest, which is to be sure to pay yourself a decent salary on the books. Far too many entrepreneurs dislike that !@#$% self-employment FICA tax so much that they pay themselves in cash. At the same time as that's illegal, it also isn't smart. Social Security (despite all hype to the contrary...) is still the most reliable way of assuring yourself a steady cash flow in your dotage. But your ultimate payout is predicated on what you pay in, and as several of my friends have recently discovered to their extreme dismay, their lack of contributions during the past twenty years have left them with only a tiny Social Security check in the future.

Another important consideration is to set up a retirement fund. Presuming that you are a successful collectibles entrepreneur, however, I would encourage you to not give your money to other people to invest. While there are certainly benefits to having others define risks for you and place your money into financial instruments that have high liquidity, the downside is that you have to pay a substantial level of fees, and that the amount of your assets is on public display. Aside from the sheer annoyance of knowing that your financial advisors are most likely selling your personal data to the whole world, as those who invested in Enron discovered to their extreme dismay, even "safe" investments can turn out to be anything but.

As an alternative strategy, if you know about retailing collectibles, my suggestion would be to spend a lifetime accumulating them. Both fine art and collectibles have pretty much kept pace with inflation over the past few decades, and with the advent of online person-to-person retailing websites like eBay, it is now possible for even novices to recover substantial levels of asset value from collectibles, with minimal cost. The key to this strategy, however, is a steady program of accumulation. As a case in point, I started personally putting away first printings of scarce Underground Comix in 1973. Prices in that category of comics collecting were static (or declining...) for many years, but since I was investing for the long haul, I kept accumulating Undergrounds even when prices were very low. I now own well over 20,000 older Underground Comix, which cost me darn near nothing. With prices in that category now surging, my return on capital should eventually end up being pretty darn high.

Before you start setting aside every collectible in sight, however, please do understand that the key to my suggested investment strategy is that you set aside only collectibles in genres that you know very well, and that you never sell. As a case in point, I started collecting pottery made by the Pueblo Indians about eight years ago. Once again, prices were very low for those handmade figures, bowls, and water jars when I began, but have since risen substantially. Since all of my capital gains in this area are non-taxable until I sell, my asset values compound without dilution. With 8,500 pieces now in my personal pottery collection, I could sell one item per day for the next 23 years, before I finally ran out. I am 52 right now, so if I were to stop accumulating pottery today, I would still have enough potential pottery inventory to last me until I am 75. My goal, however, is to keep accumulating even more pieces for as long as I am healthy, so that I will then have a retirement cushion that will last me even if the pottery market experiences a downturn, or if I live beyond 75.

If you do decide to invest in collectibles, do keep away from buying low value items, or recent fad material. Consider actual underlying scarcity and potential long-term demand, and avoid buying items with a current retail of under $50. Why? Because you want the items you're selling in the future to yield enough financial gain to make the effort of selling them individually worthwhile. Besides, if you're in the business of buying and selling collectibles, it is inevitable that you will come across items that currently are not in demand (such as Undergrounds once were...) that you can set aside from the various collections you purchase without materially impacting your day-to-day business. As long as you keep implementing this strategy for a long time, the odds are greatly in your favor that you will have something set aside that you can liquidate at the end of your days, to help pay for the dreadful costs of growing old.

A few quick final points. First, do try to stay out of debt. I know that it is hard, but debt causes more distress liquidations than any other reason. Second, be sure and pass on at least part of your knowledge about the collectibles in your investment portfolio to someone you think that you can rely upon to take care of you in your old age and/or if you are too ill to sell your own items. I actually went to the trouble of creating a massive website that contains about half of my Pueblo pottery, specifically for the benefit of my family. I'm not selling pottery right now, but if the need ever arose, prices could be loaded into the existing pueblotreasures.com database in under a day. So even if something happens to me, much of the knowledge that I've accumulated about Pueblo pottery is still available to my family.

My final bit of advice is to buy real estate. Whether you are an eBay seller working out of your home, or an actual comics storefront operator, be sure to make the stretch to buy at least one piece of property. Aside from the obvious short-term tax benefits of buying rather than renting, if you do ever have to liquidate your base retailing business at distress prices, at least you have the underlying real estate values to provide you with substantial recovery. And in a short-term financial jam, nothing collateralizes a loan better than real estate...

Next month, I am going to continue on this general topic, by writing a little about thrift...

Please send your e-mails to chuck@milehighcomics.com, and your letters to:

Mile High Comics, Inc.
Attn: Chuck Rozanski
2151 W. 56th Ave.
Denver, CO 80221



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