Mike Dohnalek is no stranger to quality men’s clothing, having been a clothing buyer for Cedar Rapids’ largest locally-owned department store and for a Florida firm. Mike returned to Iowa in 2006, taking a sales job for KGAN TV, the local CBS affiliate. However, two years later he wanted a change and because of the type of business he was thinking of opening, his timing seemed almost supernatural.

Mike went to the Kirkwood Small Business Development Center (SBDC) in May 2008 with a rough draft of a business plan for opening a retail consignment store specializing in men’s upscale consignment clothing. The recession was taking its toll on many large U.S. retailers, but smaller ones catering to the second-hand market were flourishing as cash-strapped consumers sought bargains. Consignment stores in urban areas were increasingly popular and Mike felt one would do well in Marion because it would be the only one specializing in menswear.

Mike and Kirkwood Regional Director Al Beach refined his business plan draft with specific details about location, store layout, advertising alternatives, and income projections. Mike opened his 2,000 square foot shop in a Marion strip mall in June 2008, bootstrapping his business without borrowing because of personal savings and a low cost of entry.

Nearly all of the shop’s clothing is delivered to the store, eliminating freight costs. The clothing is put on display on a consignment basis, eliminating inventory costs. Mike accepts only cash or checks at this time, eliminating credit card transaction fees. As a result, his cost of goods sold is insignificant. All clothing he receives that is unwashed or unsold within 90 days is taken to Goodwill so all inventory is fresh. While Mike has plans to introduce an automated inventory system next year, he currently maintains his consignment records on paper. SBDC Counselor Lorie Smith assisted Mike in setting up his bookkeeping using Intuit Quick Books.

It takes a while to ramp up sales at a consignment-clothing shop because there needs to be keen community awareness in order to have good quality clothing brought in to the store for consignment. Therefore, Mike’s first quarter of operation had few sales because there was very little inventory to sell. By his second quarter, however, sales were brisk and Mike found that he had doubled the humble operating profit expectations that he and Al had set in his business plan.

By his third quarter, Mike was satisfied with the success of his shop although he believed the soft economy did dampen his sales somewhat. He again went back to the Small Business Development Center, where he and Al discussed growth strategies, including the addition of shops in other Iowa markets and the pros and cons of franchising his operations.

Just when Mike’s future was looking rosy, his life took an unexpected twist due to an in-home accident and resulting medical problems. Mike was off work for one month and during that time his family and friends did their best to keep the store open. Revenues sagged, but not significantly, and when Mike returned to work he began to right the ship. The combination of his newspaper advertising efforts and the prolonged economic depression helped him overcome the setback and revenues in the first quarter of his second year were up over 40%.

Mike returned once again to the Kirkwood Small Business Development Center where he and Al discussed new marketing plans to implement in his second year. These included using broadcast TV to increase his target market, opening a shop in nearby Iowa City, packaging his print and video advertising messages for possible franchise opportunities, creating an electronic inventory/management system, and branching out into good quality, pre-worn tuxedoes and other formal wear.

Mike says the number one piece of advice from Al that has stuck with him was something Al said as they were ending their first session. Mike says, “I’ll never forget [Al] saying, ‘Look retail, sell wholesale’.” He attributes his shop’s popularity to the fact that it looks like the floor of Younkers or Von Maur.

Mike appreciates all that the Kirkwood Small Business Development Center has done to help him open and grow his business. He plans to continue to use the center’s services at every opportunity.