Should I buy a Used Bookstore?

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Should I buy a Used Bookstore?

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1EmScape
Editado: Out 9, 2009, 5:28 pm

I have been telling my LUBS since I first began patronizing them nearly a decade ago that I wanted to buy their store when they retired. Well, that time has come and we've had our first meeting about it.
I would love, love, love to buy the place, but the price she wants is completely out of my price range. I would still really like to own/manage/run this store, but know I cannot afford it.


Background info:

  • We are in a smaller town, population 13,000.
  • The store is in the downtown area, but there is a much faster-growing area of town where all the new businesses are and where a lot of businesses are moving.
  • The store does NOT own the building. Rent and utilities are about $2,000 per month right now.
  • The store sells both books and gifts, and about half of the profit is attributed to each.
  • Used book inventory is massive. Probably about 700,000 books. Some of which are complete crap (multiple copies of books which were once popular and now are not, as well as gazillions of Harlequins and Silhouettes)
  • The store issues trade credit, so all of their used book inventory walks right in the door.
  • The store makes about $100,000 per year.
  • They want $430,000 to buy it.


Issues:

  • The store makes about 8500 per month. Minus expenses, that's $6500. A $430,000 loan would cost about $3,000 per month, which leaves $3,500 per month for me to live off of. Not counting taxes. I currently make closer to $4,000 (also not counting taxes) per month at a job I don't hate, but don't love either, but that has significant promotion potential. And benefits. And absolutely no danger at all whatsoever of going away.
  • Used book stores are risky right now because although there has been a lot of speculation, no one knows for sure how technology (such as ebooks) are going to affect the used book trade. They could become more valuable as they become collector's items, or they could become completely obsolete. If I have a 30 year loan and used books become obsolete, I still owe the bank that money.
  • It would be next to impossible to pack up and move this business should for some reason the landlord of the building raise rent, or that side of town go completely dead, or my husband get a job offer in another part of the country. There are just too many books to move, and a lot of the value comes from the established name and popularity of this particular store.
  • It might not make good monetary sense, but do I want to spend my life doing something I don't hate, or something I love? // I really, really, really want to do this, but it just doesn't look practical.

    Input? Suggestions? Thoughts? Alternate places I could pose this question?

    Edited for spelling and math.

2lilithcat
Out 9, 2009, 7:47 pm

First question: have you ever run a small business?
Second: do you know anything about the book business?

A $430,000 loan would cost about $3,000 per month
Can you get such a loan?

Rent and utilities are about $2,000 per month right now.
The store makes about 8500 per month. Minus expenses, that's $6500.

Right there, I have to say, don't do it. If you really believe that rent and utilities will be your only expenses, then you clearly do not know enough about business operations to buy the store.

What about license fees? Buying stock? Salaries (including social security, unemployment taxes, etc.) Insurance? Etc., etc.

3EmScape
Editado: Out 10, 2009, 6:58 pm

She hasn't bought any 'stock' for about five years. The inventory comes in the form of trade credit.
No one needs a salary but me. I will not be hiring employees.

You bring up some good questions. What are license fees? I should ask her about insurance.

I intend to take an SBA small business course before applying for the loan. I am in the very very preliminary stage here, and would like to know if I should give up before spending all kinds of time taking classes and writing up a business plan.

Obviously I didn't outline every single thing that goes into running a business in that short post above, and your post made me feel like you were calling me stupid.

4lilithcat
Out 10, 2009, 7:59 pm

> 3

I certainly didn't mean to suggest that you were stupid, and I'm sorry if my post sounded that way.

It simply seemed, from what you wrote, that you had not considered a great many of the expenses involved in running a business. A "license fee" is just that; a fee you pay to get license to run a business. Most municipalities require them.

I don't think you should "give up before spending all kinds of time taking classes and writing up a business plan". How else will you know whether or not it truly is feasible for you?

Honestly, the biggest thing right now is that you don't know what you don't know (if you know what I mean!). Taking a small business course will help you find out, and even if you don't buy this store, the knowledge you get, you'll never lose, and it may bear fruit in the future.

5dreamlikecheese
Editado: Out 11, 2009, 2:19 am

First off, I would find out if that price is negotiable at all. Secondly, a few things to remember about running a small business (background, I have worked in a small independent bookstore for the last 6 years).

1. Even if you get all your book stock through store credits, that's still a hit to the profit you receive on each book so you need to take it into account. I also presume that the gift stock is new or purchased from somewhere, so that's another cost.

2. In addition to rent/utilities etc, you need to be aware of other overheads such as insurance (a major cost), computer costs and licensing fees for any stock management software you run, wear and tear on shop fittings which need to be replaced/repaired, general maintenance, loss from theft, business taxes/licence fees, advertising etc

3. If you don't intend to have any other employees, think very carefully about opening hour feasibility. The more you are closed, the more it affects your popularity and utility as a store. Even business owners with multiple staff end up working long hours and taking copious amounts of paperwork home. Will you be able to do complex tax/accounting and other business matters while also watching the shop and serving customers? If not, it needs to be done after closing time and adds more hours to your working day.

4. Taking a holiday or even a short break is damaging to your business if you need to close it for the period you are away. Related to that is if you get sick and have no other staff then you must halt operations and lose income when you may need it most.

There are probably a million other things a good small business course will introduce you to, but those are the main issues I've noticed in the time I've been working for a small bookshop.

I don't want to discourage you entirely, I just thought it might help to have perspective from someone (sort of) inside the business.

6aulsmith
Out 11, 2009, 7:25 pm

Folks I've talked to in the book business have said you have to be prepared for it to be your whole life (and these were people who have employees). There's a huge amount of background work that has to be done, like keeping abreast of prices so you offer the right store credit, doing online selling in addition to in-store selling, doing the accounts (and if you can't you have the expense of a book-keeper and an accountant), etc.

7andyray
Nov 14, 2009, 5:14 pm

THERE IS A BOOK STORE ON A MAIN STREET OF DAYTONA BEACH, THE OWNER OF WHICH WANTS TO SELL IT, LOCK, STOCK, AND BARREL FOR $50,000. DAYTONA AREA HAS SOME HALF A SCORE BOOK STORES (MANY SECULAR) AND NONE HAVE FOLDED. TOO, THIS RECESSION CO0UNTRYWIDE HAS BEEN A DEPRESSION IN VOLUSIA COUNTY, FLORIDA. PEOPLE ARE MOVING OUT OF THER STATE BY THE THOUSANDS EACH DAY. THIS IS THE TIME TO GET A BARGAIN. WHY DONT I DO IT AS I, TOO, WOUJLD HAVE TO OWN A BOOKSTORE? MAINLY BECAUSE I HAVE SEVERAL SEROUS DISORDERS AND DISEASES (emphysema, COPD, congestive heart bfailure, diabetes, spinal stenosis, and rhumatoid artrituss, to name a few) and am 66 years old. I can barely get a 4 to 6 hour day in outside. The owner's name is Victor Newman an d the name of the store is Mandala Books. phone n umber is listed. call him, you'lll love florida.

8Anastasia169
Mar 26, 2010, 11:24 pm

I see that this thread is old, but I just read through it and I am curious. What did you decide? Did you take any of the small business courses and what did you learn? I understand that the profit margin is very slim on books - especially new ones, but that there is a bit more room in used books. My local trade-in shop has an interesting way they do it. You are issued credits/or points for the books you bring in for trade. Then each book you buy decreases your point balance a bit, and costs you a small amount of cash. I believe this is to keep the bookstore and owner solvent.

I know changing the rules might be hard on existing customers, but I think it could be done if properly handled and might increase your monthly gross enough to make this worthwhile. I hope that books don't go away. I keep struggling with the idea of buying a Kindle and have not yet been assimilated. First, I think that I would be dangerous if I could have any book I desired in under 2 minutes; I am bad enough with Amazon Prime. Also, can you compete with the low prices on amazon? Can you list some of your stock on amazon and abe books for additional sales? Can you go through the inventory and donate multiple copies of things that won't sell and take the tax credit and then manage the inventory better?

I am excited for you, even though it is a very big deal and risk. I don't want books or bookstores to go away.

9varielle
Abr 8, 2010, 12:43 pm

I'm also interested in how this story worked out having once considered the used book store business. I've been told attaining a 5% margin means a book store is a success, so nobody is going to get rich doing it. Another thing that needs to be factored in is sales tax. In my state even if books are traded in and there's no cash involved the buyer still owes the seller the sales tax for what the transaction would have been worth. Caesar wants his share, at least in NC.

10tcw
Abr 9, 2010, 10:08 am

i would assume used bookstores are at best a maintaining investment, one where, once you've paid for the land & building, they may keep themselves afloat, but you'll never get rich. So, my plan is to win enough in the lottery to buy a bookstore, break out the south wall and add a laundromat because, you know, you meet the interestingest people in places where they're stuck for a bit. and we'll break out the north side wall and add a bar because, well, no reason other than i like a glass of beer when i read a few poems.

11varielle
Abr 9, 2010, 10:10 am

Throw in some wine and coffee and I'll help.

12EmScape
Abr 16, 2010, 11:01 am

I decided not to buy the store.
They do already have a trade credit system at that particular book store and it works very well. However, the owner stated she makes the majority of her money off the gifts and trinkets that she sells as well.

tcw, when you win the the lottery and open up your store, I would love to come work for you!

13tcw
Abr 19, 2010, 3:41 pm

that's good news, lilyfire, but we're going to have to wait at least another week,

my luck ran short this time. damn.

and the laundry's piling up.

14Anastasia169
Abr 20, 2010, 4:33 pm

A magical used bookstore would be a wonderful thing. We just got a new trade-in bookstore in town and I have been trying to support it, but I know the guy really needs to earn a living with his store and I wonder if that is even possible for a used bookstore in a medium-sized town. Here's hoping he does well.

15rocketjk
Editado: Abr 24, 2010, 1:15 pm

#14> Anastasia, I would imagine that it is somewhat easier for a small-town bookstore to get along these days then previously, due to the internet. Of course, many people buy their books online rather than in used bookstores. On the other hand, many people buy their books online from used bookstores, via sources like Alibris and Abe. I am conjecturing, only, and will certainly accept correction from people who know more directly, but I would think that the ability to reach a national customer base in that way has to be a help, overall.

16Anastasia169
Abr 23, 2010, 8:55 pm

I just hope this guy does on-line business as well. I wonder how difficult it is to sign on with Abe or Alibris. I know from personal experience that amazon can actually end up costing you money on the cheap books unless you are a very large dealer - for whom they have some sort of different pricing structure.

17rocketjk
Abr 24, 2010, 1:14 pm

#16> I chatted with one small bookstore owner once who said that Abe was a good outfit but that Alibris had some questionable business practices and she had ended her association with them. Hearsay evidence only and only one bookseller's perspective, but that's what I've got.

18EmScape
Abr 28, 2010, 11:16 pm

The bookstore I was thinking about buying lists about 1/30th of their inventory on Alibris. Neither of the owners are terribly internet savvy, that's why there's not more of it listed. However, she said they mail out between 3-5 books per day. And I just think what I could do if I had the entire inventory listed on Abe and linked to LT Local.... It literally keeps me up at night imagining the fun cataloging work I could be doing...

19Anastasia169
Maio 4, 2010, 3:38 pm

The question becomes can anyone compete with amazon and their one cent books? I think I would be very selective about what I listed on-line e.g. only books that were either rare or new enough to command more than a dollar in pricing them. Perhaps that is why your friend only has a thirtieth of their inventory listed - its just not worth it for the dreck.

20Sandydog1
Jul 14, 2010, 11:18 pm

Exactly. I don't know how half.com sellers do it. They sell books for nothing; they clearly do not charge for even their time.

And the customer is still lukewarm about buying the books because of fair but very real shipping costs.

What a labor of love.

21BusinessGuy
Jul 30, 2010, 3:00 pm

A couple of things to think about if you are looking at buying a business. What is the actual value of the business? This one is not worth 430,000. Simple things like, how easy is it to set up a competitive business down the street? Used bookstores are easy and inexpensive to start. If rents are low, and another shop is easily set up, the value is lower. Typically business are sold at 3 to 5 times annual cash flow (cash flow is roughly revenue - expenses (excluding taxes and depreciation)). That means revenue (100,000 in sales per year) minus expenses (Rent, utilities, insurance, postage, shop repairs, coffee and supplies, tax filing and bookkeeping, etc). Lets assume reasonable expenses are $4500. So Revenue ($8500/mo) minus Expenses (4500/mo) leaves roughly $4000 monthly cash flow. This totals $48,000 per year. $48,000 per year X 3 years is $144,000. After that add in inventory, and typically used book inventory has limited value. This business may be worth $250,000. The best option is to computerize your inventory and list 100% (if you can) online. Online sales can be filled with your idle time in the store, so your time to fill orders is generally postage. If the online business picks up dramatically, you hire staff. You will likely want staff after the first year, because 10 hours a day 7 days a week is manageable for a year or two, but even loving used books you will find you'll need help.

If your town were a bit larger, it might be worth setting up a competitive store in a busier area.

Best of luck,

22BusinessGuy
Jul 30, 2010, 3:23 pm

Oops: above should have read, "your cost (not time) to fill online orders is only postage and wrapping, as long as it does not interfere with your regular business.

Also, the above 'expenses' did not consider salary to run the business. When selling the business, the valuation should also be based on ANY persons employed to keep the doors open. This also means you (or the current owner). The valuation would be reduced by the actual annual staff salary necessary to keep the business running.

If you are considering buying a business, there are several web sites that provide a rough guide of business value by industry (usually in terms of the number of times cash flow, plus references for inventory valuation. If I recall Inc.com (no affiliation) has a link to just such a company. In addition, always have an independent accountant who specializes in business valuation (or a business valuation firm noted above) review the financials for the business. NEVER trust the owners valuation, or their accountants figures, even if you are buying a business from family members.

Hope this helps - and I also agree with many of the posters above - anything you learn along your journey is worth the time. I'm still learning, and I'm sure someone more qualified than me will need to update my statements above.

Last note: It is easy to let a business take over your life, so when you plan any purchase or business startup, always budget time for loved ones.

Take care

23tessieq
Set 11, 2012, 8:39 pm

As the co-owner of an online bookstore I hope I can provide a reality check for you. What folks have already said here about running a small business is certainly worth considering.

Cataloging and listing books SOUNDS fun but the cold, harsh reality is that it is time-consuming and rapidly becomes deadly dull and tedious. If you're planning on running a brick-and-mortar store full-time all by yourself, you won't have the TIME to list books online.

We list on ABEBooks.com, Amazon.com, Alibris.com, and Biblio.com. Sales used to be okay...not great, but okay; shipping about 10 to 12 books a week...but now that the economy is complete crap, sales have fallen off dramatically.

Someone wondered how the penny sellers on Amazon make money. The answer is through the shipping/handling charges. For books shipped via First Class/Media Mail, THEY--Amazon--locks in the S/H at $3.99 per book; for priority it's $6.99 and it goes up from there for shipping via other methods. Plus, Amazon doesn't allow the seller to combine shipping. Penny sellers...the loathsome mega-sellers that notoriously sell books in deplorable condition...rake in the bucks that way.

Alibris also locks in the $3.99 S/H cost like Amazon does. ABE and Biblio allow their sellers to set their own S/H costs. A lot more of their sellers are now tacking on handling charges to at least TRY to make some money SOMEhow, even when they're selling books for a buck because, after all the fees are paid, there's not much left.

Amazon, ABE, and Alibris all charge a monthly fee based on the number of books you're listing for the privilege of listing with them and then they charge a fee when you sell the book and for THEM...NOT the seller...to process the credit card payment. Biblio doesn't have a monthly fee. For example, ABE charges $37 a month for less than 4,000 books. Sometimes we don't SELL $37 worth of books in a month on ABE!

"Questionable business practices" is a sweeping generalization to say the least. All those fees ARE greedy...you can't swing a cat and not find a seller who will think fees are a great idea. Most of us regard ABE, Amazon, etc. as greedy bastards.

On the other hand, they have to pay for the computer systems that run the listings, plus their employees to maintain the computers and be customer service and all that...and they have the usual other biz overhead expenses as well. Still...when a company has MILLIONS of sellers, I think they could reduce fees to something more manageable for their sellers, most of whom are NOT mega-sellers but small companies run on a frayed shoestring.

If you list quality books online, in THEORY people will buy them. But there is a L-O-T of competition out there and the lowest price usually wins. We radically reduced our prices late last year and STILL our books aren't moving. And we have nice books, too!

ALL of the mega-sellers in Amazon, et al are more interested in blathering on about how great their store and service are as opposed to actually describing their books. Buyer beware and all that jazz because if you're just attracted to a seller by their prices and that's all they're telling you about the book, chances are extremely good that you'll get a crappy book. I bought a book from a mega-seller that...I kid you not...was described as "very good" and LITERALLY had the hard cover COMPLETELY off, several pages ripped (some of them in half and missing bits), and dog chew marks all over it. But, by golly it was cheap! I got my money back on that but ONLY after I harassed them for it.

But you'll still be competing with companies like of them and, sad but true to say, @$$h013$ usually win in this business, which is cut-throat, believe you me.

I've been in this business for over 12 years and...living wage? HA! THAT'S hilarious! I run this store pretty much as a hobby. A hobby that monopolizes my time and energy for most of the day. And we have less than 4,000 books online at any given time. There is ALWAYS something that needs doing aside from processing and shipping sales (when we GET some!). Listings to update, prices to research, books to scout, books to list...it goes on and on.

As for running a brick-and-mortar store...only if you're rich in the first place and have a LOT of energy and LOVE working with the public. Otherwise, don't do it. Customers are often rude and demanding, allowing their kids to run around the store unsupervised to pull books off the shelves and get their grubby little paw prints all over the books as they roughly leaf through them, people WILL shoplift if given half a chance (and security systems are VERY expensive, plus as one person you really cannot watch the entire store all the time), the cost of business overhead is staggering, and at the end of the day you'll be exhausted and frustrated, wondering why in the world you even considered doing this in the first place.

As a customer, you get to see bookstores from the GOOD perspective but the reality is nothing...NOTHING...like that. It's hard, grueling work and sometimes I think I'd rather be digging ditches than running the store.

I love books and I married into this store but lately we've been talking about selling our inventory and shelving...just getting rid of the store entirely...so I can focus my energies on my Etsy shops. Maybe. Someday.

24rocketjk
Editado: Set 11, 2012, 8:58 pm

"If you're planning on running a brick-and-mortar store full-time all by yourself, you won't have the TIME to list books online."

I can testify to this.

"As for running a brick-and-mortar store...only if you're rich in the first place and have a LOT of energy and LOVE working with the public. Otherwise, don't do it. Customers are often rude and demanding, allowing their kids to run around the store unsupervised to pull books off the shelves and get their grubby little paw prints all over the books as they roughly leaf through them, people WILL shoplift if given half a chance (and security systems are VERY expensive, plus as one person you really cannot watch the entire store all the time), the cost of business overhead is staggering, and at the end of the day you'll be exhausted and frustrated, wondering why in the world you even considered doing this in the first place."

My experience has been better than this over the year and a half I've been running my store. Much better. But, yes, I do have a lot of energy and I do love working with the public. I have been turning a profit with my store, but only because I am in a depressed rental market with relatively low overhead. I couldn't support myself on the money I'm making right now, that's true, but I am contributing significantly to household expenses. Luckily for me my wife and I both have health insurance through her job.

25Danneeness
Fev 2, 2013, 7:25 pm

I did listing and shipping for a used bookstore, and it's definitely a full time job in itself if you're making any money through it. During December we were shipping more than one hundred packages out every day (though any other month it was below 50 a day). Even not doing listing, it's really time-consuming. You have to answer endless emails (inquiring about condition, asking for pictures of a book, asking about shipping, inquiring about a book that got lost in the mail, etc). Amazon has recently changed its policy to require that you answers the majority of emails within 24 hours. And then there's tracking down the books that just sold in the physical store, assuming a customer hasn't moved them, or they weren't misshelved, or they weren't bought in store after being sold online, etc. And then wrapping each book up, printing labels, long lines as the post office, sending tracking information, dealing with returns, and so on.

And after all that, I'm not even sure we were making much money off it. There's the fee for each website and the cost of labor and the cost of shipping (which, in Canada, was usually more than the cap each website put on it) and refunding money for if anything went wrong... It's not something to be taken on lightly.

26HarryMacDonald
Fev 2, 2013, 7:37 pm

In words of one syllable: No. If there's any part of that which you don't grasp that, re-read it. This is the voice of (at various times) a librarian, small-businessman, writer, high-end/antiquarian collector/trader, and parent. Keep your dreams, keep your cash, and don't do it. I had the chance to buy two of the best-established used/antiqurian establishments in the Midwest, and I rejoice that I didn't. Peace, -- Goddard

27Keeline
Fev 4, 2013, 12:10 am

Stores that are available for sale have probably been on a decline for a while. This means that a very high percentage of the stock is stuff the local market has seen and has not elected to purchase. In the trade this is called "dead wood." Granted some of this may sell on a national or global market by listing online. However, there's still a lot that will never sell at any price and is better to donate for any tax write off you can get.

Having fresh material coming in that hopefully goes out again is the only way you are likely to persuade buyers to come back often and pull the trigger on purchases rather than let things sit. This means you have to be willing and able to buy the good material all the time. Of course you have to know what material is "good." In that sense, it may be well to apprentice with an existing quality used bookstore as well as attend the book school in Colorado.

In another thread someone replied that they wanted to work in a bookstore. They didn't specify but let's guess they meant a used store. I think many readers have this as a fantasy, largely because they don't know what the reality is like. One thing is for sure, there's not a lot of pleasure reading going on. The conversations with clients and fellow booksellers are only sometimes inspiring and educational.

I'd like to see more used bookstores open and stay open. However, if you're going to do it, learn as much as you can at the feet of others. Chances are you won't know if the stock is good enough to be marketable now until you get some education.

Knowing how much of the material has been listed online is one factor. If it has been listed for a while and still not sold, that says something about the selection, quality, descriptions, and price of the material relative to the wants of the online market.

All that said, we'll be exhibiting books at an antiquarian book fair in Santa Monica, California next weekend (Oct 9-10, 2013). This will include as many items as will fit in our PT Cruiser and a 6x10 booth.

James

28NearlyNewBooks
Editado: Set 30, 2016, 10:39 pm

I really like the comments, and as a used bookstore owner for the last 8 years, they are accurate!

29NearlyNewBooks
Jan 18, 2019, 11:38 pm

Following up, more than 2 years later, the price of that store should be no more than #120,000. All the advice I read from other comments about running such a business are good ones.