A reader of the Bookshop Blog e-mailed to ask if I would be willing to share my “business plan and wondering if Dog Ears Books had made money its first year. The shocking truth is–We had no business plan! But we made money!
We had books threatening to crowd us out of house and home, and we found an unheated, uninsulated shed, with no phone and no plumbing but next door to a going bar/restaurant and across the street from another. Renting the shed for the season, we made money because our rent was so low ($150), we had no other expenses (other than what little money we spent that year buying books—all used), and people coming out of the restaurants in the evening were in the mood to browse and buy. Cheap rent, good location: it was an unbeatable and very rare combination.
Since then our bookstore has been in four other locations. New books are still only a small percentage of store inventory. I order new nature field guides, new Michigan titles (fiction and nonfiction) and a few other things in my areas of interest (poetry, philosophy, gardening, farming). The best wholesale discount I ever get is 50%, and that’s with a no-returns policy, buying directly from publishers. The discount from distributors is only 40%, and when people can buy new books online for the same price I have to pay wholesale, the difficulty is apparent.
Used books, on the other hand (except for the more valuable items) I can acquire for little or nothing. Customers bring in books and receive trade credit in return. If a used book comes in that I will price at $8, the customer receives $4 credit and receives a 50% discount on the next purchase of used books, up to the amount of credit he or she has on account. If credit account has a $4 balance, for instance, the customer can buy a used book I have priced at $8 (perhaps priced as high as $25 when new) for only $4 plus tax.
Anyone needing to borrow start-up money would need a business plan, and anyone planning to stock all new books, unless independently wealthy, would need start-up money. I have bootstrapped my business up over the years, borrowing from $1,000 to $3,000 on a line of credit in late winter to get me restarted in the spring, paying the balance up during the summer.
Advice? Look at the demographics and shopping behavior of people in your “tiny town,” I told my correspondent. Do what you will, you cannot expect to change the behavior of very many people. Inventory and advertising—these line items have to be watched very carefully, as every bookseller learns sooner or later.
With or without a detailed written plan, prepare very carefully—unless you’re lucky enough to find an unheated shed, right downtown, that you can rent for $150 for the whole summer.
Pamela Grath
Dog Ears Books
106 Waukazoo Street
P.O. Box 272
Northport, MI 49670
(231) 386-7209
Looks like you did all the right things Pamela.
It will take 30-60 days of valuable time to do a passable Business Plan and then at least a month to do a Cash Flow Analysis, then a Cash Flow Budget, financial Forecasting and on and on – all of these are requested by lenders even though all they are doing is looking for another reason to say NO!
We made up a business plan about 10 years ago and presented it to the Small Business Administration here – they said it was one of the best plans they had seen but still would only come up with one half of the money we requested.
In most cases a used books organization is not likely to ever benefit from a business plan because in the end it all comes down to collateral – except to clarify themselves to themselves (so it is a worthwhile effort just for that reason) – your best sources for borrowing money are family and friends. My ex-wife loaned me $2-300,000 about $30,000 at a time over the years and that gave us the edge over any other similar business in our area.
She was paid back in full, of course, with interest and receives a better dividend from us than the pension she receives after 18 years with an oil company.
It was because of her financial backing we pursued growth very aggressively.
Getting into this business expecting to develop much of a personal income – EVER – is foolhardy – but it can be done! – the keys are – ALWAYS being in bookbuying mode – listening to your customers and buying books specifically to meet their interests (but not necessarily for them) – study business books to learn and then closely adhere to proper business procedures – and WORK WORK WORK – oh – and People are more important than books.
If you do these things your customers will do everything to make you survive – how can you not be considered successful when you love what you do?
Hope this helps someone.