Editor: Rebecca is considering making a great leap. Can you help her with questions that you think are pertinent to buying a bookstore (especially from a distance)? Comments below are very much appreciated or click the title if you are reading this on the Front Page.
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First, thank you for the website and its content! I have learned alot from the articles and the comments made. I am an online bookseller who is considering the jump into a bricks and mortar store and have a ton of questions.
I want to make sure I ask the right questions about the store that is up for sale, but am not sure of the etiquette, what in-depth questions can or can’t I ask, or the red flags to watch out for. To make it even more difficult, the store I am looking at is about 1,000 miles away from me! So, I want to have as much information as I can before I have to make the trek.
– Rebecca Jones
Would you be buying the building or only the business? Some but not all questions you’d need to ask would pertain to either case. #1 would be the yearly revenue vs. overhead (including inventory), i.e., bottom line profit margin. Many, many more questions would follow, but this one is crucial and perfectly legitimate, practically mandatory, though it probably seems nosy–and would be if you were not a prospective buyer. Let’s see where this goes from here with other people’s suggestions before I natter on longer. You are very brave!
Write down questions as they come to you. Keep a pad handy and be sure to write the questions so they will be understandable to you later. A shorthand question may have you wondering later, “What the heck was I trying to ask?”
Get a good Lawyer to draft a purchase agreement. If you can’t afford one it might be best to forget the whole deal.
I remember Michelle wrote an article on buying a bookstore
– http://bookshopblog.com/2009/01/13/purchasing-a-used-bookstore-lessons-learned/ –
I also remember her 1st point is Lesson One – “Inventory the Inventory”
She said in her article, “we assumed the former owners (a husband and wife) were very trustworthy people and we had nothing to worry about in respect to the inventory.”
Then she wrote, “One of the first things we did as we were getting settled in on the first day was to look for the HIGHEST PRICED BOOK IN THE INVENTORY. We wondered: What does a 150 year old $1400 Angler book look like? The book was nowhere to be found! We checked Homebase, it was still marked for sale. We called the former owners and asked – where was the book?? She told us it had been sold on ebay just a couple of days before the shop changed hands!”
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I certainly hope other BookShop Blog readers with more experience than I (online only) come here and comment with BOTH GOOD and BAD stories to balance out the pros and cons of Rebecca’s potential leap.
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I have to wonder Rebecca, if you have checked out the town (or city) you would be moving to. I assume you would be moving there and not leaving it to employees to run. Does the place have all the amenities you would desire? Church, social clubs, entertainment, etc. and what is the political & economical status of the place. Does it have a town council or elected officials that are currently pillaging the treasury and about to skip town with the caboodle? Do they really care about the infrastructure of the place and are they working at building up the economy as opposed to stuffing their pockets.
Here is an idea. See if you can find some local ‘bloggers’, read their posts, find some like-minded ones then write to them asking questions you have.
Best to you and yours. – Paul –
Here are some sample numbers for an actual bookshop in Oakland, CA. Take a look at the ratios and ask whether their ratios are similar:
SAMPLE: Diesel Bookstore, Oakland – 2400 square feet, 25,000 books in inventory
Revenue = $1.8 million
Costs = $1.1 million – 60.1%: Cost of books and other merchandise (cards, calendars, reading glasses, etc.)
$221,000 – 12.1%: Staffing
$207,000 – 11.3%: Rent
$137,000 – 7.5%: Profit (90% from books; 10% from merchandise)
$121,000 – 6.6%: Other expenses (insurance, utilities, advertising, professional fees, etc.)
$44,000 – 2.4%: Credit card processing fees
The success of a bookstore like Diesel rests on two pillars: keeping costs to a minimum, and savvy buying and returning of books. Managing inventory takes the bulk of the time. Need to understand the customers’ reading preferences, and the right quantity.
A used books store is a very personal thing originally put together as a labor of love but inevitably deteriorating into a hodgepodge of myriad details left undone.
I would only buy one at a very low price, discard half the existing inventory, move the remaining inventory to a very busy shopping location and start fresh.
Or, if the area is so attractive you are willing to move 1000 miles away from your present life I would move to the area and start from scratch to build the books store of my dreams.
If someone was going to buy one of my stores they would be facing two negative factors that are very difficult to overcome.
In the normal course of business we attract people who love us (and the way we do business) and they will not be happy that some carpetbagger has come along and upset a very pleasant part of their life so they will take time to win over and you will lose some of them.
On the other hand – the people we have upset over the years are never coming back.
I wouldn’t buy it because (as is almost always the case) only 20% of their inventory could possibly be saleable and, if they are willing to sell it, they have probably let business slide during the past year or three. Used books stores can go downhill extremely fast – all it takes is someone lacking a certain spark buying books – or worse, someone who stops buying books so they can glean as much cash as possible out of their existing stock.
Good bookstores are few and far between and those that exist were not put together with ANY thought of being sold off someday for a nestegg for retirement.
I’m glad you are considering opening a brick and mortar store where you might eventually earn the privilege of preserving and adding to the culture of a community.
Thanks a lot for those comments George, certainly a lot for her to consider.
For those who don’t know – George owns (how many is it now 3 or 4 ?) bookstores in Calgary. His opinions should be carefully listened to.
I had another very general thought about this, which is to check out the demographics of the area. You should be able to find these online. You want to know the age distribution of the population, the education of residents, the economic base of the area and the income distribution of residents. For instance, in the town where my bookstore is located the economy is based on tourism and, lagging behind in second place, agriculture. The population is weighted toward older, retired people. Retired people in general are not building libraries but dispersing them (sometimes that means you can buy or get for free good stuff, but they won’t buy much), and a seasonal economy means many months of the year without the sales to justify being open. Higher educational levels would be good. Higher incomes would be good, but they don’t have to be wealthy to love and buy books. These are important factors to consider.
Wow! Thanks everyone for such wonderful advice & insight! Please keep it coming, I am absorbing all I can from the people who have been there, done that and can help me avoid the major pitfalls.
The area I am moving from is an area hardest hit with the current economy. We watch everyday the horrible-ness of the foreclosures, the unemployment, and the city officials being tried & sent to prison for corruption of one kind or another.
The state we are looking at is where my boyfriend grew up and lived most of his life. It is much more stable. The area has all the amenities we require, plus some not afforded in our current area. People there actually seem happy, not the “dead eyes” look of the population we are surrounded with. I have a snapshot of the demographics of the area we are looking at, and will look it over. I’ll let you know what I find.
The store I am looking at is strictly used, has been in business for several decades in the same location. But it does seem to have that typical used bookstore feel. I can see the potential with it, but will I always be fighting an uphill battle?
I have very specific ideas of how I want my used bookstore to be, what I want to include(besides books) and how I want to market it in the community. I have run several internet searches to find information about the bookstore and can only find one or two sites where someone has reviewed it. Not too helpful.
Owning a bookstore has been a dream of mine for a very long time, and I see the potential of this one for sale, but am wondering which is more advantageous, buying a “turn-key” business and dealing with the baggage it will certainly have, or starting from scratch and having to build up a customer base from zero? I know these are very personal questions that only I can answer for myself, but hearing your stories and your advice will help me to make an informed decision.
Keep the comments and advice coming, I am listening!
Rebecca
Hi Rebecca – let me first of all state emphatically how much I HATE the idea and the so-called reality of anyone buying books locally and selling them online to the fastest buyer (wherever they are).
To me, a community’s books are a community’s books – an ongoing statement of the culture of a particular area – not something to be bought and sold for the quickest buck – and certainly not something to be held in abeyance for the Amazons, ABEs and Alibris to poach at will from unsuspecting natives.
I consider operating a bookstore is a sacred trust to be undertaken with the long term future in mind.
It is fine to have a vision of how you want your store to look but good bookstores are built by people who listen to what specific books and genres customers ask for when they trust you enough to tell you what they are looking for.
Roland – very few bookstores ever achieve much above $100,000 in annual gross sales so the Diesel Books Store in Oakland is an anomally – they must have a killer location and a neverending supply of books they are willing to buy without fail and they are working their a**es off – most dealers have shops in locations customers can’t find them because they found cheap rent and they stop buying books as soon as their shelves are filled and then sit down and wait to go out of business.
Hi Bruce – thanks for the kind words – we have five stores now with a warehouse component in one of them serving as a distribution centre for all the stores. We are looking to open another store in a city 200 miles away before venturing into franchising – but we know this business will always be an enigma with few definite answers – other than hard work.
Our customers seem to love us and what we do so we are doing very well – if you don’t count your wealth in dollars and cents – and we don’t!
We were named “The place to buy a book” by a local weekly newspaper in both 2009 and 2010 and “One of the Hundred Best Things About Living in Our City” by a glossy magazine 2-3 years ago.
Sorry to go on and on but I am Blessed to be in the book business and encourage everyone who wants to make a difference in their community to do it.
But be sure to read – and apply – “Think & Grow Rich”, The Magic of Thinking Big, The E-Myth and The E-Myth Revisited.
Had another thought. Are present owners smokers? If they are, the whole place and all the books in it will stink. Not good! Find out.
Thanks, PJ, another great question! While I am still considering the purchase of this bookstore so far away, I am leaning more toward starting from scratch. I know that even after the purchase price, I will be spending a lot of additional money to make it what I want it to be. I agree that most likely I will have to cull a very large portion of books, too.
But the interesting part of all this is that I am seriously considering the area for my new store! Yes, it is 1,000+ miles from where I am now(the area I grew up in), so the logisitics will be a bit more complicated. And a lot more exciting!
I looked up the demographics of the area and discovered this(all in a 3 mile radius):
2009 total adult population: 67,107
The 3 largest ages in population: Age 6-13 10.40%
Age 40-44 8.19%
Age 45-49 7.60%
2009 Avg household income: $85,550
2009 Retail Sales Volume for books/periodical/music stores $4,240,447
What this set of demographics did not give me was education levels. But what is your take on these numbers? This town is a suburb of a large(500,000) metropolitan city. It has 3 used bookstores, but only one with an online presence(and one of the offline stores is the one for sale) and a Barnes & Noble.
Moving halfway across the country and starting a used bookstore? Yep, I think I’m certifiable! But what an adventure! 🙂
What do YOU think?
Rebecca Jones