The best way to estimate utilities is to ask owners of other small businesses in your area what they are paying. Make sure to find out their square footage and whether they have gas or electric heat. Some landlords include water; others make you pay for it.
Insurance fees depend on your location and the value of your inventory, equipment, and buildout. You are usually responsible for replacing plate glass windows, so make sure to get this covered in your insurance. If the insurance quotes you are getting seem high, it may be worthwhile to join ABA or another organization that offers rates geared toward booksellers.
My accounting fees are based on my accountant doing only my year-end taxes. If you're going to need bookkeeping, payroll services, or more handholding, the fees will be higher. My inventory system, Visual Anthology, charges $600 per year in tech support. I don't pay to get the CD-ROM from Baker & Taylor with all the upcoming books. Instead I just enter them by hand. If you're planning to have an inventory control system, which you should, but you're not a fast typist, you'll probably need to pay for the new release CD, whether from Baker & Taylor, UBIC, or wherever.] 7.2 Financial Capital
All financing will be provided by the owner, Jill Hendrix, from the proceeds of the sale of her New York apartment. Please see accompanying bank documentation in the Appendix.
Table 7.2: Available Capital
[Ideally, you'll have remaining capital leftover in case your sales do not meet plan.
Most used bookstores are financed through the owner's personal assets - a home-equity loan, credit cards, etc. - rather than through a traditional business loan. This is partly because a used bookstore does not require a large amount of funding and oddly enough banks would rather lend more money than less since it takes the same amount of due-diligence and time to lend $50,000 as it does to lend $200,000. Also, banks want to know that your business will have assets that they can easily liquidate if you default on your loan. If you were opening a new bookstore, your inventory could be returned to your distributor but this is not the case with used bookstores.
Even if you organize your business as an LLC or corporation, keep in mind that you may have to personally guarantee your lease and other large purchases. This means that if your business is unsuccessful, your creditors can come after your personal assets, such as your house, car, retirement account, etc. Please do not start your business with money that you cannot afford to lose and make sure to discuss worst-case scenarios with your spouse, if applicable, before you decide to make the plunge.] 7.3 Break-Even Analysis
Fiction Addiction's breakeven point is projected to occur toward the end of its third year of business, when monthly sales reach $9,991.05 (i.e., yearly sales of $119,892.55).
As a double-check of the sales projections, consider that the initial inventory at our average sales price of $5.50 is $82,500.00. If the average sales price increases 3% each year, the 3rd year average sales price will be $5.84. Thus breakeven yearly sales could be achieved with an inventory turn of 1.4 at starting inventory levels. Alternatively, the owner's remaining capital could be used to add an additional 6,000 books in inventory, which would bring the inventory to a retail value of $122,640.00 and thus require only 1 turn to achieve break-even sales.
[Your break-even point is the point at which your income meets your expenses, including that of your own paycheck.]
2Although the company itself is projected to operate at a profit from inception, that profit will not be great enough to support the owner's living expenses until Fiscal Year 3.
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