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How to Start a Clicks-and-Bricks Used Bookstore
An A to Z Guide

Writing a Used Bookstore Business Plan
Part II: Sample Business Plan
(Section 1-3)

How To Start A Clicks-and-Bricks Used Bookstore Series

by Jill Hendrix

#96, 11 June 2007

The first three sections of the sample business plan for Fiction Addiction are included below. Keep in mind that your business plan should also include a title page with your contact info and a Table of Contents. Below each section, I've included comments in brackets suggesting other ways you could handle the section, areas to consider, etc. The remainder of the plan will follow in parts III and IV of this article.

1.0 Executive Summary

  • Fiction Addiction will offer a full line of used books for adults and children. We will accept customer trade-ins and will also purchase supplemental inventory from thrift stores, library sales, etc.

  • Fiction Addiction is proposing to lease the 1600-square foot retail location in Patchwork Plaza on East North Street in Greenville, SC formerly occupied by "Rags." This highly visible location will make Fiction Addiction the most accessible bookstore - new or used - for much of the East Side.

    [My original business plan was written at my potential landlord's request and thus this summary is designed to give him a brief overview of the business and my intentions vis--vis his property.]

1.1 Objectives

  • To make Fiction Addiction the neighborhood destination for book lovers.

  • To achieve a 60% gross profit margin within the first year.

  • To pay the owner/manager a salary of $30,000 - sufficient to support her - by the end of year three.

[Your objectives should cover the first 1-3 years of your business and should be as realistic and conservative as you can make them. Try to limit yourself to 3-5. Your objectives should also be quantifiable, if possible, so that you can easily determine whether you succeeded in reaching them.]

1.2 Mission

Fiction Addiction will be a used bookstore carrying a full line of books for adults and children.

We share the thrill of all avid readers upon discovering an exciting, new author and plan to use in-store merchandising techniques to share our knowledge and excitement with our customers.

Our goal is to provide used bookstore customers with the same level of service, personal attention, and knowledge that traditional, independent, new-book retailers have been renowned for.

We will be the neighborhood destination for book lovers.

[When writing your mission statement it might help to pretend that you cannot be at your store for an extended time period and you are hiring a manager who will represent your business. Your mission plan should encapsulate the ideas and priorities that you'd want your manager to consider when trying to make crucial decisions in your absence.]

2.0 Company Summary

Fiction Addiction will be the used bookstore for the East Side of Greenville, SC, selling used and collectible books of all flavors. The company hopes to lease retail space in Patchwork Plaza on East North Street.

Fiction Addiction was established as a Limited Liability Company in the State of South Carolina on September 13, 2000. It is privately held and managed by the owner, Jill Hendrix, as listed in topic 2.1.

As a new business venture, the company's history is more that of the owner than the LLC. Jill Hendrix has experience with both the publishing industry and with startup business ventures. After graduating from Yale University magna cum laude she worked in the Editorial Department of St. Martin's Press, soon rising to the level of Assistant Editor. After a year and a half she left publishing for a young software startup, Juno Online Services. Her most recent position was that of Product Manager at Earthnoise, where she worked closely with the CEO, David Steward (formerly CEO of TV Guide) to produce and analyze projected Profit and Loss Statements for new product offerings. In preparation for this venture, she attended a weeklong seminar, "Opening a Bookstore: The Business Essentials," given by Paz & Associates.

[It's OK if you haven't officially organized your business yet. You could say something like "Fiction Addiction will be established ..." instead. If you have previous bookselling experience, this is the place to highlight it. Any experiences you have had that will be relevant to your proposed business should be mentioned here.]

2.1 Company Ownership

Fiction Addiction is a privately held limited liability company owned 100% by Jill Hendrix. The company does not plan to change its form of organization within the near future.

[Other forms of ownership include partnerships, a sole proprietorship, a corporation or an S-corporation. These days LLCs are very popular, but the choice should be something you discuss with your accountant and lawyer since every state has its own ins and outs that can affect your decision.]

2.2 Start-Up Summary

Projected startup costs are listed below in Table 2.2. The owner, as discussed in Section 7.2, will provide all startup financing.

The company plans to start out with an inventory of approximately 15,000 used books with an average sales price of $5.50. Most new mass-market paperbacks are retailing for $6.99 to $9.99, trade paperbacks for $12-15, and hardcovers for $20-35. Although older books will have lower cover prices, per Section 5.2, we plan to price most items at a discount off the current retail price, rather than the cover price.

The company anticipates being able to purchase starting inventory at a lower cost than ongoing replacement inventory (as discussed in Section 5.2) given that it will be buying in bulk from library sales - - which typically price paperbacks at $.50-$1.00 and hardcovers at $1-$2. Thus the initial starting inventory cost is estimated at $10,000.

The largest equipment purchase will be an inventory control/POS system from Anthology. The one-user system includes hardware and software and 1 year of tech support. Anthology specializes in inventory control systems for bookstores and is a reputable company with over 850 clients and 20 years of experience. A computerized inventory system is necessary to participate in the growing online market for used books [see Section 4.0] and will enable the company to provide better customer service and tighter inventory control.

The owner's father, Jim McFarlane, will construct the cash wrap and fixtures. Mr. McFarlane has considerable woodworking experience and has recently acted the part of general contractor when building his own home.

The proposed location in Patchwork Plaza is finished retail space with adequate carpeting and thus will not require much buildout. However, the Plaza specifically requires that all stores have a neon-lit sign with channel cut letters, whose cost is estimated at $3,000.00.

Table 2.2: Startup Costs

Starting inventory - $10,000.00
Fixtures - $4,000.00
Cash wrap - $400.00
Inventory control system (incl. hardware) - $7,500.00
External signage - $3,000.00
LLC registration (actual) - $614.07
Deposits (rent, utilities) - $2,000.00
Buildout - $500.00
Logo (actual) & business cards - $600.00
Grand Opening promotion - $1,000.00
Initial bookkeeping setup - $500.00
Office equipment & furniture - $500.00
Store furniture, internal signage - $2,000.00
Travel (actual) - $281.00
Miscellaneous - $500.00
2 mos. owner compensation - $5,000.00
1 mo. operating expenses - $3,266.67
Total Startup Costs - $41,661.74

[You may want to leave this section till the end and fill it in after the general discussion on financials in Part IV.

Give a sentence or two justifying each of your biggest anticipated startup expenses and how you arrived at your estimate for that expense. Startup expenses are typically one-time expenses you incur before you open your doors. If you are purchasing a credit card terminal, fancy espresso machine, etc. then include a line item for each expense. If you have already created your LLC or purchased equipment/fixtures, then indicate these as actual expenses as opposed to estimated ones.

Many startup expenses are universal (i.e., inventory, fixtures, signage, etc.), but the exact amount you should budget is going to depend on your location and your vision of your store. For example, to get the upscale look I wanted, my fixture expense was higher than it would have been if I were opening a typical paperback exchange, yet not as high as if I'd hired an outside carpenter since my dad gave me a discounted rate.

To calculate how much starting inventory you'll need you need to consider the size of your space, your product mix, and how open and airy you want your store to feel. If you have limited funds, then you can approach this the other way by estimating the maximum amount of starting inventory you can afford to purchase and then use that to estimate what size store you should consider renting.

Generally you want to open with about half to two thirds of your projected inventory so that you will have room to accept customer trade-ins (if you will be doing so) and add sections as people request them. You can start with more furniture, wider aisles, and wider shelf spacing and then lose a chair here or there, move your aisles closer together, re-space your shelves, etc. as your inventory increases. If you are planning to mix your mass-markets in with your trade paperbacks and hardcovers, then you will be able to fit in less inventory than a store that has shelves specifically spaced for mass-markets. Even once your store is full, you'll still want a lot of display spaces and to be able to face out a book on every other shelf so be a bit conservative in your estimates. My 1600 square foot store can comfortably hold 20,000 books (a mixture of paperbacks & hardcovers). We're at full capacity around 25,000 and overstuffed at 30,000. My wall cases can fit 8 shelves at mass-market spacing, 7 at mixed trade spacing, or 6 if oversized books are mixed throughout. My floor cases have fixed shelves that can accommodate 2 shelves of hardcovers and 4 shelves of mass-markets. A good rule of thumb is that in one linear foot, you can fit approximately 10 paperbacks or 7 hardcovers if you'll be doing faceouts or 14 paperbacks/10 hardcovers if you are spining out all the way.

[The owner compensation figure came from my Objective in Section 1.1 and is based on there being little buildout to complete before opening. If you think it's going to take you three months to get your store up and running and you won't have any other salary, then use 3 months, etc. The operating expenses figure can be filled in once you have done your financials in Section 7, and again it should reflect the amount of time it will take to get your store running minus any free rent you've negotiated out of your landlord. They'll usually give you 1-2 months and sometimes longer.]

2.3 Company Locations and Facilities

The company hopes to lease the 1600-square-foot retail space at Patchwork Plaza on East North Street in Greenville, SC that was formerly occupied by "Rags."

[If you don't have a specific location in mind, instead indicate the kind of location you are looking for - the section of town, the size, synergistic neighbors, etc.]

3.0 Products and Services

Fiction Addiction's main product line will be used and out-of-print books of all flavors - science fiction and fantasy, mysteries & thrillers, horror, kid's & young adult, romance, historical fiction, contemporary literature, and even some nonfiction such as memoirs, biographies, cookbooks, gardening, and history. We will stock modern first editions and over time hope to garner some more collectible and antiquarian stock.

The store will also offer used audiobooks for rental as well as purchase. Renters will pay the purchase price upfront and then have the amount above the rental fee ($3.50/week) refunded upon the return of the item. This way we will not have to worry about late fees, credit checks, etc.

The store may also carry a selection of new books for those titles whose demand outstrips our used-book supply. For example, books on school reading lists, store picks, award winners, etc.

The store may also carry some book accessories, such as bookmarks, booklights, and/or other gift items.

Approximately 75% of the stock will be mass-market size paperbacks; the remainder will be trade-size paperbacks and hardcovers.

All books will be cleaned and quality checked for loose pages, torn covers, etc., before they are entered into inventory.

[This section is pretty self-explanatory. You could also include Book Searches, Gift Certificates, etc.]

3.1 Sourcing

Fiction Addiction will accept customer trade-ins for used books. We will give 20% of the book's original cover price (up to a max of $2.00), provided that the book is in good condition, the title is not currently overstocked, and we think there is still demand for the item. Audiobook traders will be given 10% of cover price, with no cap. Although other Greenville used bookstores give up to 25% in credit, we believe that the majority of our customers will never have traded at a used bookstore before and thus will be happy with terms that provide more than the customer would have received at a yard sale.

If necessary, supplemental inventory can be purchased at very little cost (less than $.50 per book) from thrift stores in the surrounding areas, which has the added benefit of reducing competition. Additional inventory sources include estate sales, library sales, bulk purchases from individuals, and online classifieds.

New books can be sourced from the distributor Baker & Taylor - Members of their First Call program can purchase most items at a 40% discount, with a minimum order of 10 items (which can be all different SKUs) and a freight fee that is currently only $1.00 per order (no matter how many boxes).

There are a variety of sources for book accessories and gift items. Most gift items can be purchased wholesale at a 50% discount off the suggested retail price + freight. Ideally, the gift items we purchase will not have the suggested retail price on the consumer packaging and thus can be priced higher if we believe that the market will support it. The minimum order for each gift vendor is usually $100-200. Lines we are considering include bookmarks from Re-marks and the Beam 'n Read booklight from ASF Associates.

[If you are planning to accept customer trade-ins, then I strongly recommend that you offer as little credit as you think you can get away with. The higher your margin - the difference between what the item cost you and what you are selling it for - the more successful your business will be. If you'll be the only used bookstore in town, then consider offering $.50 per paperback and $1.00 per hardcover. If other stores are offering the standard 25% then you can go down to 20% but perhaps not much more. Capping the amount you offer at $2.00 per book will help somewhat. You can always make exceptions for particular items if you feel like it (i.e., brand-new hardcover releases, collectibles, etc.). Look at it this way, if you have the best inventory in town then people are going to trade with you no matter your terms because what's the good of having $50 in credit at the competitor's store if they don't have anything you want to buy.

Typically, if you pay cash for customer's books, you usually offer half of what you would pay in credit. We started out offering both but were soon so overwhelmed with sellers that we felt like we didn't have time to give our true customers (most cash sellers don't ever buy anything from you) the attention they needed and so now only give store credit unless purchasing a large collection of 1,000 books or so.]

3.2 Technology

Fiction Addiction will use QuickBooks and Microsoft Publisher, off-the-shelf, PC-based software packages, for accounting and for designing internal marketing materials such as bookmarks.

As discussed in Section 2.2, the store will have a separate PC-based inventory control system used for inventory, some purchasing, sales, and returns.

We will subscribe to an always-on Internet connection from BellSouth DSL so that we can manage our online sales and easily look up answers to customer queries.

Once we begin selling our inventory online, we will subscribe to the online postage meter service from Endicia.

We have purchased the domain name for our website, which will be hosted by Chrislands, a company that has developed website software specifically geared for used bookstores. We will export our inventory from our inventory control system and FTP it to our Chrislands website on a regular basis. The site will allow local and online customers to view and/or purchase our products.

Once our website is working smoothly, we will use email newsletters to promote it and drive traffic to it. We may use Constant Contact to design and send these newsletters.

[This is the section to discuss any technology you plan to purchase or "lease" in order to run your business. I recommend all the companies mentioned above.]

3.3 Future Products and Services

Future expansion may allow for a vertical increase of our product line by offering a selection of new books. Since new titles can be stocked reliably, this would allow the store to guarantee that Store Picks and Award Winners would always be in stock, aiding the company's promotional efforts.

We may also consider purchasing remaindered books from the various reminder houses that attend the Spring Book Show. Remainders can be used to fill in sections that we cannot find sufficient used inventory for at a higher margin and better cash flow than purchasing new books.

Depending on customer interest/demand, we may provide a used book search service. For a small fee we will locate the desired book and have it shipped to the store for the customer to purchase.

[I strongly suggest focusing on your core business in the beginning, but it's a good to have an idea of what you may want to add in the future so that you can leave some room in the store for it.]

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