Tell me about the nuts & bolts you dealt with starting a small business!
December 9, 2019 8:32 AM Subscribe
I would like to know more about the realities of starting a small retail business; specifically, new and used books. If you've been through it, please tell me what your steps were like. I'm especially interested in hearing about how you negotiated the financial side- did you have money said aside? Did you get loans? If so, what was that like?
I'm in Minneapolis, if that's relevant somehow.
I'm in Minneapolis, if that's relevant somehow.
You might be interested in looking up the Raven bookstore in Lawrence, Kansas. They have a Twitter feed and email newsletter that often goes into the business side of things.
posted by kevinbelt at 9:16 AM on December 9, 2019 [2 favorites]
posted by kevinbelt at 9:16 AM on December 9, 2019 [2 favorites]
Best answer: About 35 years ago, I bought a small bookstore. I had a background working in booktores. The process was nearly a full-time job.
- Researched business stuff, like costs of heat & light, employees, taxes, insurance.
- Negotiated the next 5 years of rent
- Negotiated market interest rate loan from my Mom. Thanks, again, Mom. (paid back in full, on schedule)
- On paper (pre-spreadsheet software), created a pro-forma profit/loss analysis. The bottom line was my takehome pay, all other costs had to be researched. This was incredibly helpful. Info, advice, and template came from SBA.
- The pro-forma profit/loss analysis made it clear what sales had to be to make it work.
- Made an offer that included former owner financing part of the sale over 5 years at market interest rate.
Buying an existing business gave me open accounts with publishers and an easier time with getting insurance.
Dealing with the IRS was a nightmare. It may be less awful now. But Do Not screw with them. Due to their error that was ridiculously difficult to investigate and resolve,
I got notice of the IRS' intent to put a lien on my business. Not fun. Took getting pissy and aggressive to resolve.
Amazon is a bookstore killer. Amazon is the bookstore killer.
What might work is a bookstore cafe with lots of used books, good coffee, cinammon rolls, sandwiches, maybe an option for coffee house performances. There's a space near me that would be good for this, so I fantasize, but it takes huge amounts of energy. Making a bookstore work in 1985 was hard but possible. I saw many bookstores open, then close. Making a bookstore work in 2020 would be massively more difficult. If you can find a reliable partner, that might be a big help.
I worked 80 hour weeks. People say that, but they may have paid holidays, sick days, vacations. I went 3 years with no vacations, usually 1 day off a week. Somebody has to clean the bathroom, that's you. There are weird emergencies in retail, with more body products than you'd think. Having employees is a magnitude of order of pain in the ass, even though book lovers are better than most. I had a series of really bad accountants until I found a fantastic one.
1 local store's owner has a day job, parents volunteer to run the shop half the time, and I suspect it's barely holding on. All local bookstores sell lots of card and vaguely book-related stuff, gifty stuff.
It was a blast a lot of the time. Readers are interesting, book sales reps gave me lots of help and good advice. You don't get to hang out and read, but you get access to books, you make window displays, have readings. The research I did was invaluable in succeeding. I sold the business profitably.
Don't ask local book stores to advise you on becoming their competition; go further afield. Visit every bookstore you can find; you will always learn things
American Booksellers Association
Memail me if you like.
posted by theora55 at 9:26 AM on December 9, 2019 [11 favorites]
- Researched business stuff, like costs of heat & light, employees, taxes, insurance.
- Negotiated the next 5 years of rent
- Negotiated market interest rate loan from my Mom. Thanks, again, Mom. (paid back in full, on schedule)
- On paper (pre-spreadsheet software), created a pro-forma profit/loss analysis. The bottom line was my takehome pay, all other costs had to be researched. This was incredibly helpful. Info, advice, and template came from SBA.
- The pro-forma profit/loss analysis made it clear what sales had to be to make it work.
- Made an offer that included former owner financing part of the sale over 5 years at market interest rate.
Buying an existing business gave me open accounts with publishers and an easier time with getting insurance.
Dealing with the IRS was a nightmare. It may be less awful now. But Do Not screw with them. Due to their error that was ridiculously difficult to investigate and resolve,
I got notice of the IRS' intent to put a lien on my business. Not fun. Took getting pissy and aggressive to resolve.
Amazon is a bookstore killer. Amazon is the bookstore killer.
What might work is a bookstore cafe with lots of used books, good coffee, cinammon rolls, sandwiches, maybe an option for coffee house performances. There's a space near me that would be good for this, so I fantasize, but it takes huge amounts of energy. Making a bookstore work in 1985 was hard but possible. I saw many bookstores open, then close. Making a bookstore work in 2020 would be massively more difficult. If you can find a reliable partner, that might be a big help.
I worked 80 hour weeks. People say that, but they may have paid holidays, sick days, vacations. I went 3 years with no vacations, usually 1 day off a week. Somebody has to clean the bathroom, that's you. There are weird emergencies in retail, with more body products than you'd think. Having employees is a magnitude of order of pain in the ass, even though book lovers are better than most. I had a series of really bad accountants until I found a fantastic one.
1 local store's owner has a day job, parents volunteer to run the shop half the time, and I suspect it's barely holding on. All local bookstores sell lots of card and vaguely book-related stuff, gifty stuff.
It was a blast a lot of the time. Readers are interesting, book sales reps gave me lots of help and good advice. You don't get to hang out and read, but you get access to books, you make window displays, have readings. The research I did was invaluable in succeeding. I sold the business profitably.
Don't ask local book stores to advise you on becoming their competition; go further afield. Visit every bookstore you can find; you will always learn things
American Booksellers Association
Memail me if you like.
posted by theora55 at 9:26 AM on December 9, 2019 [11 favorites]
Best answer: I don't know from bookstores, but apparently small, independent bookstores are enjoying a resurgence, after having been close to extinction.
With regard to loans: When I bought a business, I borrowed against my retirement account (a 403(b) plan). The interest rate was 6.5%, I believe, and all of the interest went back into my account. So it was essentially interest-free. There are also Kiva loans that might be an option for you.
posted by alex1965 at 9:27 AM on December 9, 2019 [2 favorites]
With regard to loans: When I bought a business, I borrowed against my retirement account (a 403(b) plan). The interest rate was 6.5%, I believe, and all of the interest went back into my account. So it was essentially interest-free. There are also Kiva loans that might be an option for you.
posted by alex1965 at 9:27 AM on December 9, 2019 [2 favorites]
previously
New England Independent Booksellers Association There may be a similar organization in your region.
posted by theora55 at 9:41 AM on December 9, 2019
New England Independent Booksellers Association There may be a similar organization in your region.
posted by theora55 at 9:41 AM on December 9, 2019
Best answer: A close friend opened a bookstore here about five years ago. She had been a bookseller, managing bookstores, for 25+ years - her entire adult life.
Their start up funds were a combination of a business loan, a modest GoFundMe, and a cash investment from a family member who is the co-owner. They occupy a small square footage store in a strip mall with good foot traffic. They're located between the pet store and the Hallmark.
It has been touch and go, but they've survived five years. The three employees are my friend, her family member/investor, and the FM/I's spouse. The three of them staff the store 9 hours a day, 7 days a week (and longer at the holidays). I'm pretty sure there have been long stretches where nobody has drawn a paycheck from the store. She's built a small but steady business through excellent customer service, and connecting with the local schools (for book fairs) and overall being an excellent, family friendly place, but it has been touch and go. She competes against three other independent bookstores in the general area - one is a local bookstore/gifts type chain, one is a long-time fixture in the city, and one is a recent start up owned by someone whose parent is a world-famous author who is funding the store.
A big part of the reason she was able to succeed as a tiny indepenent was that she went into it with excellent relationships with publishing house reps, developed during her years managing other people's stores. I'll also note that of the four prior stores where she worked (including one very large New England chain, Bookland) none of them are in business any longer.
I would not exactly advise against you doing this, but I'd only do it if you already have significant professional experience working in retail and/or specifically working with publishers.
posted by anastasiav at 11:00 AM on December 9, 2019 [2 favorites]
Their start up funds were a combination of a business loan, a modest GoFundMe, and a cash investment from a family member who is the co-owner. They occupy a small square footage store in a strip mall with good foot traffic. They're located between the pet store and the Hallmark.
It has been touch and go, but they've survived five years. The three employees are my friend, her family member/investor, and the FM/I's spouse. The three of them staff the store 9 hours a day, 7 days a week (and longer at the holidays). I'm pretty sure there have been long stretches where nobody has drawn a paycheck from the store. She's built a small but steady business through excellent customer service, and connecting with the local schools (for book fairs) and overall being an excellent, family friendly place, but it has been touch and go. She competes against three other independent bookstores in the general area - one is a local bookstore/gifts type chain, one is a long-time fixture in the city, and one is a recent start up owned by someone whose parent is a world-famous author who is funding the store.
A big part of the reason she was able to succeed as a tiny indepenent was that she went into it with excellent relationships with publishing house reps, developed during her years managing other people's stores. I'll also note that of the four prior stores where she worked (including one very large New England chain, Bookland) none of them are in business any longer.
I would not exactly advise against you doing this, but I'd only do it if you already have significant professional experience working in retail and/or specifically working with publishers.
posted by anastasiav at 11:00 AM on December 9, 2019 [2 favorites]
The college town I live in has three independent bookstores that have all been around for at least five years, so it's not impossible. There are additionally currently two used bookstores, though some others have closed. There's also a local business that sells used books online on consignment - they pick up your books, donate most of them (because they aren't worth selling), then sell the rest. They used to also sell DVDs and CDs, but they stopped because they weren't making enough.
One thing that I haven't seen mentioned is issues with self-published authors. I had a long chat with one bookstore owner who said it was a real problem dealing with large numbers of people who don't buy books from her, but expect her to use her very limited space to carry their books (which generally don't sell). She ended up coming up with very strict policies and now only carries self-published books from local authors and then only for a limited amount of time. So that's something else you'd probably have to deal with. She's a very nice person who had sympathy for these authors, so I think it was hard for her to put her foot down.
posted by FencingGal at 1:23 PM on December 9, 2019 [1 favorite]
One thing that I haven't seen mentioned is issues with self-published authors. I had a long chat with one bookstore owner who said it was a real problem dealing with large numbers of people who don't buy books from her, but expect her to use her very limited space to carry their books (which generally don't sell). She ended up coming up with very strict policies and now only carries self-published books from local authors and then only for a limited amount of time. So that's something else you'd probably have to deal with. She's a very nice person who had sympathy for these authors, so I think it was hard for her to put her foot down.
posted by FencingGal at 1:23 PM on December 9, 2019 [1 favorite]
Best answer: The downtown library used to have free copies of "A Guide to Starting a Business in Minnesota", a hefty booklet published annually by the MN Dept of Economic development. It's very much a step-by-step here-are-the-forms sort of thing. This is the PDF of the 2017 edition.. As far as I know they keep many on hand because they are quite popular with small business starters. 😊
posted by Gray Duck at 8:10 PM on December 9, 2019 [1 favorite]
posted by Gray Duck at 8:10 PM on December 9, 2019 [1 favorite]
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The few that succeed are ones that either specialize in going to estate sales and the like and picking up rare books with high online resale value and use the storefront mostly to move the dreck or ones that are more children's spaces where they make money offering classes and such and happen to sell a few books to parents while they're there.
The national trend is that small bookshops are going out of business left and right. If you don't have a good answer on what you'll do differently that will let you succeed, you're probably not going to.
posted by Candleman at 8:51 AM on December 9, 2019 [2 favorites]