When You Buy a Bookstore
How can you not be overjoyed to hear that a bookstore you’ve loved is available … and you could become the next owner?! For many, owning a bookstore is a dream come true. You’ve spent your life so far doing many things, and now you have the opportunity to begin a new chapter doing something you love.
People want to sell their bookstore for a variety of reasons, mostly to enter retirement, but some burn out, others decide they don’t like owning a small business and feel overwhelmed with the demands of having to wear so many hats, and some simply have changes in their personal lives that makes it too difficult to carry on the business.
Here are a few things on my mind over the last few months that I want to share with you so you begin to look at your purchase of a bookstore business from a variety of perspectives.
Understand exactly what you are buying. It’s typical that a retail business will identify one price for the business and value the inventory separately. This is understandable since inventory changes each day … books arrive from vendors, books sell to customers. Inventory is constantly in a state of flux. When considering the price of the business itself, you should receive a detailed list of everything you will receive, from domain names of websites to furniture and fixtures, from wrapping paper to the store’s sound system. I was shocked when a buyer told me the previous owner came in to redeem a small bookcase she wanted to keep. The situation was awkward for the new owner.
Know you can negotiate the value of the inventory. Not everyone who has had a bookstore computer management system has used it effectively. Unless a store is vigilant about doing physical inventories (at least annually), the on-hand quantities may not be accurate, inflating the stated value of the inventory. Also, know that inventory that has not sold within a year can be returned to most vendors if the stock was purchased on a returnable basis. But, the stock needs to be returned by the company that purchased it. Make sure old stock that hasn’t sold is returned before you value the inventory and sign papers. If some of the inventory is beyond the twelve-month limit, ask the current owner to donate the stock or offer a very low amount for this merchandise. If it hasn’t sold in almost a year, you probably are going to have a tough time selling it as well. Either don’t buy it or significantly reduce its value. If a current owner cannot tell you what’s been on the shelves beyond 12 months, you have bargaining power to offer much less than the recorded cost for the entire inventory since its integrity is in question.
Beware of expecting that you’ll learn everything you need to know from the current owner. You’ll find the current owner essential in introducing you to key contacts within the community and book industry and what’s where in and around the store. Not all bookstore owners have been applying the best practices, updating their computerized management systems (there still are systems out there based on DOS!), claiming publisher co-op (worth thousands of dollars for your marketing efforts), or working to grow their business. This may be especially true for owners who are retiring where practices can be still inefficient and cumbersome based on old technologies. Be careful not to adopt bad habits and outdated routines; a former owner will only know what they know.
Know when it’s time to take the lead. There’s a friendly period where the previous owner is letting go as you are leaning in. It can be an awkward time. How long should that period last? A few weeks working side-by-side usually does it; longer can be problematic. Keep in mind that when previous owners stay on too long, staff members become confused. Who should they ask? Will they offend the previous owner if they ask you a question? Commit to a few weeks together and then proceed ‘as needed’ is our best advice.
When you buy a bookstore, you’re buying a very personal business. Navigate the due diligence process to make sure it’s clear what you are buying, and step in to take a leadership role when you’ve learned the store’s daily routine.