Before You Buy a Bookstore

There’s nothing like a bookstore going up for sale to stir emotions. In today’s world of retail, many become worried that the store will close and the community won’t have this important anchor. Some will jump to conclusions that ebooks are ruining the bookstore business (far from fact) or worse, it’s Amazon’s fault.

Lots of businesses go up for sale, but few get the emotional response as a beloved bookstore will when an owner is ready to retire or simply begin a new chapter in their personal lives.

If you are thinking of stepping forward to buy a bookstore, we recommend that you focus on these three important factors:

Identify what you are buying. When you close the deal, what will you receive? In addition to rights to the name and logo, what about the quality of the customer mailing list? Are there long-standing relationships with schools and other institutional accounts? Do you want everything in the current inventory? Books purchased beyond 12 months will not be returnable to the vendor; this “dead wood” should be valued at less than cost. Will you identify a price range for the value of the inventory so there isn’t a radical fluctuation in stock levels before you close? You should receive a list of what you are buying so there is clarity in what is transferred to you at the time of sale.
Understand the price. Retail businesses are typically priced in two parts: the value of the strength of business operations and the value of inventory. Ask about the asking price. Understand how the price was determined. If the owner hasn’t done a business valuation, you can have one conducted. Revenue, profits, cash flow, and the strength of business operations are studied to identify a reasonable price range.
Go for a “Win/Win” outcome. If the store has an excellent reputation in the community and the owners are beloved and involved, realize that a positive and smooth transition will help you be accepted as the new owner. By all means negotiate, but accept a price that is reasonable and feels fair to all parties.

There are times when we’ve seen bookstores go up for sale, but the seller asks a premium price that may justify all the blood, sweat, and tears involved over the years, but doesn’t reflect a justifiable or fair price. Sometimes it seems sellers will grab a price from thin air and hope someone will be willing to pay the price. It’s up to you to do your due diligence to understand what you’re buying, what it will take to operate and improve the business, and pay a price that makes sense and allows you to have some working capital to draw when you need it.

While owning a bookstore may be a dream come true, buying a bookstore should go beyond the emotional excitement to ensure you are making sound decisions before you sign the dotted line.