How to Start a Bookstore

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How to Start a Bookstore

Do you love books and literature and want to transform that hobby into a career? Then starting your own bookstore might be a great choice. Before you jump into bookstore ownership, take a few minutes to understand the bookselling industry, the potential costs you’ll face in opening your store, and what steps to take to prepare to go into business.

By putting in the research and preparation now, you’ll know more about what to expect and can help set your bookstore up for a successful launch.

Bookstore Overview

Independent bookstores face challenges in competing with online retailers and e-books, but one of the great things about this industry is that you can make your bookstore unique to help draw customers. Today, you’ll find bookstores across the country that differentiate themselves in many ways, from incorporating cafes and open mic nights into their businesses to specializing in rare and unusual books that customers can’t find online.

Industry Summary

The bookselling industry has faced many challenges over the past years. In 1995, Amazon opened, and the allure of online book buying resulted in a 40% decrease in the number of independent booksellers. The release of the Kindle in 2007 was another event that threatened to bring about the end of the printed book, but the number of independent booksellers increased by 40% from 2009 to 2015. This increase was due to the closure of book big-box stores, like Borders and Waldenbooks, which left an opportunity for independent booksellers.

In 2009, there were 1,401 independent bookstores with 1,651 locations in the United States, according to Statista. As of 2018, those figures had increased to 1,835 independent bookstores with 2,470 locations in the United States, disputing the claim that brick and mortar bookstores are dying.

While the number of bookstores has increased, there has been a decrease in overall book sales. Bookstore sales totaled $11.01 billion in 2015, down from the $15 billion in sales that bookstores did in 2010.

Industry Trends

Because bookstores are now competing with online bookstores and ebooks, many small independent bookstores are making a surprising comeback by leveraging the benefits they can offer that e-commerce retailers cannot. Events like book signings and author readings give readers a way to connect with their favorite authors. Some bookstores leverage the appeal of a physical location by leveraging their appeal as a social meeting place and serving coffee and snacks to help draw people in.

Target Market

Your target market will depend on the specifics of your bookstore. For instance, a college bookstore will have a different target market than a store specializing in rare books.

Plenty of people continue to read books, and the potential market for bookstores is wide. Some demographics tend to read more than others, though. According to a Pew Research Center report, college graduates usually read more books than people who haven’t gone to college, and women read more books than men. Readers who are black or white also tend to read more than Hispanics.

Checklist for Starting a Bookstore

Starting a bookstore can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.

Step 1: Write a Business Plan

After coming up with an idea, the next step in starting any business should be to write a business plan.  Not only will a bank require you to have one, but multiple studies have shown that a business plan helps increase the odds of starting a successful business. A properly used business plan will serve the entrepreneur as the road map for their business, helping them achieve their business goals.

Related: How to write a business plan

Step 2: Form a Business Entity

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a bookstore, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
 
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 3: Name the Business

Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Related: Tips & Ideas for naming a bookstore

Step 4: Select your Location

Your lease or mortgage will vary according to your location and the size of the building. Leasing a space may be easier than purchasing real estate as you start up a new business since there is typically better access to space in prime retail locations. A location with decent foot traffic or drive-by traffic is generally preferable for bookstores.

Some bookstore owners incorporate stores directly into their homes or operate only online, saving some money over the cost of a lease. Whether or not this is practical for you will depend on your home’s layout and location and whether your zoning board will allow you to use part of your home for business.

Other stores will look for locations near a university, in thriving downtowns, or in neighborhoods with strong foot traffic and nearby locally-owned businesses.  Also, either incorporating or locating close to a coffee shop can encourage people to stay longer at your bookstore.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

The types of business licenses, permits, and registrations that will be required to start a business vary on the activities of the business in addition to where it is located.

Remember that if you combine a café with your bookstore, there will be additional necessary permits regarding food handling and safety.

Some of the common local, state, and federal registrations most bookstores will need to include a sales tax permit (to sell retail products and collect sales tax), resale certificate (which allows you to purchase inventory tax-free), Employer Identification Number (business identification number), and Occupancy Permit (approval to operate a retail location) among others.

Related: Common business licenses, permits, and registrations by state

Step 6: Research Distributors

After getting your sales tax permit and possibly EIN, it’s time to reach out to distributors, as most distributors won’t send any information until they see you have taken steps to organize your business. Some of the larger distributors include the Independent Book Publishers Association (IBPA), National Book Network (NBN), and Baker & Taylor, but you may also want to look into smaller distributors if you plan to carry a specific niche.  Some book vendors will also stock items to upsell, such as bookmarks, magazines, calendars, and gifts.

In addition to new books, used books can be quite profitable too, and you may want to start searching yard sales, library sales, and Goodwill to begin building inexpensive inventory.

Step 7: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a bookstore is another.  Fortunately, the cost to start a bookstore can be relatively low, provided you can lease a good building and have some retail fixtures included.  This leaves some expenses in books, shelving, furniture, retail equipment, and signage.  Funding for a new start-up can be difficult as banks are typically going to want the borrower to have good credit and invest 15-25% of their own money.  In some cases, a loan guarantee from the Small Business Administration (SBA) may be needed.

Related: Finding the money to start a business  

Step 8: Open a Business Bank Account

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 9: Get your Marketing Ready

A great marketing plan is essential to a bookstore’s success. Not only do you need to get the word out into the community about your bookstore business, but you’ll probably want to host some special events to help draw customers into your store. Besides budgeting for more traditional marketing methods like advertising, social media platforms like a Facebook page, Instagram, Twitter, etc., and e-newsletters, think about the costs of book readings, book signings, contests, giveaways, a grand opening, and any other special events.

Another marketing strategy to offer is a customer loyalty program such as offering discounts and early meet the author access for book signings.

Book stores that incorporate online sales along with promotions and activities (book signings, book clubs, etc.) that bring customers into the store tend to be more successful.

Related: Low-cost ideas to market a new business

One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.

Step 10: Obtain Business Insurance

There are several types of insurance to consider when starting a bookstore. A few of these include:
– General liability insurance can help to pay for damages if a customer is ever injured while in your store.
– Commercial property insurance helps to cover expenses if your store and its contents are damaged, such as in a fire. It usually covers the cost of your building, your inventory and equipment, your sign, and your landscaping.
– Rare book insurance offers additional coverage specifically for rare and antique books. The policy would reimburse you for the cost of books damaged or lost in an event like a flood. (These books are so valuable that a commercial property insurance policy might not cover all of the cost.)

The cost to insure a bookstore will vary depending on many factors, such as the value of your inventory and building, as well as the state where you live. Be sure to request quotes from multiple companies, then sit down and compare the policies to determine the best plan for you.

Related: What types of insurance does a bookstore need? 

Step 11: Hire Employees

You may start out as the only person working in your bookstore, however, it’s important at some point to bring on employees as retail business hours are typically long and you will need a break or time off if you are sick.

Bookstore clerks make an average of $10.19 per hour, with the hourly pay ranging from a low of $7.97 to a high of $16.14 per hour. Hourly pay rates will vary according to your location and the local cost of living.

In addition to hourly pay rates, you will also need to cover payroll taxes for your employees. You may also wish to give your employees other perks such as paid time off, sick leave, and health insurance, which may be important in retaining good employees.

Related: Hiring your first employee

Step 12: Set up an Accounting System

Setting up an accounting system for your bookstore is critical to your business’s long-term success.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a bookstore?

Some common items needed for opening a bookstore include:

Equipment
– Cash register ($100-$1,000)
– Chairs ($50-$200 each)
– Benches ($200-$400 each)
– Bookshelves ($40-$150 each)
– Magazine racks and shelves ($45-$265 each)
Supplies
– Branded shopping bags (around $200.00 for 150; the price per bag decreases with larger orders)
– Branded bookmarks (around $95 for 500; the price per bookmark decreases with larger orders)

Inventory
Books, magazines, CDs, etc. (Costs vary, especially depending on whether you’re selling new books, used books, or both).  Sufficient funds will be needed for initial inventory to stock the shop properly.

Working capital
Your bookstore will also need working capital (otherwise known as cash flow) for it to operate. Typical uses of working capital include rent, utilities, internet, payroll, etc.

How much can a bookstore owner make?

Independent bookstore income varies widely. In 2018, the U.S. bookstore industry generated $13 billion in revenue, but your actual profits will vary according to your business model and expenses. According to a survey by Womply, independent bookstores earn about $4,334 in revenue per week from approximately 73 transactions. This makes for an average annual revenue of $225,368.

One of the challenges of the bookselling industry is that publishers traditionally give independent booksellers a discount margin of only 43% to 47% for trade titles. This is a low-profit margin that booksellers can’t alter unless they move into buying and selling used books. Some booksellers supplement book sales with other goods, such as selling coffee and foods through a café.

What skills are needed to run a bookstore?

Many skills go into successfully running a bookstore. While you don’t need a formal education to open your business, the following talents and experiences will help you start and manage your store.

Passion for books. Possibly the most important quality for a bookstore owner to have is a passion for the books they’re selling. Running a bookstore is hard work, but truly enjoying the chance to share books with the world can help. The more that you know about literature and the books themselves, the better you’ll be able to ask customers questions and help refer them to additional titles they may enjoy, and upsell additional products too. An awareness of literary trends will also help you identify what new books you should bring into your store, so you have the titles that customers will be asking for.

Interpersonal skills. Opening and running a bookstore involves plenty of interaction with other people. You’ll need to be able to welcome customers into your store, and if you hire staff, you’ll need to be able to communicate clearly to teach and supervise them.

Organizational skills. From keeping track of your inventory to assessing what’s selling (and what isn’t), organizational skills are a must when it comes to opening and running a bookstore.

Creativity. To thrive in today’s book industry, you’ll have to get a little creative. Whether it’s coming up with unique events or finding a way to set your bookstore apart from online retailers and other competitors, a little creativity is highly valuable in this industry.

Business background. While you don’t necessarily need a business degree or small business background to open a bookstore, having at least some business knowledge will help. Consider taking some classes at a local community college, or see if your local chamber of commerce can refer you to some programs or workshops for new business owners.

Are there grants to start a bookstore?

It’s extremely rare to find a grant to start a bookstore. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for a bookstore?

The NAICS code for a bookstore is 451211.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources:
American Booksellers Association
Antiquarian Booksellers’ Association of America
Independent Online Booksellers Association

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