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How To Start A Bookstore

How To Start A Bookstore

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How To Start A Bookstore

How To Start A Bookstore

Do you love books and literature and want to transform that hobby into a career? 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 the steps to take to open your 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, gaming, 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.

According to the American Booksellers Association (ABA), as of 2022, there were 2,023 member stores in 2,561 locations, which is an increase from 1,689 stores in early July of 2020. This increase disputes the claim that brick-and-mortar bookstores are dying.

Despite the growth in the number of stores, as of 2021, the bookstore industry generated at $9.5 billion, an amount that had been decreasing at a 5.7% rate every year, on average, since 20161. This decline in revenue is due to many factors, primarily rising competition from online retailers and increasing popularity of e-books

And while the industry has taken hits from digital publishing over the years, the tides have seemingly turned. According to Words Rated, “The number of books sold declined by 24.04% from a record high in 2008 to a record low in 2012. But since then, the print book industry has been making a comeback. Going from 591 million physical books sold in 2012 to 788.7 million in 2022, print book sales grew 33.45% over this period.”

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 their customers. 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. Over the past few years, small or independent bookstores have worked to create communities as a social movement. By creating an environment that buyers want to be in, giving back to their communities, and curating content that appeals to their target market, indie bookstores have overcome the big chain and e-publishing takeover.

Steps To Start A Bookstore

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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: Assess the Demand for a Bookstore

Every market is unique. What works in one area might not work in another, so it’s essential to conduct thorough research specific to your target location and audience. Here are some steps you can take to assess the market and demand:

Identify Your Target Market: Start by defining who your potential customers are. Are they students, professionals, families, or a combination of these groups? What are their reading habits and preferences? Understanding your target audience can help shape your business model, inventory, and marketing strategies.

Market Research: Conduct both primary and secondary market research to understand your potential customers and the market landscape. Primary research could involve conducting surveys or interviews with potential customers in your target area. Ask about their reading habits, preferences, and what they would like to see in a local bookstore. Secondary research involves studying already available data and reports on the book industry, such as the ones we discussed earlier.

Location Analysis: The success of a physical bookstore is highly dependent on its location. Research the areas where you’re considering setting up shop. Consider factors like foot traffic, proximity to schools or universities, competition, and rental prices. Look at census data for the area to understand the demographics. Is there a sufficient population in your target market living in the area?

Competition Analysis: Identify your potential competitors. These can be other bookstores, online book sellers, and even libraries. Visit these places, observe their business operations, and take note of what they do well and where there are gaps. Try to understand their business model, their target audience, and their unique selling proposition.

Networking: Connect with other bookstore owners, join industry associations, and attend industry events. This can provide you with valuable insights and advice. You might also consider finding a mentor in the industry.

Through this research, assess the demand for a bookstore in your target location. If you’ve identified a good-sized target market, a suitable location, and gaps in the market that you can fill, this indicates there may be sufficient demand.

Step 2: Develop 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.

Your research from earlier on the demand for a bookstore in your area is going to be one of the most important sections if you are looking for funding. Preparing an in-depth financial projection is also going to be very important, not only for funding, but to better understand the feasibility of the store. Include projected income statements, balance sheets, and cash flow statements. You should also discuss your break-even point—the point at which your revenues cover your expenses.

Related: How to Write a business plan

Step 3: Register the Business

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. Here are some general types of business registrations to consider:

Choosing a Business Structure: Before any of the following registrations, you should first to decide on a business structure. A business structure is how a business is legally set up to operate. This could be a sole proprietorship, a partnership, a Limited Liability Company (LLC), or a corporation. The structure you choose will affect your personal liability, taxation, and more.

Related: Comparison of business entities

Registering Your Business Name: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state.

Related: Tips & Ideas for Naming a Bookstore

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Business Licenses and Permits: Some of the common local, state, and federal registrations most bookstores will need to include a Seller’s 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.

You may also need special permits if you’re planning to serve food or drink, host live performances, or sell certain types of merchandise.

Open a Business Bank Account: It’s essential to separate your personal finances from your business finances. Opening a business bank account can help you manage your funds, simplify tax preparation, and give your business a more professional appearance.

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

Step 4: Secure 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.  For some, a loan guarantee from the Small Business Administration (SBA) may be needed.

Another avenue to consider is crowdfunding from your local community as a way to raise funds for your bookstore.

Related: Finding the Money to Start a Business

Step 5: Choose the Location

The location you choose can significantly impact the success of a bookstore. 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.

For a physical location, look for a storefront that is easily accessible, has good foot traffic, and is close to your target audience. For instance, if your bookstore focuses on academic or scholarly books, being near a university or college might be beneficial. The layout of your store should be welcoming and conducive to browsing. Consider having different sections for different genres, a children’s area, and spaces for reading or relaxation. Make sure the store is wheelchair accessible and easy to navigate.

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.

Related: Choosing a business location

Step 6: Research Distributors

After getting your sales tax permit and possibly the 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: Set Up a Point Of Sale System and Inventory Management Software

Setting up a point-of-sale (POS) system and inventory management software is essential for managing a bookstore as it processes sales, manages inventory, and improves overall business efficiency. The best POS systems for bookstores will track inventory, take digital payments, and offer gift cards

When setting up a point-of-sale (POS) system and inventory management software, a bookstore owner should consider key factors. The chosen POS system should integrate with the inventory management software for real-time stock tracking. It should offer user-friendly features, support multiple payment methods, and generate receipts. The inventory management software should allow for easy categorization, updates, and comprehensive reporting. Data security and scalability are vital. Additionally, it’s worth noting that many POS systems also offer integrated inventory management functionality, streamlining operations further.

When it comes to popular point-of-sale (POS) systems for bookstores, a few notable options are:

Square for Retail: Square offers a dedicated retail solution tailored to bookstores, providing a user-friendly interface, integrated inventory management, and comprehensive reporting features. It supports various payment methods, offers offline mode, and enables seamless integration with other business tools.

Lightspeed Retail: Lightspeed Retail is a comprehensive POS system designed for retailers, including bookstores. It offers robust inventory management capabilities, advanced reporting and analytics, multi-store management, and integrations with e-commerce platforms. Lightspeed Retail also supports personalized customer profiles and loyalty programs.

Booklog: Booklog is a specialized POS and inventory management software specifically designed for independent bookstores. It offers features such as barcode scanning, advanced search capabilities, customer tracking, purchasing tools, and comprehensive reporting for managing book inventory efficiently.

These systems have gained popularity among bookstores due to their tailored features, ease of use, and ability to streamline inventory management, sales, and reporting processes. It is recommended to research and evaluate each system’s specific features and pricing to determine the best fit for the unique needs of a bookstore.

Step 8: Get your Marketing Ready

Marketing a bookstore effectively requires a blend of traditional and digital strategies. Before deciding on how to market, honing in on your target market is essential. 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.

A great marketing plan is essential to a bookstore’s success. Not only do you need to get the word out to 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, TikTok, 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 is a customer loyalty program such as offering discounts and early meet-the-author access for book signings.

An engaging website that includes store information, event calendars, and even an e-commerce platform can broaden your customer base. Active participation on social media platforms can help you engage with customers, share news and promotions, and build a community around your bookstore. Email newsletters are a great way to keep your customers informed about new arrivals, upcoming events, and special promotions.

Bookstores 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

Step 9: Hire and Train Staff

Hiring the right staff is crucial to the success of a bookstore. Your employees not only help run the operations of the business, but they also represent your brand and interact directly with your customers. Common types of employees in a bookstore include booksellers, cashiers, stock clerks, and store managers.

Bookstore clerks make an average of $12.17 per hour, though these figures can also vary significantly depending on the location and size of the bookstore.

Here are some specific tips for hiring and training staff in a bookstore:

Look for Passion: Hiring employees who are passionate about books can make a big difference. They will be able to provide genuine recommendations and engage meaningfully with customers about various genres and authors.

Customer Service Skills: Excellent customer service skills are a must. Your employees should be friendly, patient, and helpful. They should be able to handle customer queries and complaints in a professional manner.

Literacy and Knowledge: While it’s not necessary for your employees to have read every book in the store, they should have a good general knowledge of literature and be able to guide customers toward books they might enjoy. This could involve reading industry reviews, staying informed about new releases, and understanding the store’s inventory.

Training: Once you’ve hired your staff, provide them with thorough training. This should cover everything from using the point-of-sale system and managing inventory, to understanding store policies and procedures. Regular training sessions can also be useful to introduce new books and share information about different genres and authors.

Diversity: Aim to have a diverse staff in terms of interests, reading preferences, and backgrounds. This can ensure a wide range of book recommendations for customers and create an inclusive environment in your store.

Encourage Reading: Consider allowing staff some paid time each week to read and learn about the inventory. This can help them provide better recommendations and stay informed about the books you’re selling.

Remember, your staff is the face of your bookstore. Hiring the right people and investing in their training can greatly enhance the customer experience and contribute to the success of your bookstore.

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 10: Prepare to Launch

Starting a bookstore is a significant endeavor, and there are several crucial aspects to consider. While I have covered many of the common steps all will need to do, there are a few others that may need to be looked into:

Business Insurance: Make sure to secure a comprehensive insurance policy that covers your inventory, equipment, and premises, as well as liability insurance to protect against potential claims from customers or employees. Consult with an insurance professional to ensure you have adequate coverage.

Related: What types of insurance do bookstores need?

Bookkeeping: Establish a robust bookkeeping system from the start. This will help you keep track of your income and expenses, manage your cash flow, and make tax reporting easier. You may want to consider hiring a bookkeeper or accountant, or using bookkeeping software.

Related: Setting up bookkeeping for your first business

Payment Systems: Be ready to accept multiple forms of payment, including cash, debit cards, credit cards, and mobile payments. You’ll need to set up a merchant account to process card payments. Consider the costs associated with different payment methods and choose a system that is convenient for your customers and cost-effective for your business.

Remember, every bookstore is unique. What works for one may not work for another, so be prepared to adapt and adjust your plans as you learn more about your market and your customers. Running a bookstore can be a rewarding experience, particularly if you have a passion for books and a desire to share that passion with others.

This material is property of StartingYourBusiness.com

Greg’s Tip: Local bookstores should also focus on building a strong online presence and investing in e-commerce capabilities. Online sales and digital marketing can greatly expand your customer reach and complement your physical store.

Also, establishing strong relationships with local authors, publishers, and literary communities can provide valuable partnerships and opportunities for book signings, author events, and collaborations to enhance the visibility and reputation of your bookstore.

Greg's Business Tip

Bookstore Startup FAQs

How much does it cost to start a bookstore?

There are many costs to consider when starting a bookstore. From the lease or rent, renovation, inventory, utilities, insurance, employee wages, and more, these costs will vary widely depending on your location, the size of the store, the type of inventory you want to carry, and how many employees you hire.

The cost is going to be different for everyone, but I have some estimates to consider:

The most significant expense is typically the inventory. Based on some sources, the initial cost for inventory can range between $50,000 to $200,000, depending on the size of the store and the books you intend to sell. For instance, a small bookstore might need around 3,000 to 5,000 books to start with. According to TCK Publishing, the average wholesale cost for a bookstore to purchase a book is typically around 50-55% off the list price. This means that if a book has a retail price of $15, the wholesaler will pay the publisher around $6.75 for it. So if each book costs an average of $6.75, the initial inventory cost will be $20,000 to $34,000. For larger stores, the initial inventory cost can easily exceed $100,000.

There will also be significant costs to outfit the store. Some common items needed for opening a bookstore include:

– Cash register with a point of sale system ($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)

Lease or renting the physical location is another significant cost. Depending on your location, you could be looking at anything from $1,000 per month in a small town to over $5,000 per month in a large city. You’ll also need to consider the cost of renovating or fitting out the store to suit your needs. This can range from a few thousand dollars to $50,000 or more.

Deposits for utilities such as electricity, water, and internet can add up to a few thousand dollars.

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. It’s generally a good idea to have a cash buffer of 3-6 months of your operating expenses in savings.

How much can a bookstore owner make?

Independent bookstore income varies widely. According to a survey by Womply, independent bookstores earn about $4,334 in weekly revenue from approximately 73 transactions. This makes for an average annual revenue of $225,368. This number could vary greatly depending on population, seasonality, etc.

One of the challenges of the bookselling industry is that publishers traditionally give independent booksellers a discount margin of only at best 50%. 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 food 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.

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?

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

How To Start A Bookstore

How To Start A Bookstore

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