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Do you want to start used bookstore business?
Are you planning to start a used bookstore business?
If you happen to be a book-lover and love to spend your time surrounded by books, this is the perfect business for you. Moreover, this business requires the least capital for startup and also has the least risk of failure provided that you plan and execute it successfully. For making this venture successful, you will have to prepare a comprehensive business plan which will establish the basis of your company’s future operations and decisions.
So, if you are wondering how to start a used book store and create an effective business plan then here we are providing you the business plan of a used bookstore business startup named ‘Amanda’s Store’.
Executive Summary
2.1 The Business
Amanda’s Store will be a used bookstore business that will buy and sell all sorts of used books as well as out-of-print books. The store will be located in the main commercial market of the Downtown Manhattan and will contain nearly 10,000 used books at the time of startup.
2.2 Management
Amanda’s Store will be owned by Amanda Wolves who has served as the head librarian of Manhattan Central Library for the last 20 years. It was Amanda’s passion for books that led her to opening a used book store.
2.3 Customers
Our target market is the residential community living near us. We will provide all sorts of used academic and non-academic books to our esteemed customers.
2.4 Business Target
We aim to become the best used bookstore in Manhattan within next five years of our startup. We also aim to balance the initial cost of the startup with earned profits by the end of the first year.
Company Summary
3.1 Company Owner
Amanda’s Store will be owned by Amanda Wolves. Amanda has served in many libraries throughout the United States after graduating in Library Sciences. She has also been associated with Manhattan Central Library as the head librarian for last 20 years.
3.2 Why the business is being started
Amanda is a bibliophile and has always been passionate about reading and collecting books. It was her desire of living surrounded with books and a passion for sharing her gigantic collection of books with everyone that led her to the decision of opening a used book store.
3.3 How the business will be started
Initially, the store will contain nearly 10,000 used books, out of which 3,000 are from Amanda’s own collection, 3,500 have been donated by Amanda’s friends, relatives and volunteers, and 3,500 have been purchased from flea markets and thrift shops. In addition to that, Amanda will procure bookcases along with the usual inventory.
The financial experts have forecasted following costs for the startup:
The detailed startup requirements are given below:
| Start-up Expenses | |
| Legal | $75,500 |
| Consultants | $0 |
| Insurance | $62,750 |
| Rent | $22,500 |
| Research and Development | $42,750 |
| Expensed Equipment | $42,750 |
| Signs | $1,250 |
| TOTAL START-UP EXPENSES | $247,500 |
| Start-up Assets | $0 |
| Cash Required | $322,500 |
| Start-up Inventory | $52,625 |
| Other Current Assets | $222,500 |
| Long-term Assets | $125,000 |
| TOTAL ASSETS | $121,875 |
| Total Requirements | $245,000 |
| START-UP FUNDING | $0 |
| START-UP FUNDING | $273,125 |
| Start-up Expenses to Fund | $121,875 |
| Start-up Assets to Fund | $195,000 |
| TOTAL FUNDING REQUIRED | $0 |
| Assets | $203,125 |
| Non-cash Assets from Start-up | $118,750 |
| Cash Requirements from Start-up | $0 |
| Additional Cash Raised | $118,750 |
| Cash Balance on Starting Date | $121,875 |
| TOTAL ASSETS | $0 |
| Liabilities and Capital | $0 |
| Liabilities | $0 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
| Capital | $0 |
| Planned Investment | $0 |
| Investor 1 | $312,500 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $695,000 |
| Loss at Start-up (Start-up Expenses) | $313,125 |
| TOTAL CAPITAL | $221,875 |
| TOTAL CAPITAL AND LIABILITIES | $221,875 |
| Total Funding | $265,000 |
Services for customers
If you are thinking how to start a used bookstore business, you must decide what services will you provide to your customers because the planning of many subsequent things depends on it.
Amanda’s Store will be a used bookstore business that will buy and sell all sorts of used books as well as out-of-print books. Our books will lie in following three categories:
- Academic Books: This category includes textbooks for students studying in schools and colleges.
- Non-Academic Books: This category includes books belonging to all genres including science fiction, action, drama, adventure, romance, mystery, horror, self-help and children books.
- Magazines: This category includes all local, national and international magazines.
Marketing Analysis of used bookstore business
The most important component of a used book store business plan is its accurate marketing analysis that’s why Amanda acquired the services of marketing experts to help her through this phase. After identifying the demographics, the marketing experts also helped her to select the best location for starting a used bookstore.
5.1 Market Trends
According to US economic census, book retailers generate more than $19 billion dollars in revenue per year, out of which 10% is contributed to the used bookstores scattered nationwide. The number of used bookstores have also increased over the last few years and are projected to increase over the next years.
5.2 Marketing Segmentation
Our target market is the residential community living nearby at the 10 minutes’ drive from our office. The community consists of all types of people from varying backgrounds. There are currently more than 738,000 households in Manhattan out of which 17.1% have children under the age of 18 living with them, 25.2% are married couples living together and 10.9% are persons with 65 years of age or older.
It is very important to analyze the market segmentation of your future customers before you think about opening a used bookstore because a successful and efficient marketing strategy can only be developed after we completely know our potential customers. Our experts have identified the following type of target audience which can become our future consumers:
The detailed marketing segmentation of our target audience is as follows:
5.1.1 Senior Citizens:
Our first target group comprises of senior citizens aged above 50. Nearly 90% of American citizens aged over 50 years love to read books in their spare time. Our used bookstore will be the perfect place for these people to find books about any genre they are interested in. This group will be the biggest consumer of our products and hence our marketing strategy will be specifically built to attract them.
5.1.2 Children & Teens:
Our second target group comprises of children and teens aged below 25. Children and teens studying in schools and colleges are in a constant need of various curriculum and textbooks. Academic books are generally very expensive that’s why our store will be the perfect place for this group to find economical academic books.
5.1.3 Adults:
Our third target group comprises of adults aged between 25-50. This age group is least fond of books due to its hectic work schedule and busy life. That’s why the sales contribution of this group will be very low as compared to the other two groups.
The detailed market analysis of our potential customers is given in the following table:
| Market Analysis | ||||||||||
| Potential Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | |||
| Senior Citizens | 53% | 22,334 | 32,344 | 43,665 | 52,544 | 66,432 | 17.00% | |||
| Children & Teens | 39% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 13.43% | |||
| Adults | 7% | 322 | 455 | 655 | 867 | 433 | 2.32% | |||
| Total | 100% | 34,089 | 46,143 | 60,873 | 72,156 | 87,410 | 32.54% | |||
5.3 Business Target
We aim to become the best used bookstore in Manhattan within next five years of our startup. We also aim to balance the initial cost of the startup with earned profits by the end of the first year.
5.4 Product Pricing
After considering the market demands, we have priced all our products in the similar ranges as of our competitors.
Strategy
The growth of a company, especially of a startup, heavily depends on its sales strategy so make sure to pay special attention to it before thinking about how to open a used bookstore.
6.1 Competitive Analysis
Our competitive advantage lies in two things, our organizational strategy and the unparalleled customer service provided by our team. Our books will be stored and displayed in a well-arranged and organized manner so as to minimize the time required by our customers to find a specific book. Secondly, we will provide exceptional customer service to create a comfortable environment so that our customers can easily stroll through our books for as long as they want.
6.2 Sales Strategy
For promoting our sales, we will advertise our store in local magazines, newspapers and social media. We will also distribute our flyers in nearby schools and colleges.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
Our forecasted sales are summarized in the following column charts:
The detailed information about sales forecast, total unit sales, total sales is given in the following table:
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Academic Books | 2,320 | 2,430 | 2,800 |
| Non-Academic Books | 4,100 | 5,230 | 6,000 |
| Magazines | 700 | 1,200 | 1,400 |
| TOTAL UNIT SALES | 7,120 | 8,860 | 10,200 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Academic Books | $140.00 | $150.00 | $160.00 |
| Non-Academic Books | $600.00 | $800.00 | $1,000.00 |
| Magazines | $700.00 | $800.00 | $900.00 |
| Sales | |||
| Academic Books | $214,800 | $274,000 | $333,200 |
| Non-Academic Books | $120,050 | $194,500 | $268,500 |
| Magazines | $50,110 | $71,600 | $93,000 |
| TOTAL SALES | |||
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Academic Books | $0.70 | $0.80 | $0.90 |
| Non-Academic Books | $0.40 | $0.45 | $0.50 |
| Magazines | $0.30 | $0.35 | $0.40 |
| Direct Cost of Sales | |||
| Academic Books | $98,300 | $183,000 | $267,700 |
| Non-Academic Books | $66,600 | $119,900 | $173,200 |
| Magazines | $17,900 | $35,000 | $52,100 |
| Subtotal Direct Cost of Sales | $294,100 | $699,400 | $1,104,700 |
Personnel plan
The staff of a company matters a lot in its success but in some businesses, it is the key deciding factor. That’s why a personnel plan should be developed before starting a second hand bookshop. Amanda has developed the following personnel plan for her company.
7.1 Company Staff
Amanda will manage the overall operations and will hire the following people for her assistance.
- 1 Accountant for maintaining financial and other records
- 1 Cashier for selling/buying books
- 2 Sales Executives for marketing and discovering new ventures
- 6 Salespersons for organizing the store and assisting customers in finding books
To ensure the best quality service, all employees will be trained for a month before starting their jobs.
7.2 Average Salary of Employees
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Accountant | $85,000 | $95,000 | $105,000 |
| Cashier | $80,000 | $92,000 | $109,000 |
| Sales Executives | $99,000 | $114,000 | $129,000 |
| Salespersons | $166,000 | $173,000 | $180,000 |
| Total Salaries | $345,000 | $379,000 | $418,000 |
Financial Plan
The financial plan presents a detailed map about the cost of inventory, payroll, equipment, rent and utilities needed for the startup that’s why it should be developed before thinking about how to open a used book store.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 11.00% | 12.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 26.42% | 27.76% | 28.12% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
The following graph shows the company’s Brake-even Analysis.
| Brake-Even Analysis | |
| Monthly Units Break-even | 5530 |
| Monthly Revenue Break-even | $159,740 |
| Assumptions: | |
| Average Per-Unit Revenue | $260.87 |
| Average Per-Unit Variable Cost | $0.89 |
| Estimated Monthly Fixed Cost | $196,410 |
8.3 Projected Profit and Loss
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $40,124 | $45,046 | $50,068 |
| Cash from Receivables | $7,023 | $8,610 | $9,297 |
| SUBTOTAL CASH FROM OPERATIONS | $47,143 | $53,651 | $59,359 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $47,143 | $53,651 | $55,359 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $21,647 | $24,204 | $26,951 |
| Bill Payments | $13,539 | $15,385 | $170,631 |
| SUBTOTAL SPENT ON OPERATIONS | $35,296 | $39,549 | $43,582 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $35,296 | $35,489 | $43,882 |
| Net Cash Flow | $11,551 | $13,167 | $15,683 |
| Cash Balance | $21,823 | $22,381 | $28,239 |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $309,069 | $385,934 | $462,799 |
| Direct Cost of Sales | $15,100 | $19,153 | $23,206 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $15,100 | $19,153 | $23,206 |
| Gross Margin | $293,969 | $366,781 | $439,593 |
| Gross Margin % | 94.98% | 94.72% | 94.46% |
| Expenses | |||
| Payroll | $138,036 | $162,898 | $187,760 |
| Sales and Marketing and Other Expenses | $1,850 | $2,000 | $2,150 |
| Depreciation | $2,070 | $2,070 | $2,070 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $4,000 | $4,250 | $4,500 |
| Insurance | $1,800 | $1,800 | $1,800 |
| Rent | $6,500 | $7,000 | $7,500 |
| Payroll Taxes | $34,510 | $40,726 | $46,942 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $188,766 | $220,744 | $252,722 |
| Profit Before Interest and Taxes | $105,205 | $146,040 | $186,875 |
| EBITDA | $107,275 | $148,110 | $188,945 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $26,838 | $37,315 | $47,792 |
| Net Profit | $78,367 | $108,725 | $139,083 |
| Net Profit/Sales | 30.00% | 39.32% | 48.64% |
8.4 Projected Cash Flow
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $184,666 | $218,525 | $252,384 |
| Accounts Receivable | $12,613 | $14,493 | $16,373 |
| Inventory | $2,980 | $3,450 | $3,920 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $201,259 | $237,468 | $273,677 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $12,420 | $14,490 | $16,560 |
| TOTAL LONG-TERM ASSETS | $980 | $610 | $240 |
| TOTAL ASSETS | $198,839 | $232,978 | $267,117 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,482 | $10,792 | $12,102 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $9,482 | $10,792 | $12,102 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $9,482 | $10,792 | $12,102 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $48,651 | $72,636 | $96,621 |
| Earnings | $100,709 | $119,555 | $138,401 |
| TOTAL CAPITAL | $189,360 | $222,190 | $255,020 |
| TOTAL LIABILITIES AND CAPITAL | $198,839 | $232,978 | $267,117 |
| Net Worth | $182,060 | $226,240 | $270,420 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | INDUSTRY PROFILE | |
| Sales Growth | 4.35% | 30.82% | 63.29% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.61% | 4.71% | 3.81% | 9.70% |
| Inventory | 1.85% | 1.82% | 1.79% | 9.80% |
| Other Current Assets | 1.75% | 2.02% | 2.29% | 27.40% |
| Total Current Assets | 138.53% | 150.99% | 163.45% | 54.60% |
| Long-term Assets | -9.47% | -21.01% | -32.55% | 58.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.68% | 3.04% | 2.76% | 27.30% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 25.80% |
| Total Liabilities | 4.68% | 3.04% | 2.76% | 54.10% |
| NET WORTH | 99.32% | 101.04% | 102.76% | 44.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.18% | 93.85% | 93.52% | 0.00% |
| Selling, General & Administrative Expenses | 74.29% | 71.83% | 69.37% | 65.20% |
| Advertising Expenses | 2.06% | 1.11% | 0.28% | 1.40% |
| Profit Before Interest and Taxes | 26.47% | 29.30% | 32.13% | 2.86% |
| Main Ratios | ||||
| Current | 25.86 | 29.39 | 32.92 | 1.63 |
| Quick | 25.4 | 28.88 | 32.36 | 0.84 |
| Total Debt to Total Assets | 2.68% | 1.04% | 0.76% | 67.10% |
| Pre-tax Return on Net Worth | 66.83% | 71.26% | 75.69% | 4.40% |
| Pre-tax Return on Assets | 64.88% | 69.75% | 74.62% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.20% | 21.16% | 23.12% | N.A. |
| Return on Equity | 47.79% | 50.53% | 53.27% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.56 | 4.56 | 4.56 | N.A. |
| Collection Days | 92 | 99 | 106 | N.A. |
| Inventory Turnover | 19.7 | 22.55 | 25.4 | N.A. |
| Accounts Payable Turnover | 14.17 | 14.67 | 15.17 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 1.84 | 1.55 | 1.26 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.02 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,943 | $140,664 | $160,385 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.45 | 0.48 | 0.51 | N.A. |
| Current Debt/Total Assets | 4% | 3% | 2% | N.A. |
| Acid Test | 23.66 | 27.01 | 30.36 | N.A. |
| Sales/Net Worth | 1.68 | 1.29 | 0.9 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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