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.

Used Bookstore Business Plan - 3 Years Profit Forecast

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:

Used Bookstore Business Plan - Startup cost

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 bookstore 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:

Used Bookstore Business Plan - Market Segmentation

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

Used Bookstore Business Plan - Sales Monthly

6.4 Sales Yearly

Used Bookstore Business Plan - Sales Yearly

6.5 Sales Forecast

Our forecasted sales are summarized in the following column charts:

Used Bookstore Business Plan - Unit Sales

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.

Used Bookstore Business Plan - 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

Used Bookstore Business Plan - PROFIT MONTHLY

8.3.2 Profit Yearly

Used Bookstore Business Plan - PROFIT YEARLY

8.3.3 Gross Margin Monthly

Used Bookstore Business Plan - GROSS MARGIN MONTHLY

8.3.4 Gross Margin Yearly

Used Bookstore Business Plan - 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

Used Bookstore Business Plan - Projected Cash Flow Diagram

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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