How Much Does it Cost to Open a Bookstore?
If you’re an avid reader, odds are you have thought about opening your own bookstore. You love to read, so why not share the joy of reading with as many people as possible? Of course, when it comes to business ideas, one of the first things people need to grapple with is the cost. Like any business, it takes money to get a bookstore off the ground and you need to find a way to fund it.
The smallest bookstore (700 sqft) can be opened for as little as $23,500. However, on average, a bookstore will cost between $50,000 to $90,000. Most owners will end up paying around $90,000 to $100,000 to start a bookstore. Mega book stores that plan on selling new titles will cost a minimum of $300,000 to open.
700 SQFT Bookstore Startup Costs
|Inventory (Based On 800 Titles)||$8,000|
|Shelving – 10 Units at $200 each||$2,000|
|Security Deposit (3 Months)||$6,000|
|POS System (For Inventory management)||$2,000|
|Company Filling & Cards & Design||$600|
|Discount On first 500 books(30% off)||$2,500|
|1st Month Utilities (Phone & Electric)||$650|
There are a lot of things that go into the costs of opening a bookstore. So we put together this comprehensive article on the costs to start a bookstore. We will cover the main costs for space and inventory and discuss how much you can expect to make running a bookstore.
Interesting Fact: This cost is split between rent, inventory, and operating expenses. . Bookstores typically have smaller profit margins but they are relatively low-cost to start compared to other businesses.
What Are The Standard Start-Up Costs?
There are two major costs you need to consider when starting a bookstore: location and inventory. Odds are these two things will eat up most of your costs. Other miscellaneous costs are related to permits, insurance, and other operational costs such as websites and marketing.
One of the good things about a bookstore is that they do not have to be large and so do not have to incur high monthly rents compared to other businesses. Rental prices for retail locations depend heavily on the city and specific location of the store.
According to Modern Times Bookstore, the average bookstore in the US has about 3,000 square feet of space. Typical ranges are between 1,500 and 5,000. The average annual retail space rental prices in the US are about $10 per square foot.
So for a 3,000-square-foot bookstore, you can expect to pay at least $30,000 in rent for the year. Depending on property costs, annual rental prices could be between $15,000 to $100,000+ per year. For example, retail space in Oakland, CA will likely be much more expensive than retail space in St. Louis.
One of the good things about bookstores is that they do not require many amenities. All you will really need is WiFi for internet connection and basic heat/lighting. If you have a unique selection of materials, then you can choose to set up shop in a cheaper location that receives less foot traffic as dedicated enthusiasts will still come to your store.
Additionally, there is a growing trend of so-called micro-bookstores that utilize small spaces. Some micro-bookstores come in at 100 square feet, meaning property costs are extremely cheap. The key is to find rent prices that match your expected revenue and the expected size of the operation.
The next major cost for your business is inventory. After all, what kind of bookstore would you be without any books? Inventory will cost the most right at the beginning when you are starting out. After that, you can continually update your inventory as you make sales.
There are two main ways to get inventory: new or used books. We will cover the costs for each in separate sections.
One of the good things about selling new books is you can be sure of the quality and you will have access to new titles. Unfortunately, sourcing new books is significantly more expensive than sourcing used books.
The first thing to do is figure out what kinds of books you want to sell. Do you want to carry primarily fiction novels, or do you also want to sell things like photo books, memoirs, how-to books, and the like? The types of books you want to sell will have a big effect on inventory costs. For example, paperback novels will likely be much cheaper to source than hardcover limited editions.
Generally speaking, bookstores can buy books from publishers at a discount retail price. This arrangement helps publishers get their work into stores. You can find some books up to 60% off
The typical independent bookstore holds about 7,000 titles at any given time. Assuming an average paperback novel cost of $15, you can expect to buy books for anywhere between $6 to $10. That comes out to approximately $40,000 to $70,000 just for inventory. Note, however, that bookstores can range in size from a few hundred titles to tens of thousands of books, meaning that inventory costs can be between a few thousand dollars and hundreds of thousands.
One of the best features of bookstores is that you can start one with an entirely used inventory. Used books are usually much cheaper to source than new books and you can consequently make more money off them. The main reason to buy directly from publishers is to get books that have just come out and other relatively uncommon titles.
As a general rule of thumb, used books cost about 25%-50% of their new retail price to buy. So if a new version of a book costs $15, you can find a used copy for anywhere between $3-$7.
Note that in some cases, used books can cost significantly more than used titles, especially if the book is rare or a limited edition print. For example, a first edition hardcover copy of The Fellowship of the Ring can sell for over $6,000.
So assuming our book store of 7,000 used books at a price of $2 per book comes out to about $15,000 for inventory. That is significantly cheaper than if you decided to buy only new books. Many bookstores include new and used titles in their catalog to maximize product selection and customer reach.
One way to stock up on your inventory is to ask for book donations from the community. If people have old books they no longer want, you might be able to get some donations. If you do get free donations to your store, make sure that you give back to your community by donating proceeds to local community organizations and libraries.
Startup Cost Table
Below is a table showing average costs for various factors in opening a bookstore. Keep in mind these costs are averages and your actual prices may differ. One major factor that can cause pricing differences is your location and the kind of inventory you want to carry.
There is significant variation in these costs depending on your bookstore’s location and the kind of titles you sell. For example, it may only cost $50,000 to open a small bookstore selling primarily used titles.
Alternatively, you could feasibly open a micro-bookstore with a few hundred titles for around $10,000. The good thing about bookstores is that you have a lot of flexibility in terms of size and what kind of inventory you stock.
Factors Affecting Startup Costs
When you initially start, you’ll probably want to handle the majority of daily operations yourself so you can save on labor costs. Eventually, though, you’ll need to hire some extra hands.
Most bookstores can make it with primarily part-time help, though you may want to consider full-time employees depending on how much work needs to be done. Employees will cost you in wages, benefits, and other things such as worker’s compensation insurance.
Although running a bookstore is not particularly dangerous, you will have to pay for at least general liability insurance. Some insurance providers have liability policies that cost only a few hundred dollars a year. You may also want to add additional property insurance to protect your retail space in case it’s damaged.
Bookstores will have a lot of miscellaneous startup costs, such as the costs of marketing, down payments for properties, promotional materials, and websites. You can cut out most of these costs and run a more or less bare-bones operation, but companies that put some money into branding and promotion typically do better.
How Can I Get Money for a Bookstore?
Most people probably won’t have the capital lying around to pay for all the costs of starting a bookstore upfront. Odds are you’ll have to secure a source of funding before you can start operations.
The simplest way to get a business loan is to go through your local bank. Most banks provide small business loans where you can get favorable terms and rates.
If you are applying for a business, you will have to have a plan for your business drawn out, including business expenses and projected revenues. You can find small business loans for anywhere between $1,000 to over $500,000. The typical APR for bank business loans is between 4% to 20%, depending on your financials and the size of the loan.
SBA loans are underwritten by the federal government and given out through preferred or certified lenders. SBA loans are designed specifically for small businesses. These kinds of loans are different from traditional bank loans because the government promises to cover a portion of the cost in case you default on the loan. SBA loans can range up to $50,000 and most SBA loans have an interest rate below 7%.
The internet has provided new ways for people to get financing for their business projects.s Crowdfunding platforms or peer-to-peer lending networks are methods for private individuals to loan money to business owners.
Since they are performed through private channels, crowdfunding and P2P lending typically have fewer restrictions and no maximum limits. However, that also means that P2P loans usually have higher interest rates and no protections if you cannot pay off the loan.
How Much Can I Make Owning a Bookstore?
Bookstores are not particularly lucrative operations, but they have relatively low operating and upkeep expenses so many businesses make it on relatively thinner profit margins. According to Womply, the average independent bookstore pulls in about $700 in revenue every day. Assuming that your store is open 300 days over the year would come out to $210,000 in revenue.
Of course, this number can vary significantly depending on your location. For example, the top five cities for independent bookstores each average over $1,500 in revenue per day. Absolute revenue is not so important as whether or not the revenue you make can keep your business operating.
Fortunately, though, bookstores, in general, are not extremely profitable. According to research, the average bookstore operates on a 2%-3% profit margin, significantly lower than the average 7% profit margin for all businesses across all industries in the US.
The good thing about bookstores is that they are relatively cheap to maintain and operational expenses are not very high. You most likely won’t have to pay for any additional labor when starting out, so you can save on paying for employees until you start making money and need to expand. Once you get to that point, you should be making enough money to afford some part-time help.
Is Opening a Bookstore Worth It?
At the end of the day, opening a bookstore absolutely is worth it, especially if you yourself love books and want to share them with other people. Bookstores are often a community center and you can feel good knowing that you are supplying books to readers who want them.
The profits may not be very high, but you can make enough to keep your business open and expand so you can provide more books to more people. So ultimately, whether or not opening a bookstore is worth it depends on your interest and life goals.
Running a small business is a great adventure but it takes some capital to get started. Fortunately for book lovers, it does not cost much to start a bookstore compared to other businesses.
When planning out your new store, make sure you take into account the kinds of titles you will carry and what kind of niche you want to service. And if you decide to get a loan, get quotes from multiple loan providers to get the best possible source of funding.