How to Build Value in a Bookstore Prior to Selling
Contrary to popular belief, bookstores are actually expected to grow over the next 4 years.
In our digital age of advanced technology, you’ve probably heard that books are on their way to becoming obsolete. Within a couple decades, some people anticipate that libraries will no longer exist and that books will be replaced by a tablet screen. Well, book-lovers, rest-assured…the retail book industry is doing just fine and doesn’t see an end in sight any time soon. While more consumers are transitioning to digital forms of reading, there are still thousands of people who love a crisp, hardcover book over a generic iPad screen. Don’t believe us? Book sales worldwide come out to about $120 billion and since 2009, the number of independent bookstores have increased by 30%! The bookstore industry is expected to grow by 3% next year and have several factors driving that growth including college attendance, specialized subjects, community events and e-readers. Contrary to popular belief, the industry is doing just fine and is actually on track to continue growing by about 3% every year until 2020.
As we have told many business owners in a variety of industries, the best time to begin planning your exit is when your business is doing well and the industry is flourishing. If you have been thinking about selling your bookstore, the timing could not be better. After all of your years of hard work, you deserve to cash in on your sweat equity and secure the best price possible for your business. In order to do that, you may need to make a couple changes in order to increase the value in the eyes of a business broker, who would be representing you. The first step to beginning this process is obtaining a professional business valuation. To give you an idea of how the value of a bookstore is calculated, I have included some multiples below. Keep in mind that only a business broker can tell you the true value of your business and these multiples are merely a guide.
- 15%-20% of annual sales + inventory
- 1-2x SDE
Now that you have an understanding of what is most heavily weighted during the valuation, you can begin taking steps now to build additional value within your bookstore. I have compiled a list of tips to help you on your journey, which I have listed below.
Getting involved in your community will not only help increase your sales, but will also build your brand and get you in front of potential clients on a regular basis. One of the easiest ways events to plan is a book fair at your local schools. Parents are more likely to spend money on books than toys, and in the older grades, kids often need certain books for their classes. Your store could also host book signings, book clubs, kids book events, and special release events. Community engagement is a form of marketing and like all marketing, it might take a while to see a return but if you constantly feed that pipeline, you’ll see an uptick in your revenues.
It’s hard for a business in any industry to remain competitive without a website. 40% of all worldwide internet users have bought something online and that number is only expected to grow. While shopping at bookstores offer a certain comfort, there is a huge audience of potential customers out there that you are not even reaching without ecommerce capabilities. The first step to taking action is making sure you have a fully optimized website with the capacity to conduct sales. You may even want to invest some money into web marketing to help boost the website in search results, which you can do by setting up a Google AdWords campaign and claiming social media pages. Having a website with a sales portal will not online get you in front of more customers and boost your sales, it will help you manage your inventory better and show buyers that your bookstore is up to date with industry trends and demands.
Additional Revenue Streams
Bookstores are no longer just bookstores; they have expanded into more of a gift shop with items ranging from iPods to journals. If your bookstore hasn’t branched out to include complementary items, you could be missing out on serious bucks. We recommend starting small with items like journals, stationary, magnets and coffee mugs but eventually, you could work your way up to giftcards, movies, e-readers, electronics accessories and so much more. The possibilities are endless. Bookstores have proven to be a very seasonal industry, with a strong fourth quarter due to the back to school rush and the holidays but then seeing a dip later in the year. Adding new items to your store could help offset that di and help even out your annual cash flow.
Inventory can be a deal killer if not properly managed and sorted prior to the due diligence stage. With millions of books in circulation and even more in digital format, it’s critical that your bookstore has inventory management technology. You may not need something as sophisticated as what Barnes & Noble has, we do recommend some type of software to help with return management, store searches, and managed stock. While inventory management software can be expensive, most buyers will not consider purchasing a book store without it and in the end, you will get a return on your investment since it will be considered goodwill. If you are in the market for inventory management software for your bookstore, check out some of the top-rated options within your industry.
To learn more about which inventory system may be best suited for your bookstore, there are thousands of options available online, some of which are even free (or very low cost).
Every business owner needs an exit strategy and I hope that these tips have carved out a path of ideas on where to begin and ultimately, how to increase the value. After all of the years of hard work, you deserve to get the best price possible for your business! Even if you are still a couple years away from planning your exit, it is never too early to begin planning and having a plan in place will only benefit you. The first step to designing an exit plan is finding out what your bookstore is worth, and we can tell you with a no-cost, no-obligation business valuation. Give yourself that extra edge; call us today and find out how you can maximize the value of your business and make this the year you take the next step.