With the bookstore sector resurgent after a few years of decline now is a fascinating time to get into the bookshop trade.
But what’s the process for buying a bookstore? Here is our 10-step path to ownership:
Research the sector
Will the sector suit your experience, attributes, and goals? It’s worth remembering that most bookshop owners got into the trade through their love of books and reading rather than expecting to make a huge profit.
Look at the trends, facts, and figures and what running the business involves before you leap.
What business model?
Do you want to purchase an established independent bookstore or a franchise? There are pros and cons to both options.
With an independent store, you are free to implement your own creative ideas – as many in this sector have to distinguish themselves from Amazon.
With a franchise – the most notable example being Dymocks – you’ll have the backing of a
Set your criteria
Time to consider your must-haves, like a prime location on a busy thoroughfare with plenty of foot traffic, or perhaps next to an independent cinema as part of an arts complex.
Or, you might want plenty of space to stock a wide range of genres.
Obviously, however, the fussier you are, the higher the asking price will be. So you need to decide on a budget.
You could pick up a failing business for a knockdown price, provided the reasons for its struggles – whether it’s poor marketing, poor customer service or inappropriate stock for the local demographics – are easily remedied.
Target a business for acquisition
Now you’ve set some parameters, look at the marketplace for bookstores for sale and narrow your search according to your criteria. Perhaps make a list of pros and cons for each candidate on your shortlist.
Remember that, although your ideal store might not currently be on the market, it could be worthwhile asking them – as diplomatically as possible – if they are willing to consider selling.
Before you go any further, it’s useful to do some detective work. Pose as a customer to assess the experience and what could be improved and what cannot – such as poor footfall.
If you’re happy with your findings, the next step is to send an
Should the response firm up your interest, the buyer may have some questions of their own to make sure you’re a credible buyer with the financial means to make a deal happen.
Once you’ve shown that you’re a serious buyer, it’s time to open negotiations.
Bring in the experts
Time to get your team together, including your accountant, lawyer and perhaps a business broker. They can help you independently value the business, conduct negotiations, and vet any financial and legal documents.
In terms of valuing the business, you’ll probably be looking at the value of the real estate, if freehold, in addition to an industry standard multiple of profits.
Heads of agreement
If you can negotiate a deal that both parties are happy with, the terms will be set out in the heads of agreement – a pre-contractual, non-binding agreement.
The document is a useful framework for the final
However, being non-binding, there is room for adjustment should due diligence uncover any surprises.
Your advisors can help you conduct due diligence, the process by which you thoroughly investigate the business to check that you’re buying what you think you’re buying. This will typically include:
- Checking the condition of the premises, including fixtures and fittings
- Review of financial records – generally at least three years’ worth
- Review of asset inventory and documents related to the lease or freehold
- Review of legal and regulatory compliance
- Assessing the business’s reputation
- Research into competitors, market forecasts
Sale and purchase agreement – and completion
The Sale and Purchase Agreement (SPA) is the final, binding document setting out agreed terms. Don’t sign on the dotted line until you’ve reviewed it thoroughly with your lawyer.
It’s worth checking what the legalities of an SPA are for your state as they can vary slightly.
Signed the SPA? Congratulations! You are now the proud owner of your very own bookstore.
The whole process may seem time-consuming and arduous, but taking it a step at a time will make it more manageable.
The next step is to familiarise yourself with your new business. After a period of adjustment, you can then set about refreshing your book range, attracting more customers and boosting revenues.