Drop Down Menu
entrepreneur, consultant, business plans Trailer



Case Study: Used-Book Store

Entrepreneurship University

College of Entrepreneurial Studies (CES)

Internet Marketing


Lesson 10:
Case-Study: Used-Book Store

Back to Lesson Menu

"We've got the merchandise and the store; all we need now is an identity."

Dwight Payne summed up the status of a new venture he just initiated with friend Gary Heap. Dwight and Gary reside in Santa Barbara, CA, where they attend college and pursue their mutual hobby of science-fiction book collecting.

"Dwight and I are really into science fiction," Heap explains. "We have pooled our book collection and have over 4,000 volumes - Heinlein, Van Vogt, Asimov, Bester, Moorcock, Pohl. You name the book; it's somewhere in our collection."

"Not only that," Payne adds, "we've got sci-fi magazines going back over twenty-five years. All neatly catalogued and indexed. I'll bet it would cost us $20,000 to assemble this collection today."

Payne and Heap decided that, at the end of this school year, they will dedicate the summer to getting a used-book store started in Santa Barbara as a means of supplementing their income year-round. They elaborate:

Payne: Gary and I figured that we might as well try to capitalize on our love of books and reading. Both of us are familiar with used-book store operations because we have haunted them so regularly in building our collection. We've been to just about every used-paperback operation in Southern California. A lot of them seem to be profiting.

Heap: My uncle owns a storefront near the University, and we made a deal for him to rebuild it as a used-book store; it's just about finished. He also co-signed an inventory loan for $4,000 for some start-up working capital. In exchange he gets 25 percent of our sales for two years. Not a bad deal, actually, since it is such a good location to serve the hordes of avid readers in the university area.

Payne: Just three weeks after lining up the building, Gary and I lucked into a deal in Ventura. The owner of a pretty good-sized used-paperback outlet put his merchandise up for sale to raise some quick cash.

Heap: We swung a good deal with him - over 10,000 paperbacks, magazines, and comics for $3,500, and $1,500 for all the shelving we will need. We borrowed the money from some fraternity brothers, rented a U-Haul truck, and carted the stuff home.

Payne: It filled the building about half way. We're currently cataloging the stuff. We got a great deal. Most of the books are in good shape and recent. It's a good mixture of fiction and nonfiction, including westerns, mysteries, gothics, biographies, and a few technical books.

Heap: We're virtually ready to open the doors, but we still haven't decided on what competitive strategy to use. We don't want to be just another used-book store. There are a half-dozen of those around town. We want to be something different in our image and in the way we operate.

Payne: We want to be able to attract customers based on our differentiated image and unique style of operating. We're looking to be something a little different. And profitable!

ADVISE DWIGHT AND GARY (There is no one right answer)

1. The marketing concept

  • Suggest a marketing concept for the store, including a name.
  • Who are the customers? What are they looking for?
  • How will Dwight and Gary meet their needs? (Company image, policies)
  • How will they get known? (Advertising, promotions, competitive edge)

2. Reality check

  • Decide on days of the week and hours the store will be open.
  • Estimate staffing required and hourly salary costs.
  • Do Dwight and Gary really work for free?
  • What is a reasonable expectation of customers per day? Average purchase per customer?
  • What are pessimistic and optimistic values of these estimates?
  • How much will they have to spend on advertising and promotion to meet these estimates?
  • What will they pay, on average, for each book?
  • How much can they get, on average, for each book?

3. Feasibility worksheet

Put together a projected (often referred to as pro forma) income statement. Relate the estimates developed above to monthly sales (pessimistic, expected, and optimistic), cost of goods, and expense amounts for wages and promotion. We should add 25% to wages paid for the payroll estimate, to account for taxes, sick days, etc. Debt service payments may be assumed to total $400 per month. Estimate rent and utilities and any other expenses that you feel might be incurred.

4. Conclusions

Find a break-even sales estimate, that is the value for sales that produces a Gross Margin just equal to Total Expense. When gross margin generated equals expenses, profit/loss is equal to zero; this sales level is called the break-even point.

Would you do it if you were they? Why or why not? What kind of a test is this where you can’t look up the answer? It’s an entrepreneurship test; learn to be comfortable with your best estimate.

(After many requests, I have decided to make available the spreadsheet that represents my approach to this problem, while reiterating that there really is no "right answer."


Wishing you success,

John signature

John B. Vinturella, Ph.D.

Thanks for visiting our site. We work hard to keep it current, fresh and interesting. We hope you found some useful information here. Below see the latest headlines (via their RSS feed) from About.com: Financial Planning.

» The Basic Monthly Budget Worksheet Everyone...
01/12/15 06:54 from About.com Financial Planning: Most Popular Articles
class="no-js" itemscope itemtype="http://schema.org/Article" > itemprop="description" >A personal or

» The 5 Biggest Mistakes People Make When Buying...
01/12/15 06:54 from About.com Financial Planning: Most Popular Articles
For many, a car is a necessity. But finding the right car with an affordable price tag can be challenging. Learn how to avoid these top car-buying mistakes.

» Your 7-Step Guide to Making a Personal Budget
01/12/15 06:54 from About.com Financial Planning: Most Popular Articles
Though making a budget may not be the most exciting activity, it is vital to keeping your finances in order. Learn how to make a budget in 7 simple steps.

» Why Getting a Tax Refund Anticipation Loan is...
01/12/15 06:54 from About.com Financial Planning: Most Popular Articles
A Refund Anticipation Loan (RAL) is a loan that is offered by many tax preparation companies to people against their income tax return. A tax refund anticipation loan can be approved in a manner of minutes and the money accessible within...

» 4 Easy Ways to Contact the IRS
01/12/15 06:54 from About.com Financial Planning: Most Popular Articles
Have questions on your tax return, refund status, or need help? The IRS makes itself quite accessible. You don’t have to fear the IRS. While nobody wants to talk to them about an audit, they are there to help you with your taxes.

Bottom Menu

Home | Library | Small Business Center | EPU-CES/ | EPU-CIM
Entrepreneur's Fieldbook | Raising Entrepreneurial Capital
Business Plan Guide | About Us | Privacy Policy | jbv Vita | Site Map


Special: Hurricane Katrina Pictures

Secondary Links
  Google Search


Search WWW
Search jbv.com

Google AdSense and eBay

Auto MAP It!

Website Magazine