Buy the Book

Black bookstores may be the way of the dinosaur. Here's what retailers must do to survive and thrive.

recommendations,” concurs Channer, noting that a personal recommendation will help push his book when it’s no longer a new title.

FINANCING IS THE HURDLE
Perhaps the most formidable challenge to getting and keeping a black bookstore running is financing. Getting a bank loan can be daunting, especially since the profit margin from book sales is narrow.

“There are a lot of people who get into this business because they really love books,” says Len Vlahos, communications director of the American Booksellers Association (ABA), a trade organization that advocates on behalf of independent booksellers. “It’s a very romantic idea, but the average net profit is only about 1.5%. It’s a very thin business,” he cautions.

Acquiring a bank loan was impossible for Villarosa when she began raising capital to open Hue-Man in 1984. “I couldn’t qualify. I had no background as a bookstore owner and I had no collateral,” she recalls. As a result, Villarosa decided to solicit investors. To prepare, she took SBA classes, created a business plan for her proposed store and visited other bookstores across the country to learn the ropes. Initially unable to secure investors, Villarosa took on a partner, who has since divested. Together they contributed $40,000 of their personal savings to launch the 3,000 sq.-ft. store. During the first few years, Villarosa continued working part time as a therapist, so she could reinvest all of the bookstore’s profits and grow the business. Raising capital bec
ame easier as the business began to succeed, says Villarosa, who now retains 60% ownership of Hue-Man and has 17 investors.

Like Villarosa, Fugate and co-owner Thomas Hamilton invested their own capital to finance Eso Won. But the duo decided to become booksellers first before opening a retail space. In 1988, they invested $4,000 to purchase an inventory of 300 black-authored titles.

“We were a weekend business, selling out of our homes and at festivals,” says Fugate. Eight months into their venture, however, the partners had raised enough money and accumulated sufficient inventory to open a store. They spent about $6,000 in start-up costs to open their first location-a 900-sq.-ft. space on the top floor of a converted house. Besides rent, the cost covered utilities, installing phone lines and building bookshelves. Instead of taking salaries, the co-owners kept their full-time jobs during the first six months, opening the bookstore in the evenings during the week and all day on weekends.

But McGee may be one of the few black bookstore owners who’ve been able to secure bank and equity financing to launch a business. “When you borrow money from a bank, your cash flow can be so unpredictable that it can be difficult to build your business and pay back a loan,” says Villarosa of why banks seldom finance independent bookstores. “Sherry had enough personal collateral, a dynamite business plan and was an expert in marketing and management,” adds Villarosa about why McGee succeeded.

Despite her expertise, McGee’s $500,000 capitalization proposal was initially turned down by her bank. “We would have been as unsuccessful as other bookstores without

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