What New Booksellers Should Know

Q: I would like to open a bookstore that specializes in African American authors. How do I start purchasing books? Do I look up every title and call each publishing company? I have called the one popular bookstore in L.A. that specializes in black authors and they offered no help to me.

--Aasia K. Fontenette

Northridge

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A: There are two publications, Publisher’s Weekly and American Bookseller, that most bookstore owners rely on for lists of bestsellers in various categories. Most of the new bookstores that we are in contact with link up with major wholesalers, who also publish lists of the 5,000 top-selling books throughout the country, often by regional sales. Lists like these become starting points for new booksellers as they begin ordering their inventory and hook up with local distributors.

Probably the two premier African American bookstores in the nation that I know of are Hue-Man Experience in Denver, owned by Clara Villarosa, and Black Images in Dallas, owned by Emma Rodgers. I recommend that you get in touch with them for some advice and ask them about specialized distributors in the Los Angeles area.

The book market today is extremely competitive, not only because of the huge national chains but also because of bookshelves in stores like Price Club and Wal-Mart. And although people opening bookstores appealing to a niche market are more likely to be successful, it is difficult to imagine anyone opening a new bookstore without going through some kind of formal training. We hold a booksellers school designed for those thinking about opening a bookstore. The course covers all aspects of beginning and operating a bookstore, and it costs $695 for four days. We offer it four times a year in various regional locations.

We also publish “A Manual on Bookselling,” the bible of bookstore owners and managers, for $24.95. Each of the 65 chapters looks at a different aspect of the book business. You can get more information on the booksellers school and on the manual by calling us at (800) 637-0037 and asking for the education department.

--Willard Dickerson, director

of education, American Booksellers

Assn., Tarrytown, N.Y.

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Q: I have been working in the banking industry as an internal auditor for five years. I am contemplating starting my own business working from home as a loan agent, but I do not know how to go about starting. Can you help?

--Hiren S. Majmudar

Rancho Cucamonga

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A: If you want to work in the commercial real estate field, you need to get a personal property broker’s license from the state of California--something similar to a real estate broker’s license.

As a commercial loan broker, the lender would pay you a referral fee for bringing in clients who want commercial real estate loans to purchase buildings or other property. Many lenders interested in making commercial loans have well-defined loan-broker programs and you could align yourself with one lender exclusively or work for several.

If, however, you want to be the kind of loan agent who simply matches up clients with bank loans, all you have to do is set up a home-based business, develop a network of lenders who are interested in working with you and then go out and find customers who need loans.

Typically, you would be working for small-business people who would pay you to spend your time and use your expertise to secure them the loans they need at the best rate. You could also arrange personal loans for people.

The challenge for any loan agent is in developing marketing savvy, organizational skills and networking ability. To start out, you should tap your existing network of friends, family, business and professional contacts to see if any of them is interested in arranging a loan. Loan agents must be well-integrated into the local community and visible in such organizations as chambers of commerce and business and professional associations.

You could also run advertisements and send out direct mail pieces to local business owners letting them know that you can save them time and money when they need a loan.

--Eugene Valdez, Claremont

Advisory Co., Upland

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Q: I have developed a new type of hot pack that soothes sore muscles. I have run retail stores in the past totally unrelated to this area and I have no idea what stores that would sell my product expect to make. Would you know?

--Yvonne M. Morrow

Consolidated American

Systems Inc.

Pasadena

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A: Because of economies of scale, the smaller boutique or health-related stores typically have higher profit margins than the national chain stores because they do not deal with a large volume of sales or merchandise. But do not limit yourself to selling only to specialty stores--you may also be able to place your product in major stores, which typically operate on smaller profit margins.

Specialty stores usually mark up their merchandise from 50% to 60%. Mass-market retailers might sell at a profit margin more like 30% to 40%. If you bring in distributors--which many manufacturers must do--it gets more complicated because they usually have 25% to 50% profit margins of their own.

So if your product costs you $3 and you sell it for $6 to a distributor, he or she might sell it to a retailer for $10 and you could later see it on a store shelf with a price tag of $17 to $20.

A mistake that many start-up manufacturers make in setting prices for their products is not building in enough profit margin to allow for future growth and expansion. I advise manufacturers to shoot for a gross profit margin of at least 50%, although in the very beginning you may sell at or near cost just to test the market and gain acceptance for your product.

Once your product is established, however, do not forget when you are figuring your cost to include not only materials and labor but also profit, overhead (including your salary, marketing and administration), rent and other factors. Make sure to leave yourself enough margin to make your business viable in the long term.

--Peter Cowen, consultant,

president of StratePlan, Westwood

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If you have a question about how to start or operate a small business, please mail it to Karen E. Klein in care of the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia 91016, or e-mail it to kklein6349@aol.com. Include your name, address and telephone number. The column is designed to answer questions of general interest. It should not be construed as legal advice.