Advice: New coffee bars are risky business
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Dear Karen: To cover startup costs for a new coffee bar, should I apply for a small-business loan or get a home equity loan?
Answer: These days, no entrepreneur can get a small-business loan without substantial collateral and a personal guarantee. So you’ll probably have to put up your home equity in either case.
However, a coffee shop is an extremely risky venture because of well-heeled competition from chains such as Starbucks and Seattle’s Best, said Jeff Williams, chief executive at Bizstarters.com.
Before you risk your home, do a detailed business plan with solid financial projections. Williams’ company now has a Southern California outlet that can help; for more information, visit www.bizstartandgrow.com/.
Author wants a fair cut
Dear Karen: I’m a syndicated puzzle creator pitching a book of cryptograms. Is it reasonable to ask for 20% of gross sales?
Answer: A 20% royalty off the gross is very high, said Colleen Dunn Bates, publisher at Prospect Park Books in Pasadena. The standard for authors is 5% to 7% of gross or 10% of net proceeds, she said.
“If you expect the publisher to cover design, production, printing, distribution, sales and marketing, and pay you 20% of gross, there simply won’t be enough revenue to produce the book,” she said. “If it’s a paperback, 7% to 8% of gross royalty would be as high as you should expect.”
Send a formal book proposal that does not mention money. If the publisher responds favorably, get an experienced agent or attorney to negotiate terms for you.
Small-business questions? E-mail Karen at smallbiz@latimes.com.
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