If my past six columns on the risks and requirements of opening your own
comics shop haven't scared you off of the idea, then maybe discussing (in
very general terms) the costs involved in opening a store will bring you
to your senses. I say this with some measure of facetiousness, as I really
would like to see more fans take the next step into retailing comics, but I
want to be sure that everyone who makes the decision to hit the tar baby
knows exactly what they're getting into before they begin.
As regards working capital requirements, a lot depends on the size and
scope of your store. Are you planning to open (at least initially) a
small (700-900 square foot) neighborhood store? In that case I would
estimate that $50,000 would get you started. You can figure the following
in expenses:
Fixtures $10,000
Inventory $30,000
Advertising $ 5,000
Safety Reserve $5,000
I've made this analysis incredibly simplistic, as fixtures will include not
only display racks, but also signage, phone installation, first month's
rent and security deposit, computer software, etc. Believe me, $10,000
evaporates very quickly in addressing those areas. That's why most new
comics stores end up buying their fixtures second-hand.
As regards inventory, you can figure that you'll have to pay Diamond up
front for much of your initial inventory. Even if your primary focus will
be comics, you'll still need to purchase a supply of trade paperbacks,
statues, and comics-related toys. As a newbie, with no established earned
discount, your max discount on this initial purchase will probably be only
40%. The math can be chilling, as just a purchase of 500 trade paperbacks
at $19.95 each equals $9,975 at full retail. Even with your 40% discount,
you will still owe Diamond $5,985.00 for this small batch of books, plus
freight. Bear in mind that 500 trades will not get you far, as that is
equal to about 1 copy each of the popular titles that are in stock with
Diamond.
What makes this math even more difficult is that not all of the inventory
you initially purchase will sell to your local audience. This is the bane
of comics shops, and the #1 reason why they fold. A typical successful
neighborhood comics shop has about 200 regular customers (at least one
visit per 2-3 weeks), 200 peripheral customers (at least one visit per
5-6 weeks), and another couple hundred folks who stop by a couple of
times a year. While that may seem like a lot of fans in total, it really
isn't. Particularly if you're ordering all sorts of diverse product,
hoping that at least one person in your clientele group will have an
interest in every item. As a general rule, no matter what you do, you
will get stuck with all manner of good products that no one within your
usual clientele will have any interest in buying. This is the point at
which your precious working capital starts being tied up in unsold
inventory. If you don't figure out a way to get that inventory selling,
your business will inevitably die.
Another very important factor in the success of your new store is that you
have an attractive stock of collectibles. If you don't take advantage of
the suggestion I made in my last column to spend a couple of years selling
on weekends to build up a collectibles inventory before you open, then
you'll need to purchase a very large collection of prime material before
you open. This can be done at comics conventions from other dealers, but
be prepared to pay top dollar. That's why most new comics store owners
quickly make the decision to contribute some, or all, of their personal
collection into the store. The hard truth is that most successful comics
shop owners end up owning far fewer comics after they open their store,
then when they were just a fan...
On the topic of advertising, it is critical to get the word out to as broad
a spectrum of the general populace as possible that you've opened a new
comics shop. Even utilizing very limited mechanisms (Yellow Pages ads,
flyers, newspaper ads, late night cable spots, radio ads, etc.), this is
going to cost you a minimum of $5,000. If there's already another comics
shop within 10 miles, double that figure. The good news is that the need
to advertise diminishes over time. Once comics fans realize where you are,
word-of-mouth advertising will usually keep them coming in, but getting
your initial critical mass of customers to start frequenting the store can
be quite expensive.
My final budget item was to keep at least $5,000 in a cash reserve. This
will, of course, not work for you for very long. Of the 3,000+ comics shops
open in America today, I doubt if more than a few hundred could claim that
they have access to $5,000 in free working capital. Still, if you can at
all do it, it would be wonderful for your peace of mind to know that you
always have at least one month's basic expenses tucked away. You never
know when another economic disruption, such as a UPS strike, or 9/11 might
occur.
All of the costs I've mentioned to this point are for a barebones comics
shop. If you are also planning to sell cards, games, toys, or other
non-comics related product lines, then I highly encourage you to seek
more working capital. A full-line new store will require at least $100,000
to get started.
Next week, I'll offer some suggestions on how to reduce the costs of opening
a store.
Please send your e-mails to
chuck@milehighcomics.com, and
your letters to:
Mile High Comics, Inc.
Attn: Chuck Rozanski
2151 W. 56th Ave.
Denver, CO 80221
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