How to Open Your Own Comics Retail Store Part VII

In my last column, I gave you the bad news that opening your own comics shop requires a minimum of $50,000 in initial working capital, and upwards of $100,000 if you're planning to stock a broad selection of cards, toys, and games. Now I want to go past those initial harsh numbers, and give you an alternative plan. Simply put, I would suggest that if you're interested in becoming a full-time comics retailer, check around your area and see if there are any existing shops that might be for sale. Bear in mind, however, that I'm still not recommending that you start with less than $50,000 in working capital, even if you're buying an existing store. You'll still need that much money for your down payment, and to reinvigorate the store's inventory.

My goal in advising you to seek an existing shop to purchase is to try and save you much of the effort and cost that typically goes into starting a store from scratch. As an example, an existing store with any kind of decent sales volume is likely to have an earned discount from Diamond that is higher than the maximum 40% discount that you would be receiving if you started an entirely new operation. That higher discount could possibly save you several thousand dollars in your first month of operation. Especially if you were restocking the store with a large amount of new material. You would also inherit, at least in some measure, existing customer traffic. That could save you thousands of dollars in advertising costs. The fixtures in the store might be worn, but going out and trying to find entirely new fixtures is cost-prohibitive for most new operations. I figure it is much better to purchase used fixtures all in a group, rather than having to search them out, one at a time.

Having mentioned the positives of purchasing an existing store, I now want to dwell on a few negatives. The first is the quality of the existing operation. Does the store have good sales ($10,000 - $20,000 per month)? If the answer to that question seems to be positive, then focus on the quality of the sales. Are the current owners selling products at full price, or are they discounting heavily? My experience has been that it is a foolish waste of time to buy operations that have been steeply discounting. Their customers most likely come to them primarily because of those "sweetheart" deals, and will not take kindly to having their discounts rolled back. In fact, I've even seen instances where customers will stop frequenting a store out of pure spite, simply because the deal we offered after taking over the operation was slightly less than what they had been getting from the previous management. It didn't matter that our deal was still the best around. All that mattered was the fact that we were now the "Bad Guys," for having taken away their cherry deal. Avoid this problem at all costs. Only consider purchasing a store where the majority of sales have been at, or close to, full price.

Another consideration is the type of sales being generated. If your primary area of expertise is comics, yet 35% of the store's gross comes from gaming, you better think twice about whether you want to try and broaden your knowledge base in order to accommodate that type of fan. If you're not prepared to learn enough about gaming to help and encourage the gaming fans in the area, you need to expect the majority of them to go away. If that were the case, you would need to severely adjust your sales projections, and your budget. Clearly, you couldn't pay very much for the store.

My final concern on sales when I'm purchasing a store is the earned discount on the items being sold. A store that is just a DIAMOND PREVIEWS catalog operation is a poor candidate for purchase. While Diamond's contracts with the large comics publishers require them to offer a sliding scale of discounts that reward you significantly for selling larger numbers of comics, the other items that Diamond offers in 75% of the catalog have a max 40% off discount. Frankly, you can't survive on 40% off. If you can't achieve an average of a 50% discount on all the items you sell in any given month, you're already dead. You just might not know it yet... The most successful comics stores are generally those that generate a high percentage of their sales from back issue comics and collectibles. Margins in those areas are typically 60%-90%. When substantial back issue comics and collectibles sales are blended together with lower margin PREVIEWS product, it can be relatively easy to reach the required 50% margin figure, and sometimes go quite a bit higher. Bear in mind that each 1% of operating margin for a store grossing $20,000 per month is $200 in net profit. Margin points really matter!

If the store you're considering purchasing passes all of the above requirements, then I think you may be on to something good. Believe me, if you can find the right purchase situation, you can save yourself years of effort, and tens of thousands of dollars of cost. This not a pie-in-the-sky suggestion, either, as I would project that half of the comics dealers in America would sell out tomorrow if offered a reasonable down payment for their store. If that's the case, however, then why would you ever want to enter the business? I'll offer my explanation next week...

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