Drug testing

Used-Book Case Study

Dwight Payne and Gary Heap reside in Santa Barbara, CA, where they attend college and pursue their mutual hobby of science-fiction book collecting. They pooled their book collection of over 4,000 volumes, and sci-fi magazines going back over twenty-five years. All neatly catalogued and indexed, they estimate it would cost $20,000 to assemble the collection today.

Payne and Heap decided that, at the end of this school year, they will dedicate the summer to getting a used-book store started in Santa Barbara as a means of supplementing their income year-round. Heap's uncle owns a storefront near the University, and agreed to rebuild it as a used-book store. He also co-signed an inventory loan for $4,000 for some start-up working capital. In exchange he gets 25 percent of store sales for two years.

In addition, they bought a collection of over 10,000 paperbacks, magazines, and comics for $3,500, and some used shelving for $1,500. These purchases required borrowing the money from some fraternity brothers.

ADVISE DWIGHT AND GARY (There is no one right answer)

Decide on days of the week and hours the store will be open. Estimate staffing required and hourly salary costs. Do Dwight and Gary really work for free? What is a reasonable expectation of customers per day? Average purchase per customer? What are pessimistic and optimistic values of these estimates? How much will they have to spend on advertising and promotion to meet these estimates?

What will they pay, on average, for each book? How much can they get, on average, for each book?

Put together a projected (often referred to as pro forma) income statement. Relate the estimates developed above to monthly sales (pessimistic, expected, and optimistic), cost of goods, and expense amounts for wages and promotion. We should add 25% to wages paid for the payroll estimate, to account for taxes, sick days, etc. Debt service payments may be assumed to total $400 per month. Estimate rent and utilities and any other expenses that you feel might be incurred.

Conclusions: Find a break-even sales estimate, that is, the value for sales that produces a Gross Margin just equal to Total Expense. When gross margin generated equals expenses, profit/loss is equal to zero; this sales level is called the break-even point.

Would you do it if you were they? Why or why not? What kind of a test is this where you can't look up the answer? It's an entrepreneurship test; learn to be comfortable with your best estimate.

(After many requests, I have decided to make available the spreadsheet that represents my approach to this problem (go to jbv.com/mb/UsedBook.xls), while reiterating that there really is no "right answer.")

John B. Vinturella, Ph.D. has almost 40 years experience as a management and strategic consultant, entrepreneur, author, and college professor. For 20 of those years, Dr. Vinturella was owner/president of a distribution company that he founded. He is a principal in business opportunity sites jbv.com and muddledconcept.com, and maintains business and political blogs.

limousine chicago service
In The News:

Become a Recognized Authority in Your Field - in 60 Days or Less!

You don't have to be rock-star famous before you are... Read More

Why eBay Is A Smart Choice For Entrepreneurs

Attention entrepreneurs: If you think the search for the ultimate... Read More

Why Every Student Should Start a Business

With the economic downturn, students in all the major business... Read More

Success Secret - How To Find Million Dollar Opportunities

They're really are powerful million dollar opportunites everywhere.Ok, let me... Read More

Online Women Entrepreneurs Need To Pace Themselves

Saving time means pacing yourself, being organized, and always prioritizing... Read More

The Visionary Entrepreneur

Any success you have in life must begin with a... Read More

Solving the Million Dollar Mystery: 4 Steps To Create A Turn-Key Business

You're a smart, hardworking entrepreneur, and you're moving fast. You... Read More

The Reluctant Entrepreneur

It seems odd to think of a person opening a... Read More

Pre-Money vs. Post-Money Valuation

When a company decides that it must raise capital, a... Read More

Raising Capital for Your Business ? How Long Does it Take?

Most companies vastly underestimate the time commitment necessary to successfully... Read More

Reducing the Stress of Being an Entrepreneur

Starting and running your own business can be exciting and... Read More

Street Smarts Vs Book Smarts, What Does It Takes To Be An Entrepreneur

The latest series in "The Apprentice" features 2 distinct group... Read More

Dream It, Create It, Become It! Design a Dream Board

Have you ever heard of "Dream Boards" or "Treasure Maps"?... Read More

Franchising Companies Need New Franchisee Checklists

When franchise companies are moving fast in the market place... Read More

Protect Your ASSets in Business

Many people are starting an online business without a thought... Read More

... in Pursuing the American Dream

This morning I woke up at 4:30 in the morning,... Read More

Business Planning for College Students and First-Time Entrepreneurs

More and more students, both in undergraduate and graduate institutions,... Read More

Corporate Espionage in Franchising

Franchising Trade Journals do not do well, because today with... Read More

Four Steps to Entrepreneurship

As more and more people start or consider starting their... Read More

Six Degrees of Separation

Through just five or six intermediaries, you could be linked... Read More

How To Get More Clients and Customers; Dont Sell Be of Service

Whether you are just starting your business or focusing on... Read More

New Rules

Last week I was working with one of my small... Read More

Enterprising Route is to Go Your Own Way

DON'T talk to me about education for entrepreneurs. They're pouring... Read More

Rx for Falling Corporate Profits

Once again the squeeze is on as renewed inflation worries... Read More

Could a Book About Your Company be Worth $1.7 Billion? Building Value Through Publishing

"Berkshire Hathaway (NYSE: BRK.A) to purchase Clayton Homes for $12.50... Read More

under street lights street light base Pete's produce ..