Back in November 2009, Jack McKeown published an idea in Shelf Awareness that he thought could make a big difference in making independent bookstores a viable business and a vital part of communities around the country.
In the wake of Borders’ bankruptcy, the idea takes on new life. Now, Don Linn and Jack McKeown expand on the opportunities for indie booksellers in an article in the March 7, 2011 Publishers Lunch (registration required).
Here is the sketch of the original proposal:
The Neighborhood Bookstore Development Bank (NBDB)
- Inspired by the Fresh Food Financing Initiative (FFFI), a successful seven-year-old program to help finance new independent, neighborhood groceries in five states, and the National Infrastructure Bank proposed by Felix Rohatyn and Everett Ehrlich in 2008.
- Structured as private bank to assemble a portfolio of bookstore investments.
- NBDB Commission of experts operates at arm’s-length to evaluate business plans and approve loans.
- American Booksellers Association (ABA) contributes mission charter and board memberships, assists in preparation of business plans through education programs.
- Core mission:
- capital improvements and expansion of existing stores
- conversion from rental to ownership of storefronts
- create new bookstores in under-served markets
- convert historic buildings to adaptive reuse as bookstores
- upgrade systems, websites and e-commerce initiatives
- finance print-on-demand centers (e.g. Espresso Book)
- 60/40 balance between new / existing store development
- Capitalized through initial round of paid-in equity and leveraged at conservative 3:1 ratio–$2.5 million in equity yields $10 million in loan-able funds.
- Pool of investors could include ABA, national wholesalers (Ingram, B&T) and investment arms of publishing conglomerates.
- Investor objectives are annual dividends and long-term appreciation, while supporting growth of key customer segment.
- Capital would be callable beyond seed round with aim of $10 million: $40 million by year three.
- Government (including Small Business Administration) involvement though grants or guarantees.