Exit Strategies - Getting Out (A Bad News - Good News Story)
What do you do with your books when it's time to exit?
By Susan Halas
As book values slide and taste changes, boomers age, and new technologies play an ever larger role in the book trade - dealers and collectors increasingly ponder their exit strategies. There are lots of ways to get out of the book business, but few are fast, and even fewer it seems are profitable.
This month AE spoke with a wide range of individuals and firms. These were collectors and dealers who either had recently left the trade or were seriously contemplating downsizing, refocusing or completely closing shop. Though almost all were willing to talk about their situations, almost nobody wanted to be quoted for attribution. Given a high degree of confidential information associated with this topic we'll try to hit the highlights without revealing too many of the specific details.
The Bad News
Most AE Monthly readers already know the bad news: As more and more inventory comes to market prices, even for good books in good condition, continue to decline with no sign this trend will end or rebound. On the contrary, indicators are strong that eBooks, Kindle, the wide availability of free on-line content for previously out-of-print titles, print-on demand and other innovations will make even greater inroads into what was once the territory of the printed book and continue to erode book values.
The Train Wreck Scenario
When AE asked for comments on this topic our IN box filled rapidly with train wreck scenarios.
Take for example the dealer who decided to put it all on eBay. Such a deal - he offered thousands of volumes of clean stock at a low starting price with no reserve. Shazam!! It sold. It sold for 10 cents on the dollar. That was not 10 cents on the dollar of retail value, that was 10 cents on the dollar of his original cost!
Then there was the bricks and mortar store in the college town that finally couldn't make it any more. They held a huge liquidation sale which did indeed clear the shelves and brought in enough cash to cover their debts. Prices started at 50% off; each week there were even further reductions until it was 90% off. What was left sold by box and the rest went to Goodwill. They got out in three months and the average selling price for nearly 100,000 volumes came to less than a buck a book.
If that's not grim enough, consider the widow of a long time specialist. She died and left a will saying that her heirs were to have equal shares of her book collection, other collectibles, papers and copyrights. She named a family friend as her executor, a local lawyer who knew nothing about the books or the book business. Her children did know something about the trade but they had very different ideas about what constituted an "equal share."
The body was hardly cold before they were at each other tooth and nail. With lawyer in the middle and the meter running at $250 an hour it took two years to settle the estate. The beneficiaries each got some of what their mother would have wanted them to have, however they still aren't speaking to each other.
Here's what one of the heirs in that drama had to say: "If you're thinking about passing books and other collections on to the next generation give it while you're still alive. If you don't want these things to actually transfer until you die, at least designate book-by-book, picture-by-picture, map-by-map: Who is it for? Who do you want to have it? What is fair? If our mother had made these decisions while she was still alive, it could have been so simple. Instead it was miserable, bitter and expensive."
The Good News
The good news is you can get out, and there are at least a few recent examples of people who have gotten out without taking a beating, but… it takes time, a certain Zen like detachment, and realistic valuation.
What are your books worth? Do you want to sell them one at a time or as a collection? Are you expecting to get as much or more than you paid for each and every one of them? If so you might have an unpleasant surprise in store. Over and over again the sellers who did well pointed out that a very high percentage of the value is usually concentrated in a very small number of items.
Let's say it again: accurately valuing your holdings is critical. That means separating the true high value items from the mid range and the low to no value books. Accurate realistic valuation is the first step toward an exit strategy that maximizes the return for each category. It takes time and planning.
One high profile collector who spoke with AE recently held a profitable auction of some of his books. He shopped many of the major auction houses and went with the one that gave him the best deal. "The well promoted well attended event doesn't just happen," he stressed. "You have to make it happen; you have to be on top of it."
As for the time frame - estimates varied but most took several years. "Take it in six month increments," he advised. "Plan what you're going to do. Know the value of what you have. Auctions aren't for everyone, but auction records are a pretty reliable indicator of value and scarcity."
In his view when the time comes to sell the collection or inventory that features a "collage" approach and includes books as well as many kinds of related materials such as photos, prints, maps, ephemera and other relevant items will bring a higher price and find a better home than the "books only" collection.
He also emphasized the need for a certain amount of critical detachment. "Many of the people I see," he said, "are not really dealers. They're collectors who got into selling as a way to fund their book buying habit. They have a hard time imagining a life without their books. They equate selling with dying. It's not surprising they put it off."
Exit Strategies - Getting Out (A Bad News - Good News Story)
His sentiments were echoed by an equally respected West Coast dealer who with his partner recently sold over 15,000 volumes. They shopped the auction houses carefully and were able to negotiate a favorable contract because of the reputation and value of their inventory. Their holdings brought top dollar from buyers around the world. They donated their reference collection consisting of another 10,000 books and catalogs to a major university which resulted in a significant personal tax treatment as well.
But their experience is not typical. When it comes to giving books away, or donating them as a collection, unless they are exceptional and arrangements for the gift have been made well in advance, the would-be donor may find that libraries and special collections are not interested, or only interested if the gift comes with funds to care for them.
Consignment can be Win/Win
Perhaps the only win/win ending we found that might work for the average collector or dealer is some form of consignment arrangement. When the fit is good, consignment can have advantages for both sides.
Typically the person going out consigns some or all of the stock to someone continuing in the business. There is a written contract that spells out the terms. The consignee takes physical possession of the books, and the consignor sets the selling price and receives a stipulated percentage as the books sell.
This kind of an arrangement can be a good fit for both sides. Since the books are typically sold individually at retail, the consignor gets a much larger percentage of the selling price than might be the case if sold as a lot or at wholesale. The consignor is also relieved of chores like listing, shelving, packing, insuring, advertising and other costs. In exchange the consignee gets good quality inventory that is paid for only when it sells.
This was the one situation where AE found two parties who were willing to discuss how the process worked and allow their names to be used.
David Strang of Dimension Books was an Arizona based collector and dealer of first edition literary fiction as well as mystery, crime and suspense. He also had substantial retail bookstore experience. When the time came to sell he sent a letter of inquiry to many of the advertisers in Firsts Magazine. The most appealing response he received came from Joachim Koch of Books Tell You Why. The company, an ABAA member based in South Carolina, is an aggressive and technology savvy marketer.
The two discussed the books, the time frame and agreed on an open ended plan that was beneficial to both. After about eight months Strang said he is pleased with the results. He has received a monthly income from his books at very close to the prices he would have gotten if he'd sold them himself at retail without any of the associated costs.
Koch is also happy with the arrangement as the books he took on consignment enhance his inventory and his ability to offer his customers good value without having to purchase the books until they sell.
In generic terms Koch said that these are some of the key points that their consignment agreement includes:
"We offer a 'full service' package for selling books, i.e., we catalog, take images, store, market online and offline, list on 10+ platforms, sell, complete transaction with customers, ship, worry about returns, etc.
While we suggest a price, the seller can adjust the price, he/she 'owns' the price and, as long as it is within ethical reason, we comply with the request.
Our consignment fee is based on list price (on our site), i.e., We swallow any discounts by dealers and provide clear pricing/payment terms.
A consignor can end the agreement at any time, no questions asked. Only in the first three years we charge a termination fee to avoid that we go through all the listing effort and the consignor wants their books back the day after. While we'd be returning the books, we're charging a modest fee to at least cover some of the cataloging/listing efforts."
Though this kind of an arrangement may not work in every situation, it is definitely worth considering when high value individual items are involved and a suitable match can be found.