When he told his friend Dana Waters that they should start their own bookstore, Scott Mumbauer didn’t expect Waters’ reply.

“I was only joking when I mentioned it,” Mumbauer said.

Waters wasn’t joking.          

“He told me we should,” Mumbauer said.

Mumbauer and Waters began My Friends’ Bookstore in September 2006, posting handmade flyers around campus and hanging a handwritten sign outside their dorm room telling fellow students that they’d buy their textbooks. The business is thriving a little more than a year later.  What began as a joke has gained serious practical experience for three full-time college students. Jonathan Choi joined Mumbauer and Waters in December ’06. 

Early Business Struggles

From the outset, the three have enjoyed the successes and endured the failures typical of enterprising small business owners.

“When I got back from class, there was a line outside my door of 30 people wanting to sell their textbooks,” Waters said. “I knew then that this could actually be something.”

How could Waters have any doubt that his undertaking could be something? When he was five, Waters assumed the role of salesperson at a garage sale his parents had in his native Birmingham. He remembers walking around to all the customers in the garage, telling them the prices of items, showing them how the items could help them, and offering to take money off if they didn’t bite on his pitch. Waters, around eight years old, turned his focus to starting an ice cream store in front of his house. He drew up the blueprints for the project but never followed through.

“I always had these ideas and never went through with them. I just have to do one, and this is the one,” Waters said about the bookstore. “I’m in college. It’s not like my life depends on this business being successful. It’s something that I’m really passionate about, so I told myself to do it.”

Waters’ determination was backed up by his father’s encouragement. Mumbauer’s parents also supported their effort and provided them with a loan to get their business started. Even at the beginning—when their entire business relied on handwritten signs, a quickly put-together website, word-of-mouth advertising, and borrowed money-- students flocked to them for business. At first, too many students came.

The partners’ first serious mistake was buying all of the books that were brought to them. Because they did, they ran out of money in three days and were left with a surplus of inventory and no capital. On the brink of having to close doors before barely getting started, they got another loan from Mumbauer’s parents.

Mumbauer had mixed emotions.

“I felt excited that our business had been so well received among students,” he said, but admitted, “I was nervous because anytime you see large amounts of cash under your name disappearing it can be nerve-racking.”

They had no money to show for their initiative and hard work. And plenty of hard work they had. Waters remembers “running a full-time store that was open 14 hours a day, going to the bank, interacting with customers, all during exam week.”

Luckily, help was on the way.

A Friend Helps

Jonathan Choi, a freshman whom Waters and Mumbauer had become friends with at the Carol International House, noticed how much time the two spent working on the business.

“Jonathan came when the business was bigger than we were,” Waters said.

To help, Choi created an on-line order form that minimized the time spent on paperwork. He also redesigned the website, making it a more effective tool for placing orders and reaching potential customers. Mumbauer and Waters offered Choi a partnership in Dec, 2006, which he accepted.

Around the same time, a private investor took interest in the business, giving Waters, Mumbauer, and Choi $5,000. The investor, aware of the business’s previous financial troubles, gave the money to be spent to buy books online to complement the bookstore’s inventory. The bookstore owners stocked up, having plenty of books on-hand for students when they returned in January.

They seemed poised for the future: Waters would take care of the financial aspects of the business, Mumbauer’s focus would be advertising and day-to-day operations, and Choi would handle the website, networking with students, and gaining exposure to underclassmen. The money helped immensely as well. Their greatest help, however, would come when they returned to school after Christmas break.

What Waters Learned in Class

Waters, a business administration and French double major, took Small Business Management the semester he returned in January 2007. Taught by 2005 SC Professor of the Year Norman Scarborough, the class is billed in PC’s academic catalogue as “a practical course designed to enhance the student’s ability to apply fundamental managerial techniques to the operation of the small business.” No student has taken fuller advantage of the class than Waters.

In the class Waters learned how to manage the bookstore and its finances, and how to advertise more effectively. Waters also learned that his and his friend’s business, despite its early hardships, began as many businesses do. Overall, the class changed the course of the business.

“It went from being a survivable business to a profitable business. Finding stuff in the book gave me the boost I needed to find everything and take the bookstore to the next step,” Waters said. “Without the class I don’t know what would’ve happened.”

The class provided both a spark and guidance that the bookstore and its owners needed. Mumbauer, a business and music double major, hasn’t taken the class yet, but he says his business classes so far have seemed much more practical. Choi hasn’t taken the class yet either, although the biology major plans to when his lab schedule allows. Waters, as a student in the class last semester, did keep his business partners informed about information covered in class. He even provided them with a textbook to read over this past summer.

The Best Plan Ever

The business plan Waters created in class also took the business to the next step. In Small Business Management, students are required to write a business plan. Waters had never heard of writing a business plan before he took the class. Although a hypothetical project for most students, the plan proved to be practical for Waters.

“It’s amazing how writing down what you already know will make you sit down and think about and change it,” Waters said. “(The business plan) helped our business figure out what it is exactly we’re trying to do. It made the business a concrete idea instead of just three college students trying to buy back books.”

Mr. Scarborough called Waters’ plan the best one he’s ever seen in his class.

“Dana did a thorough job of researching the industry, analyzing his potential customer base, identifying industry trends, challenges and opportunities, and preparing projected financial statements,” Scarborough said. “In addition, the plan was extremely well-written, polished, and realistic.”   

Scarborough was so impressed with the plan that he asked Waters if he would allow Scarborough to use it as the sample business plan in the next edition of his textbook. Translated into Spanish, Indonesian, and Chinese, the professor’s textbook is among the best-selling small business and entrepreneurship textbooks in the world. When the next edition comes out next spring, Waters’ plan will be featured in it.

Moving Forward

The business was finally in a position to move forward. With motivated and capable young entrepreneurs running it, the business now had a solid plan. The business did have one problem, however, the same one as ever: money. Waters, with a plan to go by, recognized that he needed $15,000 with which to buy more textbooks. Fortunately, the business had a knowledgeable ally, Scarborough, someone who could help with the problem.

Waters approached his professor, telling him about their financial problem. Waters told him that he knew about someone who had expressed an interest in investing in the business. Scarborough wasn’t comfortable with what Waters told him. The professor asked his student if he wanted to explore the possibility of getting a bank loan. Waters said yes. Scarborough called the Palmetto Bank, where he serves on the advisory board and asked the branch manager if she would consider meeting with Waters, Mumbauer, and Choi. She invited them in. The three presented their business plan. A few days later the three young entrepreneurs received a $15,000 unsecured line of credit without the co-signature of a parent.

“That is quite an accomplishment for a business operated by college students,” Scarborough said.

The loan went a long way in settling the rocky waters of the business. Gone were the days of worrying about if the business would make money or where they would look for the next loan.

Although he knew about the students’ troubles, Scarborough knew it was only a matter of time before they would meet success.

“These young men are very gifted intellectually and are highly motivated. They are willing to take reasonable risks and are willing to work hard—all classic traits of successful entrepreneurs,” he said. “Like all entrepreneurs, they made mistakes when they first got into the business, and like successful entrepreneurs, they learned from them.”

The Next Chapter

What’s next for Waters, Mumbauers, Choi and My Friends’ Bookstore?

Since receiving the bank loan, the bookstore has attracted another investor who has put in $3000 - $5,000 per semester. The business has reached $100,000 in sales and is growing at a rate of 30percent per year. The entrepreneurs now have the budget to advertise more: selling tee-shirts and hoodies, sponsoring events on campus, and eventually buying spots in the college newspaper, The Blue Stocking.

The website is growing so fast that they have to change providers every six months to those who can offer more services. Designed to sell online the inventory that doesn’t sell on-campus, the website now accounts for 30% of their business. Plus, they have sold at least one textbook to all 50 states.

The three students are unsure what will happen with the business in three years, once they’ve all graduated. Despite all the growth and potential for monetary gain, it seems unlikely My Friends’ Bookstore will end up a cash cow.

“It wasn’t as much for business or profits as much as it was to help students,” Waters said about the business’s beginnings.

Waters’ words echo Scarborough’s sentiments that “the students run the business with a sense of social responsibility.”

Choi, who will be here when Waters and Mumbauer graduate, agrees: “Part of me wants to hold onto it and run with it for as long as I can. But a lot of people here should experience this as well. Maybe students can have internships they could do for My Friends’ Bookstore under our ownership or someone else’s. Something where kids like me who as a freshman could own 33 percent of an existing business. I think everyone should experience this."

posted by sadyer@presby.edu