Why I said don’t buy that newsagency

Twice in the last month I have suggested to individuals who have contacted my for my opinion that they not proceed with the purchase of the newsagency business they were considering purchasing. In each case the red-flags I saw were similar.

For one business the owner did not have current financials. The only reasonable evidence of income was a lottery terminal report. The rest was a claim in the form of a spreadsheet for which there was not evidentiary support including BAS statements. Without basic bookkeeping as required by law my feedback was the business does pass due diligence. By all means purchase it for stock value, but nothing else.

In the case of the second business, the owner claimed income they could not verify as it was not shown in the POS software reports because they deleted a couple of departments to reduce their tax. The prospective purchaser believed the vendor and argued with me when I said I would not purchase a business based on unreported income. They were desperate to buy a business and were bedazzled by the profitability of the business. The problem is the profitability relied on the unreported income.

Each of these situations damages our channel in my view. Business owners operating businesses without proper recordkeeping and basing a sale price on unreported income deserve to not achieve the price they seek.

There are plenty of well run newsagencies for sale out there, good businesses backed by accurate data. These businesses sell more easily than those with key data missing.