A common question I am asked privately from people who find me through this blog is what should I ask for when looking at buying a newsagency?
The question itself, when asked, indicates how green a prospective purchaser is when it comes to purchasing a business.
Here is an updated list of data I suggest newsagency business purchasers access from the vendor or their representative. I first published this two years ago. I’ve just updated it:
- P&L from the accountant for the last two years. i.e. not a spreadsheet created for the purpose.
- Tax returns for the same two years. While note always appropriate given business structures, they can provide a cross check with the accountant P&L.
- A good explanation of any add-backs reflected in the P&L.
- Sales data reports, for the last two years, from the POS software in use – to verify the income claim.
- Sales data reports from the lottery terminal to verify the income claim.
- BAS forms to confirm data in the P&L.
- A list of all inventory to include purchase price and date last sold for each item.
- Copies of invoices from which you can randomly select to verify the above point.
- A copy of the shop lease.
- A copy of any leases the vendor expects you to take on board.
- A detailed list of all forward orders placed on behalf of the business.
- A list of all employees: name, hourly rate, nature of employment, start date, accrued leave and accrued long service leave.
- A testament from the vendor as to the claimed accuracy of sales data.
This is good basic information that will enable any purchaser to undertake reasonable assessment of a business.
A good business will shine through the numbers just as a business with upside achievable by new owners will shine through.
My advice to newsagents looking to sell who are concerned about this list is: think about it now and focus on your business so the data I have listed looks good.
Every day you make decisions in your business that impact many of the data points listed.
This is why I say every day is your pay day. Run a smart, lean and profit focused business and you will have a good pay day today and a good one when you come to sell.
The most appealing businesses are those that are easier to run and are making money.
The time to focus on that is now.
Sure a purchaser can turn a business around. They should get the rewards if they are expected to do that for your business.
The price you can sell your business for will be based on what it is making now.
Getting the data ready for the sale of the business could, of itself, help you improve how you run your business.
Dear Mark, looking for some expert advice. I am in process of buying a newsagency and given the Tatts timelines settlement is 3 months away. Now how do I ensure that seller doesn’t experiment with any new stock lines and leave me with the dead stock. Stock recon will happen in Feb.
Another concern is that they may loose focus once they have sold and next 3 months will be down the hill before we acquire.
any suggestions will be helpful. Also given the long settlement should we still do 10% deposit or reduce it to 5 %.
Rob, those concerns can be easily handled in an appropriately drafted contract. Ensure there are clauses re their performance between now and settlement and a right of refusal over stock. The risk to your could be that they don’t buy stock and thereby make the shop less appealing and this could see traffic fall off.
Most vendors I see run their businesses well because they want a good and respectful handover.