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buying a newsagency

If you are considering buying a newsagency

Plenty of newsagency businesses are changing hands. I think that is in part because the channel had a good Covid. Retail businesses in our industry are looking sweet, and there’s some cracking opportunities out there.

A common question I get asked is, “What should I ask for when I’m looking to buy a newsagency?”

The question itself shows how green a prospective buyer is when it comes to buying a business. My first piece of advice is to get your head around the newsagency business of today, so you know what you’re getting into. And, I do mean today. The newsagency of today and into the future is not the agency focussed business of the past.

Here’s a list of data I suggest prospective newsagency buyers request from the vendor or their representative:

  • The accountant’s P&L for the last two years. Not a spreadsheet that’s been created for the purpose. You need the real P&L.
  • A list of add-backs used to calculate the profit figure on which the asking price is based.
  • Tax returns for the same two years. While not always appropriate given business structures, they can be used to cross-check the accountant’s P&L.
  • Sales data reports from the POS software for the last two years. This is the key data to verify the income claim.
  • Sales data reports from the lottery terminal to verify the income claim.
  • BAS forms to confirm the data in the P&L.
  • A list of all inventory in the business, including the purchase price and date last sold for each item. And copies of invoices that you can randomly select to verify.
  • A copy of the shop lease.
  • A copy of any leases that the vendor expects you to take on board.
  • A list of all forward orders placed on behalf of the business.
  • A list of all employees, including their name, hourly rate, nature of employment, start date, accrued leave, and accrued long service leave.

This is all basic information that any buyer should have access to in order to assess a business. A business for sale for which this information is not readily available is not, itself, ready for sale.

Once you have the information, analyse it yourself. You should not outsource your decision as to whether a business is a good business to buy or not.

My advice to newsagents who are looking to sell and are concerned about this list is to think about it now and focus on your business so that the data I’ve listed looks good. The time to prepare your newsagency for sale is every day you’re in the business.

This is why I say that every day is your payday. Run a smart, lean, and profit-focused business and you’ll have a good payday today and a good one when you come to sell.

The most appealing businesses are those that are easy to run and are making money. Sure, a buyer can turn a business around, but they should get the rewards if they’re expected to do that for your business.

The price you can sell your business for will be based on what it is making now.

So get your house in order and make your newsagency as appealing as possible to buyers. The rewards will be worth it.

I first shared a list like this more than 15 years ago. Today’s list is the latest refinement.

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buying a newsagency

Newsagency for sale, Mount Morgan, Queensland – tree change opportunity

Wattle Bee Next in Mount Morgan is for urgent sale for health reasons. The sale profile has all the details.

What’s interesting about the business is that it is transformed, it is not your typical newsagency. This business is an early-adopter of coffee in our channel, and it has a reputation for good coffee. It has also pioneered white goods, the cafe experience and gifts – all done in a style that fits with this town outside of Rockhampton.

I don’t often mention businesses for sale here. I mention the Wattle Bee Next newsagency for sale because it is urgent and because it represents an opportunity for someone looking for a change to a terrific part of Australia.

The freehold is available to purchase from the landlord too if that interests.

From my understanding of the 491 visa sub-class in Queensland, the purchase of this business would qualify for providing a pathway to permanent residency.

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buying a newsagency

Updated advice for new newsagents, those who have bought a newsagency

This is not a complete list. Also, it’s my list. Others will have their list.

Before you get to the list, consider  consider the type of newsagency do you want to run: retail or agency. In my opinion, retail has growth opportunities and relies on you whereas agency is flat or declining with others in control of much of your business. I am more interested in retail.

You drive business value by playing at the boundaries of the business, broadening what you sell, the price points you can achieve and the new faces you can attract. Attracting new shoppers has to be a key focus as this feeds into other metrics.

Plenty of people offering newsagents advice on how to run their businesses and what to stock are not newsagents, not even retailers. Often, they are not business owners with a vested interest in your success. Be cautious about advice offered, especially from supplier reps. Their needs are likely not your needs.

I own the newsagency software company supplying more newsagents with software than all others, I also own the newsXpress marketing group and I own 4 newsagencies. Best of all, every day I get to work with retail experts, retail practitioners. They have the best advice, from lived experience, successes and failures. In offering advice here I’m not trying to make money off of you. The advice is offered free to anyone to read and use or not.

Here’s my updated list for new newsagents:

  1. MAGAZINES.
    1. Arrive invoices through XchangeIT – no other way.
    2. Only sell magazines by scanning. Never use department keys.
    3. Do not label all magazines. Do not label weeklies or high volume monthlies.
    4. When returning magazines, scan out returns. Do this at least weekly.
    5. Do not early return magazines the day they arrive unless you have been sent too many. Often newsagent who early return deny the opportunity of sales.
    6. Early return at least twice a month – based on what is NOT selling.
    7. If you have sub agents – only supply them through the sub agent facilities in your newsagency software.
    8. Check your magazine account as soon as it comes in to ensure you have received all credits.
    9. Pay your magazine bills on time without fail – avoid being cut off for weeks without magazines.
    10. You control where magazines are placed, it is your shop.
    11. You do not have to put posters in the window. I recommend against this.
    12. You do not have to do big magazine displays – it is your choice. I see no evidence of it increasing sales.
    13. I recommend against letting magazine companies set up display unless you think they will help drive sales.
  1. NEWSPAPERS.
    1. You control where newspapers are placed, it is your shop.
    2. If you are regularly undersupplied, complain to the publisher as well as the supplying newsagent (if you do not have a direct account).
    3. Scan all newspapers you sell.
    4. Scan all newspaper returns – accurate data will be your friend in the event of a dispute
    5. You do not have to put out newspaper posters or place newspapers in a certain position unless you have signed a contract with a publisher agreeing to this.
    6. Manage your exposure to promotions where you sell stock for a tiny margin.
  1. CARDS.
    1. Cards have the largest %GP of all physical products you will sell (except coffee if you offer that). Treat cards with the respect that value demands.
    2. Think carefully before signing a contract.
    3. Pay for your own fixtures.
    4. Put out your own cards. Learn what you stock. Take ownership of this most important product category.
    5. Ideally, do your own card order. It’s your money being spent. Don’t leave this to someone else to do.
    6. Agree on an ordering process with your card co. account manager, for example what number of cards remaining in a pocket to order on.
    7. Immediately report any over or under supply.
    8. Trust your data ahead of your gut and ahead of sell-in reports from suppliers.
    9. Pay on time or risk being cut off.
    10. Discount seasonal stock at the end of the season for a couple of days to pick up stragglers and make an extra few $$$.
    11. At least every two years (preferably annually) undertake a range review of sales by pocket based on your sales data, not card company provided data.
  1. STAFF.
    1. Decide on your pay rates. The award is best used as a base guide. It’s likely that to attract and retail good staff you will need to pay above award.
    2. Ensure everyone has a list of things to do each day.
    3. Have a documented position description against which your employees are measured.
    4. Have a written roster every week.
    5. Have a structured process for handling annual and sick leave.
    6. Use payroll software for record keeping.
    7. Pay always on time and preferably by electronic transfer.
    8. Pay super on time. Do not start someone working for you unless they have provided a super account number with their tax file number.
    9. Change your roster regularly for casuals.
  1. STOCK  AND SUPPLIERS.
    1. Every day, look for opportunities to attract new people through what you choose to range and how you display it.
    2. Do not buy for yourself, what you like.
    3. Only see supplier reps who have made an appointment.
    4. If a supplier rep tells you something will be a success, ask for the evidence.
    5. Use your computer system to guide ordering of stock – order based on sales.
    6. Order to a budget.
    7. Scan everything you sell.
    8. Scan out personal use stock.
    9. Set your own mark-up policy for items that are not pre priced.
    10. It is easier to discount than increase prices.
    11. Do not pay for an external stock taker – do it yourself through the year.
    12. Check high theft risk items like weekly or fortnightly.
    13. Arrive and price stock on the shop floor, and not the back room. You’ll sell more this way.
  1. SHOP LEASE.
    1. Negotiate your own lease. Paying someone who is not financially invested in the outcome is likely to not get a better deal for you, despite their pitch.
    2. Read your lease.
    3. Make sure the permitted use clause serves the future needs of your business.
    4. Pay on time otherwise you could be locked out.
    5. Do not agree to a new lease unless you have read the entire document and are prepared to agree to it in its entirety.
    6. Conduct discussions with your landlord in writing to maintain a paper trail.
  1. GST.
    1. Complete your BAS on time and make any necessary payment – to reduce the opportunity for you being audited.
  1. FINANCE AND OTHER MATTERS.
    1. If you borrowed to get into your business, start paying this off from the first week, make progress everyweek. This avoids you having a challenge when you come to sell the business.
    2. Pay yourself a wage or at least accrue this in the accounts.
    3. Integrate with accounting software like Xero – keep bookkeeper costs down.
    4. Ensure workcover (workers comp.) cover is up to date and maintained.
    5. Ensure you have appropriate council permits for what you sell – i.e. food.
    6. Have a structured banking process that ensures that cash is tracked at all steps and at all time.
    7. Take a data backup every day. The best approach is an automated cloud backup – ask your software company.
    8. Bank every day and bank the takings for each day separately to make reconciliation easier.
    9. Use your software to manage the end of shift process to drive consistency and accuracy.

As I said at the start, this list is evolving with time. I hope it is useful to new newsagents and would be newsagents, to understand some of the day to day tasks you cannot afford to get wrong.

Footnote: I first published a version of this advice 7 years ago.

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buying a newsagency

We bought a newsagency

Last week we bought a newsagency on Glenferrie Road Malvern in Victoria. It had been in the same family for almost 40 years and had stayed true to the traditions of years ago. We will take the same approach we did with the business we bought in Mount Waverley Victoria three years ago: slow and steady change, based on data, with a minimal capex budget and ensuring to not leave existing customers behind.

Here’s a short video I shot on day 2.

Already this week the shops is looking different. Each day it is changing, but with baby steps.

We are grateful to the family for the opportunity to pick up from where they left off serving Malvern shoppers.

Oh, and before the folks at Newspower shoot off a letter, the sign people are booked to remove the logo. Being Christmas and all accessing them has been challenging.

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buying a newsagency

Updated checklist for anyone considering buying a newsagency

There has been a surge of interest in buying a newsagency in 2021. Retail businesses in our channel are appealing, and, looking out in the market, there are some excellent opportunities.

A common question I am asked by 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. My first advice is that they better understand the newsagency business of today, to understand what they could be buying into.

Here is an updated list of data I suggest prospective newsagency business purchasers access from the vendor or their representative:

  1. P&L from the accountant for the last two years. i.e. not a spreadsheet created for the purpose.
  2. A list of add-backs used to achieve a profit figure on which the asking price is based.
  3. 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.
  4. Sales data reports, for the last two years, from the POS software in use – to verify the income claim. This source data is key.
  5. Sales data reports from the lottery terminal to verify the income claim.
  6. BAS forms to confirm data in the P&L.
  7. A list of all inventory in the business including the purchase price and date last sold for each item. And, copies of invoices from which you can randomly select to verify.
  8. A copy of the shop lease.
  9. A copy of any leases the vendor expects you to take on board.
  10. A list of all forward orders placed on behalf of the business.
  11. A list of all employees: name, hourly rate, nature of employment, start date, accrued leave and accrued long service leave.

This is good basic information, a starting point, which will enable any purchaser to undertake reasonable assessment of a business.

My advice to newsagents looking to sell who may be concerned about this list is: think about it now and focus on your business so the data I have listed looks good. The time to prepare your newsagency for sale is every day you are in the business.

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.

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.

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buying a newsagency

10 things you could do in your newsagency business to make it more valuable when you choose to sell

Here are 10 things newsagents could do in their businesses to make them more valuable when it comes time to sell. based on my years of experience working with newsagents and, yes, owning newsagency businesses, most items on this list will be ignored most of the time.

  • Declutter. An appealing looking business is easier to sell. On the shop floor, at the counter, in the back room – declutter and make the business more appealing to you, prospective buyers and customers.
  • Deal with old stock. Old stock is worthless to you and anyone being the business. Keeping it is a waste of space, time and cash. This work starts with you knowing what is old stock. Note: a business doing this for the first time will usually find that a third of their current stock is performing well below what is average for the business.
  • Review unprofitable activity. Look carefully at each category of product or service you offer. Get to an accurate understanding of the value of each. Consider quitting those that are under performing.
  • Trim the roster. Labour costs around 11% of revenue. Every dollar saved is a dollar that benefits the P&L. Yes, this likely means more hours for you. It all depends what you want out of the business.
  • Price for margin. While plenty of retailers pressure suppliers for lower prices, too few actively consider what they could sell some items for, missing the opportunity for a better margin. Where you can, price for a better margin.
  • Document. Write up your processes, systems you follow and more. Document this and make the business easier to run and appear easier to run. The documenting process itself is likely to lead to efficiency opportunities uncovered. The resulting documentation will make the business more appealing.
  • Clean up online. Review your Facebook, Google and other listings. Make sure they are current for if they are not it reflects poorly on the business.
  • Reduce debt. I see too many retail businesses where debt is used with an expectation that it will be dealt with when the business is sold. Clean it up now as much as you are able. The less interest you pay the more money the business makes.
  • Review opening hours. Often in business data I see opening hours opportunities – either for longer hours or shorter hours. be guided by your business data.
  • Balance sheet clean up. While selling a retail business will often not include selling the company structure, the tidiness of your balance sheet may not be ideal for that time you do come to sell. It’s better you discover this and work on it prior to needing to.

This list could be considerably longer. My goal is to encourage newsagents top consider what they can do in their businesses today to make them more valuable when they do choose to sell.

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buying a newsagency

Deleting your business data prior to selling your retail may not be a wise move

A former newsagent got into some legal hot water about the performance of the business as represented through the sales process.

It was when the purchaser discovered historic business data had been deleted that they became suspicious. That kicked off a legal process that was expensive for both sides and resulted in a financial payout to the purchaser.

When you sell a business you sell it with a set of assets necessary to the running of the business. Data are such assets, especially data relating to sales performance. How can someone buying your business expect to achieve results close to yours if they do not have the historic data to guide decisions?

I mention this today as my newsagency software company has a process around any request from a customer for help with deleting data. We ask for the request to be in writing, signed by the owner. We do this based on legal advice. We do not want is to be drawn into a legal battle between vendor and purchaser. We have been in the past, several times, when vendors found business performance that did not match representations made in the sales process.

In the legal fights I have seen at close range (as an expert witness)  it has been expensive for the business purchaser as well as the vendor. If data is deleted, the vendor can’t prove their position and this tends to not play well for them. I’ve reluctantly become involved as an expert witness relating to the management of the data.

My advice to anyone selling their business is don’t delete recent (within the last 7 years) historic business data on which you would, in the usual course of business, expect to rely for decision making.

If any asks me I say don’t delete business data. It is what it is. There is nothing to fear from the truth.

Now, on the matter of data. It is a core business asset, genuinely valuable. Collect it, cultivate it, treat it with care, analyse it. The most successful retail businesses I see do this. A retail business of any size can do it, and expect valuable results from it.

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buying a newsagency

Newsagencies are good businesses to buy right now, popular, too

Newsagency businesses are selling quickly in today’s business market. They are popular in part because they had a good Covid, in part because of the relative certainty of revenue and in part because of the opportunities of change.

Newsagencies are seen as being a safe investment, because of the multiple options and opportunities for driving value from the investment.

I’ve seen businesses sell within a few days of going on the market – city and country.

This is great news for those in our channel keen to sell their businesses. It is also great news for people looking to invest in our channel.

We are in the midst of a kind of renewal in the channel. New capital, fresh energy, fresh ideas. This is all good for the channel.

What we are also seeing is more change in the channel, less cohesion as to what a newsagency is, and that’s okay.

There’s the core of papers, magazines, cards, and lotteries for most but not all. Outside the core we are seeing more engagement in more recent categories like homewares, niche gifts – not the usual low cost imported gifts but higher price point, locally made and less likely to be in mass retail.

So, it’s good news for newsagents selling their businesses and good news for people joining our channel by buying a newsagency business.

Like any business investment, you get out of it what you put in outside of the money itself, the strategies, energy, mood and embrace of change. It’s terrific seeing some of the fresh ideas coming with new business owners.

Yes, now is a good time to buy a newsagency business. There are good businesses for sale and plenty of opportunities for leveraging growth through them, and therefore a good return on your investment.

Now, before people get in a lather and say the old newsagency is dying, I agree. That purely old newsagency model that relies on legacy products is significantly challenged. But, plenty of older style newsagencies are doing well. These businesses present opportunities to evolve into new traffic and revenue models.

I have written the above because of some who comment here who have sold or closed their newsagency businesses and talk down the channel of which they are neo longer part.

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buying a newsagency

Why some bank manager’s don’t understand the value of a newsagency business

The views of bank managers are given too much attention in my view. However, sadly, they are the gatekeepers to business funding. So, they are listened too.

A bank manager recently said to someone why would you buy a newsagency, they are going nowhere. It was a generalisation, not based on any business financials, not considering the transition already achieved in a business. It was ignorant and unhelpful.

Why would you ever listen to a bank manager. They are idiots. Yes, another generalisation, which is equally unhelpful.

The challenge for our channel is that banks have models that are out of date, models based on an assumption that all newsagency businesses are the same – when they are not.

The value of a business flows from its P&L, the business plan and the track record of those seeking the loan. The historic performance of the channel is not relevant today. 

I know of newsagents achieving excellent growth. Most would not identify as newsagents but they have enough elements of a newsagency for them to fall under that retail channel category. While the growth is coming from non traditional categories, it is sustaining legacy aspects of the business, keeping services and products represented in regional and rural locations.

This is why the out of date modelling by the banks as represented by their managers is unhelpful for the transformation many of us in our channel are passing through.

Bankers should understand this as they are transforming their model too. That is why the quote at the start of this post is frustrating. It is ignorant and harmful to all in our channel.

If a bank manager says there is no future in a newsagency consider saying: I agree, there is no future in the traditional newsagency you might be thinking of. But, hey, that type of business has not been our model for years. Yeah, we left it behind and embraced something with new categories, new traffic drivers, better margins and lower operating costs. That’s why your banker model of a newsagency does not apply to our business.

Newsagents who are looking to sell their business should lean into this line of thinking. They should be on the front foot, addressing this issue before it is brought to them.

Bankers are frustrating. I remember a time when their opinions were based on what they saw and who they met outside their office. Today, their opinions are fed from out of date business modelling that is certainly not relevant to what may newsagencies are.

Footnote: in the headline I say some because there are some bank managers who think for themselves. They are a rare breed that we should cherish should we be lucky to find them.

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buying a newsagency

Updated checklist to consider when buying a newsagency

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:

  1. P&L from the accountant for the last two years. i.e. not a spreadsheet created for the purpose.
  2. 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.
  3. A good explanation of any add-backs reflected in the P&L.
  4. Sales data reports, for the last two years, from the POS software in use – to verify the income claim.
  5. Sales data reports from the lottery terminal to verify the income claim.
  6. BAS forms to confirm data in the P&L.
  7. A list of all inventory to include purchase price and date last sold for each item.
  8. Copies of invoices from which you can randomly select to verify the above point.
  9. A copy of the shop lease.
  10. A copy of any leases the vendor expects you to take on board.
  11. A detailed list of all forward orders placed on behalf of the business.
  12. A list of all employees: name, hourly rate, nature of employment, start date, accrued leave and accrued long service leave.
  13. 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.

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buying a newsagency

Governments need to address business price quoting just as they are addressing housing under quoting

Under quoting by real estate agents is an issue that gets plenty of medial and politician attention, especially in Victoria and New South wales where auctions appear to be more popular. In Victoria recently  one agent was fined and more are heading to court.

In our channel, the problem is the misrepresentation of the performance of the business. This is done several ways:

  1. The misstatement of the profit of the business by providing a blended P&L and not the P&L the business actually operates under.
  2. The valuation of stock as if it is all current when, too often, plenty of the stock sold with the business is not current.
  3. The value of business assets such as the computer system where they have no value because they have not been maintained or because the data is useless. Useless data = no business value.
  4. The misstatement of revenue because of manipulation to minimise tax.
  5. The misstatement of actual business costs because of poor records for owner time required in the business.

Some brokers are dreadful at preparing a business for sale and providing prospective purchasers with accurate and reliable data on which to make their decision. this can see people coming into the business unprepared and based on data that is completely wrong.

I have had two calls this week from people looking to buy newsagencies in Victoria and in each case the broker has not done their job in preparing the business. For example, they have a value for the computer system, considering it and the data an assist. In each case, the data in the computer system is useless, there is no stock on hand value, no tracking of each item sold and no compliance with industry data standards. A quick check by the lazy broker could have discovered this and counselled the newsagent to sort the data out to make the business more appealing.

People looking at buying a newsagency need to be fierce. They need to ask the tough questions, demand proof and only proceed when they are completely satisfied.

People selling their newsagency need to prepare the business, make it appealing,e sure all data is accurate and clean house so the sale is easy … otherwise, people like me, when asked for an opinion, say don’t do it, not this time.

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buying a newsagency

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.

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buying a newsagency

Do I think a newsagency is a good business to buy?

Further to my post yesterday, the question do you think a newsagency is a good business to buy? is one I am also asked regularly.

Any newsagency is a good business to buy to the right purchaser, the person most suited for that business.

The answer really does come back to the purchaser because they may have skills ideal for a specific business. Equally, they may lack skills essential to a particular business – making them not the right purchaser.

The question demands an answer thoughtfully considers and takes into account who is asking, their skills, their resources, their experience, their fitness, their desire and their hopes and plans for the future.

While the business they are asking about is important, I see the answer as relying more on the person themselves. This is why I say any newsagency can be a good business to buy and often is.

I have a lot of confidence in the channel even though what the channel stood for in the past is changing rapidly, faster than ever before, to the extent that the channel is not the channel. But all of that is good in my view for I love change and the opportunities in change.

So, for the right purchaser, yes, a newsagency is a good business to buy.

Where it is not is if you are not interested in retail, not prepared for change, not appropriately resourced and expecting an easy ride. Yes, if you are lazy, a newsagency is not a business for you.

I say all of this as someone keen for more new blood in our ‘channel’. But it has to be good blood from energetic and optimistic retailers … because it is you who will help give us a terrific future.

Now is a great time to buy a newsagency if you want to participate in a time of great change and great opportunity that comes with great change.

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buying a newsagency

A checklist when looking at buying a newsagency

One of the most common questions I get 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 a list of data I suggest newsagency business purchasers access from the vendor or their representative:

  1. P&L from the accountant for the last two years. i.e. not a spreadsheet created for the purpose.
  2. A good explanation of any add-backs.
  3. Sales data reports, for the last two years, from the POS software in use – to verify the income claim.
  4. Sales data reports from the lottery terminal to verify the income claim.
  5. BAS forms to confirm data in the P&L.
  6. A list of all inventory to include purchase price and date last sold for each item.
  7. A copy of the shop lease.
  8. A copy of any leases the vendor expects you to take on board.
  9. A list of all employees: name, hourly rate, nature of employment, start date, accrued leave.

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.

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buying a newsagency

Great growth story from a regional newsagency

I have been fortunate to see sales data for a regional newsagency run by the same owners for more than fifteen years. In the twelve months to the end of May 2015, this business increased revenue by 13% over the previous twelve months. This is an excellent result.

Better still, the business increased gross profit by six percentage points – making the value of the revenue increase even greater.

This is an excellent news story, showing that a traditional newsagency can grow by making some simple changes that do not require any shoplift or other structural changes.

Here are more results from this uplifting story:

  1. Cards up 10%.
  2. Gifts up 200%.
  3. Magazines down only 1%.
  4. Stationery up 26%.
  5. Toys – a new department with excellent results.
  6. Plush – a new department now accounting for close to 2% of revenue.

Thanks to expanding the range of products sold and using free marketing initiatives, the store increased shopper transactions by 10%. Add to this growth in basket depth and average item value and you have compounding good news.

To provide context, the business has overall non agency revenue of half a million dollars a year.

I mention this success story here to show newsagents that there are opportunities for sustainable growth of revenue and, better still, overall gross profit percentage.

This is another example of why a newsagency is a good business to buy.

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buying a newsagency

Beware the add backs if you are buying a newsagency

I was looking through a profile for a newsagency for sale in Victoria recently and was surprised at the number of add-backs to get to an Adjusted net profit. In this instance, I’d consider this figure to be a work of fiction as there is no accompanying explanation or detail provided.

The best assessment of business performance is the Profit and Loss statement. While it could be that the company has other interests or activities, it would be straightforward for an accountant to provide a P&L for the newsagency entity within the overall business.

It is only when you get back to original accounting and business performance data that you can assess the financial health of a business. This is crucial to determining the appropriateness of the vendor asking price.

A good business run well and profitable will attract a good price.

I am suspicious of newsagency business profiles with many add backs, especially when these are presented would accompanying explanations or a supporting P&L to provide context.

If you are planning on selling your newsagency soon, do everything possible to drive profit today as this is what will benefit you when you do decide to sell. Smart purchasers will pay a premium for profit and not for a figure boosted by add-backs.

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buying a newsagency

Why a newsagency is a good business to buy #3

This week I am going to publish a different reason each day on why a newsagency is a good business to buy – in no particular order.

#3: you’re part of something bigger

Even though newsagencies are independently owned and operated, vary significantly in range, service and location, trade under different brands and vary in terms of local community connection, they are all part of something bigger.

Whether this connection is seen or unseen, at the very core of every newsagency is the common connection of newspapers, magazines, cards and stationery and for many, lotteries. These product category cores provide newsagents with reasonable base traffic today and this is what you can leverage for success.

This about it. Buy a retail business selling gifts and you have one category on which to rely. Buy a newsagency with gift or one you plan to add gifts to and you have a base on which you can build thanks to being part of something bigger.

Even with declines in some categories we carry, being part of it is better than being in a retail category without this. I know of retail categories which would love even half the daily traffic of an average newsagency.

So, yes, newsagencies are part of a bigger, sometimes unseen, network and this can be leveraged to our success.

Newsagencies are good businesses to buy. We newsagents need to do more to demonstrate that this is the case. It starts with us making our businesses more appealing and is assisted by stories we tell about being a newsagent.

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buying a newsagency

Why a newsagency is a good business to buy #2

This week I am going to publish a different reason each day on why a newsagency is a good business to buy – in no particular order.

#2: there are processes to guide you

Newsagencies are structured businesses at their core. Lotteries, cards, magazines and newspapers have considerably structure around them. You can learn from suppliers so you operate within the required structure.

Stationery is less structured but there is structured support if you seek it.

Gifts and other more general retail items, which not structured, are supported through suppliers who can guide and advice.

If you want help, it’s there.

If you are new to retail, there are plenty of sources of assistance and advice if you seek it out.

Buying a newsagency you are buying into a business for which there is as much support as you seek.

If you are someone who likes to complain you will have plenty to complain about in terms of structure, training and support – but that would be a choice you make. However, such complaints are not justified in my view given what is available for you out there.

For an independent small business channel, newsagencies offer more structure than most This is good news for buyers!

Newsagencies are good businesses to buy. We newsagents need to do more to demonstrate that this is the case. It starts with us making our businesses more appealing and is assisted by stories we tell about being a newsagent.

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buying a newsagency

Why a newsagency is a good business to buy #1

This week I am going to publish a different reason each day on why a newsagency is a good business to buy – in no particular order.

#1 – A newsagency is a good business to buy because of the community connection.

Small and independent retail business struggle for relevance in a local community. Your local newsagency fares better than move because of the regular traffic for everyday items like newspapers, magazines, cards, lottery tickets and home stationery. While some of these categories may face challenges, sales continue to be strong, traffic continues at a level other small and independent retailers would love.

Newsagencies are traffic rich. Smart newsagents are leveraging this to the max and chasing new sources of traffic.

Ask anyone in town where the local newsagency is as they will know. This is an awareness base on which you can rely.

Anyone buying a newsagency can leverage this awareness, they can build on it. This puts you ahead compared to if you purchased some other local independent retail business.

At an ANF conference on the Gold Coast a years ago I asked the question of newsagents what do you stand for? The vast majority said being community connected in the most important point of difference. This is true for many today and it is a good reason to buy a newsagency.

Newsagencies are good businesses to buy. We newsagents need to do more to demonstrate that this is the case. It starts with us making our businesses looking more appealing and is assisted by stories we tell about being a newsagent.

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buying a newsagency

How new owners trashed a retail business in two months and look set to lose money

There is a cafe near my office that grew in popularity from opening several years ago. The food range was excellent, the quality high, the service friendly and the coffee good.

Three months ago, the business changed hands. The new owners replaced the staff, changed the food range dropped the food quality and demonstrated little care for customer service.

Now, in apparent desperation, they have signs at the front of the café offering discounted deals. I suspect they will be out of business soon. The signs are sometimes shrill in approach, acting as a turnoff.

The best way to build traffic and success for any business, especially any retail business, is from within – through offering products nearby people want and that these are offered with friendly service.

The best way to take over a successful business you have paid a good price for is to ensure you understand how the business operated to achieve the numbers you paid for it and to ensure that at the very least you do what was being done before.

While a poor business you take over will demand change, a successful business you take over will benefit more from considered nurturing. That’s where the people who took over my local coffee shop have failed. They made a successful business bad, they are driving it to failure.

Taking on a retail business is not rocket science, not even if you have no retail experience whatsoever. Take your time, understand successes in the business and support them. Discover weaknesses and work on them. Back your judgement as it’s your own money on the line every day.

In the case of the café near my office, they took the business down market and in doing so misread what locals wanted – that they would pay more for quality product. These new owners offer cheaper product as a strategy, I suspect, to grow volume. The reality is they’d make more by selling less but for a higher margin.

I see newsagents make this mistake. They chase cheap products and happily sell them at a low margin. While sales may be okay, how many customers who buy on price come back? I’d say that number is less than those who find products they cherish and for which they pay a higher price.

The only way for the new owners of my local café to turn around their situation is for them to start selling quality products backed by friendly service.

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buying a newsagency

Promote your newsagency for sale to your customers

sellingyourbusinessConsider a sign in the window if you are selling your newsagency. A customer could be in the market for a business and yours could be a good fit. Brokers tell me buyers in rural and regional situations are more often locals.

A sign in the window can work – as long as the business – the shop itself – looks healthy and appealing. A FOR SALE sign in the window of a shop that looks like it is on its last legs will not help drive a sale.

Too often retailers selling their business go to considerable lengths to hide that the business is for sale and through this they miss opportunities – including selling to existing staff and or customers.

By putting a sign in the window you also remind yourself every day that the business is for sale and that you need to keep it looking at its best. It also reminds you to talk more about what there is to love about the business than what you don’t love.

Yes, this approach will have people asking. You could be the best sales person of the business. Be sure to have a broker as a backup for the more formal questions.

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buying a newsagency

It’s time for a code of conduct for newsagency brokers

Rather than getting involved in commercial deals outside the remit of a traditional association, newsagent associations should spend their time and newsagent money on association services. One such service could be the development of a code of conduct for newsagency brokers.

Newsagency brokers are vital to the renewal of the channel. They assess, package and promote newsagency businesses for sale. They chase the highest price for the vendor as their key goal yet they look for support from existing newsagents to help their businesses.

Some newsagents have paid more to purchase their businesses than real net profit can justify. Even one is too many.

One newsagent I spoke with recently shared the profile provided by the broker. It was a work of fiction.  The figures did not meet even basic accounting requirements.  Beyond the usual (an sometimes questionable) add backs, there was no accountability on the veracity of the claimed sales.  I know the business. The sales claimed were not being achieved in the business at the time it was offered for sale.

Brokers have an obligation to the future health of the channel.  Incoming newsagents paying too much to purchase their businesses will kill the channel.

I know some excellent brokers. This post is not about them. It’s about those who package businesses with information which inaccurately reflects the financial performance of the business.

We need a code of conduct for brokers. Newsagent associations could develop this if they consider themselves to be relevant to the businesses.  It would be money well spent.  Brokers who sign up and submit to auditing could get a seal of approval.  This could give buyers more confidence.

Of course, good brokers could establish this for themselves and pub list it on their blog or website.

Any newsagency broker code of conduct should be framed within the view of the incoming newsagent as they will be there in their business after the broker receives their commission and the vendor moves on.

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buying a newsagency

Take care when buying a newsagency

I have been contacted by another newsagent this week who is considering taking legal action against the vendor and broker for the newsagency they purchased from and through not so long ago.  They think that they have a case based on the financial data presented.

In this case the business was purchased based on sales data and ‘standard’ margins by department.  The due diligence was arranged by the broker.

Anyone buying a newsagency should only do so based on audited financial accounts.  While this will frustrate some newsagents, it will ensure that you are purchasing the business based on real numbers rather than numbers based on assumptions.  Newsagents with nothing to hide will welcome this suggestion.

Buying a business based on profit assumptions made made by ‘standard’ margins is dangerous.

Anyone buying a newsagency should never buy a newsagency based on due diligence organised by the broker.  The broker has a conflict of interest.  They have a contract to represent the buyer. They are paid a success fee on completion of the sale.  Common sense should tell any purchaser to get their own due diligence. A small investment in independent due diligence could be the best investment ever made.

There are plenty of good newsagency businesses on the market. Take your time, do your research and buy well for the future of your business and the future of the channel.

Now is a good time to buy a newsagency, there is upside in the model and there are good opportunities for growth for a proactive business person.

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buying a newsagency

Due diligence tips if you are buying a newsagency

My work with my newsagency software company, Tower Systems, sees me get involved in many change of newsagency ownership situations. Often, the involvement is sought to help get to the bottom of a dispute. If the purchaser undertook reasonable due diligence many of the disputes I see could have been avoided.

Here is my incomplete due diligence list. I say incomplete as it is what I suggest you do which is so often forgotten:

  • Use an accountant who is knowledgeable about newsagencies to audit the figures provided by the vendor.
  • Do not use the vendor’s solicitor or accountant.
  • Request sales reports direct from the software being used in the business – for comparison against the sales numbers in the P&L.
  • Request a list of customer accounts in a spreadsheet with customer name and purchases in the last year. Look for related party transactions and large customers and ensure that their value is secured.
  • Review roster sheets with claimed hours worked.
  • Request a full list of inventory sorted by when the item last sold. Pay attention to items which have not sold in the last year.
  • Consider having the stock take on settlement done using the computer system in the business – this is far better and more accurate than having a stock take done externally. It also leaves you with a valuable asset – accurate stock on hand data.
  • Request a list of all forward orders placed in the name of the business. This is especially important leading up to major seasons such as Christmas.

This list is by no means complete. I have listed items which tend to be overlooked.

There will be some newsagents who are not happy with me publishing this list. If you have nothing to hide then why worry? Transparency around a good business can only add value.

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buying a newsagency
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