I am aware of a greenfield opportunity in Victoria. If you know of someone looking to create a new retail only newsagency or someone interested in buying a newsagency please get in touch with me by email at mark@towersystems.com.au or phone 0418 321 338. While I am in New Zealand until tomorrow morning my phone diverts.
Every week I hear from one or two people looking at buying a newsagency asking about the process or whether I think newsagencies are good businesses to own.
A it happens I do think that newsagencies are good businesses to own. Sure, print products are challenges. However, they are not dying any time soon. Indeed, traffic from newspapers and magazines is excellent … good enough to build strong sales of other products. Lottery products generate excellent traffic. Greeting cards generate excellent traffic. Business services like photocopying generate excellent traffic.
So, my first reason for saying that newsagencies are good businesses to purchase is the traffic opportunity. Smart newsagents can achieve good things with this traffic. they can lead the business through change which attracts new customers and gets existing customer spending more.
The challenges we face as a channel and , more importantly, individually, present opportunities for us to play considerably outside our traditional model. There is where good retailers wille xcell. not so much good newsagents of the old school variety, but good retailers.
This is my second reason for saying that newsagencies are good businesses to purchase … the opportunity to profit from change. Take an old school newsagency and turn it into something fresh and bright. Use the core traffic and get out of what is not making money. I have seen newsagencies take on cafe, book, printing, gift, homewares and even haberdashery products. The changes of today and tomorrow present excellent opportunities.
many newsagents are tired, some are lost, some are not retailers. Replacing these folk with fresh retail-focused ideas can refresh a business and help it turn a profit.
This is my third reason for saying that newsagencies are good businesses to purchase … to bring in new blood and turn a tired business around.
Almost every newsagency in Australia is connected to the community in some way or another. Through supporting sports groups, participating in community groups and helping other local charities, the local newsagency is the quintessential local business. In some locations, the newsagency defines the local character. In others, it is the local meeting place.Even in capital cities, newsagencies are the places people go when big retailers let them down.
This is my fourth reason for saying that newsagencies are good businesses to purchase … to better leverage the community connection.
While there are plenty of reasons for buying a newsagency, these are four I would highlight. I think that the channel has a bright future if we embrace change and attract more buyers with good retail skills.
There is a considerable risk in selling or buying a newsagency using a regular real estate agent. They often do not understand the specialist requirements for managing the change of ownership of a newsagency. I have seen serious mistakes made which have cost one of the parties a sizeable sum.
Buying a newsagency is a complex transaction which can be easily mishandled. It requires good industry knowledge, supplier connections and an attention to detail.
While I am not about to recommend one broker over another, I do recommend that newsagents selling and prospective newsagents buying do so from an experienced specialist newsagency broker.
I am often asked by people looking at buying a newsagency why they should given the issues and challenges discussed here and elsewhere.
In my view, a newsagency represents a good investment and offers good opportunities, plenty of upside – despite some challenges presented by out of date practices. The value in theupside is why I have expanded my own involvement.
There is plenty about a newsagency business you can control.
There are excellent new traffic opportunities: ink, books, gifts, services and some other new products areas I am not prepared to name here just yet. These are brining new customers in.
There are excellent sales efficiency opportunities – selling more to existing customers. This is achieved by cleverly leveraging high traffic products such as newspapers, lotteries and major magazine titles to drive impulse purchases.
There are good margin opportunities. For example, ditching magazine company calendars in favour of dealing with calendar specialists – newsagents more than double their margin.
Proactive newsagents can transform the business. This is where the biggest opportunity lies. By respecting existing key traffic generators and evolving the business offer in other categories, smart retailers can significantly increase sales and profit. Yes the traditional newsagency is old and tired. The new newsagency is vibrant and profitable.
Change. Yes technologies like the iPad will impact our businesses. This will be more in a good way than a bad way. Entrepreneurial newsagents are seizing the opportunity of change and using this to motivate internal change. There are newsagents making good money from cafe services, online businesses and expanded distribution businesses.
So, why would I buy a newsagency today? The opportunity!
The only caveat I would apply is that you need to buy at the right price.
I will be covering the themes in this blog post in detail at the Newsagency of the Future workshop next month.
Would you buy a car off the lot without fuel? When you buy a newsagency you can reasonably expect to be buying the business in its then existing form: shop fit, stock, customers. It is also reasonable that you expect to be buying information necessary to run the business. Information is the fuel of any good business.
This is on my mind today because of a newsagency which was sold recently where the new owner discovered that the sales history and other business data had been deleted, leaving nothing with which to compare the performance of the business or to guide business decisions.
The people buying the newsagency have been denied access to a key asset which they assumed was part of the purchase. Their job for the next year has been made more difficult. They have no sales history at all. They didn’t want confidential customer account data, just information necessary to properly manage the business.
The people selling the newsagency decided to delete crucial business data for their own reasons. They would have known the cost to the new owners of this data not being available. Their choice has hurt the business they called home for years.
My recommendation if you are buying a newsagency is that the sale contract includes a special condition along the lines of:
The seller agrees to not delete, remove or change in any sales, stock of customer history or data stored in the business computer system or manual records without the written permission of the purchaser.
While such a clause may be more onerous that some newsagency sellers would want, use it as a discussion point.
Industry associations should play a role here and ensure that the business settlement addresses this and other issues – especially since they have commercial relationships with newsagency brokers. The future of the channel depends on new people coming in. One way to ensure this is to offer some guidance around change of owner best practice.
When a newsagent sells their business they are selling the business as it operates. Data is crucial to business operation. Selling an operating newsagency without historical data is like selling a car without any fuel in the tank.
The most accurate way to determine the value of stock being sold with a business at the time of changeover is to use the stock value in a Point of Sale system used by the business and where a stocktake is done, using the system, at changeover.
The resulting stock listing and valuation is based on actual buy price of the stock and not a calculation of implied cost using the retail price as a starting point.
The old school manual stocktake method relies on a physical count just like the computer stock take. The difference lies in the calculation of the cost price. Some stock takers ask the outgoing newsagent for their mark-up. Others get some invoices and work out the mark-up based on some samples – this also relies on information provided by the outgoing newsagent.
The only accurate stocktake is based on real cost price data and real stock on hand count data. Anything less is inaccurate.
It is my experience that the incoming newsagent, especially one buying a newsagency for the first time, is the most vulnerable in the current common approach to stocktaking as they don’t know of tricks which can be used to inflate the stock buy price.
As they say, let the buyer beware.
People interested in buying a newsagency would be well advised to check with lease consultants and or landlords given the number of new newsagency locations available right now.
I have seen a list of thirty quality shopping centre locations across the country. Many, but not all, are in new centres where the landlord is looking to attract a national brand business to sit appropriately near other national brands. Some are to be a second newsagency in an existing centre.
While some people prefer to purchased an established business, others enjoy the process of creating a new business from scratch. This is where the greenfield opportunities can appeal. It is also where we can attract new operators to the newsagency channel.
I feels to me as if there are more greenfield opportunities today that for the last few years.
I’m aware of three new newsagency locations available through my involvement with newsXpress. One each in Victoria, New South Wales and Queensland. Each is a greenfield shopping centre based location set to open early in 2010. If you know of anyone interested in opening a next-generation newsagency, please pass on my details: 0418 321 338.
Often, brokers handling the sales of newsagencies add back owners wages to the profit of a business before determining the selling price. For someone who has not purchased a newsagency before this can provide a false view of what the newsagency is worth. They see a ‘profit’ of $150,000 a year and think that is a nice return. Once you factor in that the husband and wife running the business together put in 100 hours a week, the real net profit of the business is under $50,000.
My view is that the multiple, if used in setting the sale price of a newsagency, should be based on real net profit and that real net profit must reflect a fair wage for the owners time working in the business.
I have seen recently situations where the add-back approach results in new newsagents paying over the odds and wondering, three or four months in, why they are not making the money pitched by the vendor and their broker.
I appreciate that this is a contentious issue. It is, however, something we need to discuss and resolve. The financial health of our channel depends on new newsagents joining us on fair and equitable terms.
Through my involvment with newsXpress I am hearing of more newsagency for sale opportunities through landlords looking to get national brand representation in their centres. Right now, I am aware of newsagency locations available in Queensland, New South Wales and Victoria. Some are greenfield locations and others are existing centres. I’d be happy to point interested parties to the landlords involved. I can be reached on 0418 321 338.
I have been working with several new newsagents in recent weeks to help resolve issues arising from poor handover from previous owners. In each case, the main issues could have been resolved with the outgoing newsagent providing a document at settlement which details information crucial to the running of the business.
Instead of a gracious and open hand over, I have seen situations recently where the outgoing newsagent actively sought to make life difficult to the incoming newsagent. People who have never owned or operated a newsagency before are particularly challenged in this situation.
One handover document I saw last week was appalling – from someone who ought to have known better.
A poor handover damages the reputation of the outgoing newsagent and the newsagency channel overall. It is in our interests to structure this process. I’d like to see a common handover document adopted. This could cover:
I am sure there is more which could be added to this list. This is something I would like to see Associations work on. It would be a valuable resource they provide to incoming newsagents and practically demonstrate the value of association membership.
If the new newsagents I have been working with recently were provided the information I have listed, their past few weeks would have been a more enjoyable introduction to the newsagency channel.
I met with a newsagent in Sydney tonight to talk about challenges faced by the business. Answers for the key challenges are in their business data. The biggest challenge is understanding that and then leveraging the data to guide a solution.
The newsagent is relatively new to our channel – less than a year. They came to us with a background of success in another retail channel. They made all the right moves including completing the required supplier specific training as well as the industry endorsed ANF training. None of this training equipped them for the newsagency specific challenges they face.
We let new newsagents down. Our training of new entrants is inadequate. The business management support infrastructure outside one or two marketing groups is almost non existent.
The newsagent found me through this blog. I have no other connection to their business. I am glad to help where I can. Indeed, each situation I encounter like the one I found tonight, is educational.
The key problem I saw tonight was a business making decisions on out of date data. Their accountant provides a P&L six monthly. The only guide as to how the business is travelling is their bank balance.
They buy stock based on what they see they need and based on what supplier reps order for them. They process magazine returns using distributor websites. No one is driving them to change their practices – suppliers have provided website work-arounds which bypass industry EDI standards.
We let ourselves down from the first new newsagent training session through to their early months.
An overhaul of how we bring new newsagents into our channel, how we educate them and how we support them through their early months is years overdue. We have too many relatively new newsagents falling behind, hurting their businesses and the channel more broadly.
This is an issue crying out for national attention.
As for the newsagent I met with tonight, they will quickly address what needs to be addressed. I am confident or a turnaround in the next three months – we are developing a plan which will improve the business and build their knowledge. I am blogging about the meeting and the training issue at their suggestion – they feel let down by the introductory processes.
Newstrade is running a seminar for anyone interested in buying a newsagency on July 22 – in Burwood, NSW. This seminar is an excellent opportunity for anyone in NSW considering buying a newsagency to find out more about the newsagency business and the process of evaluation and purchase.