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Selling your 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

Preparing your retail newsagency business for sale

Selling a retail business is like selling a house, you need to prepare it so that it looks appealing to prospective purchasers. Selling a newsagency is more challenging because of assumptions out there and changes in what a newsagency is can could be.

Here is my updated advice on preparing a newsagency for sale.

  1. Make it look and feel appealing. While there are people who will look for a challenge (opportunity). Most buyers will want two see a business they understand and feel they can run.
  2. Eliminate dead stock. It looks bad on the shelves and looks bad on the books. Purchasers should not pay full wholesale for inventory more than six months old as your poor buying or management is not their obligation.
  3. Streamline operations. Make the business look easy to run by ensuring it is easy to run for you. The easier it looks to run the more interesting to people who don’t understand the business.
  4. Maximise profit. What anyone will pay will depend on actual profitability of the business.
  5. Be happy. Owners who talk their business down will find it harder to sell the business.
  6. Keep your social media presence up to date. Today, many people check out a business online prior to looking at it in-store. Maintain up to date Facebook, Instagram and elsewhere.
  7. Get your paperwork in order. Early on, get business documents together:
    1. Premises lease.
    2. Equipment lease.
    3. Employee records.
    4. Product forward orders.
    5. Franchise documents.
    6. Supplier agreements.
    7. Details of any forward orders.
    8. Any other documents relating to the operation of the business including manuals for any equipment items.
  8. Choose a broker for your circumstances.

Success at selling your newsagency business depends on the work you do to prepare it for sale. Focus months, even a years, out can make for an easier and better sale.

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Selling your 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

WHY YOU SHOULD VET EVERYONE WHO ASKS FOR ACCESS TO YOUR BUSINESS DATA IF YOU HAVE YOUR NEWSAGENCY FOR SALE

When you list your retail business for sale, I suggest you have a clause in the agreement with the broker requiring them to get approval from you before they provide any business data to any party enquiring.

I am aware of several situations in our channel where a party has enquired and used the data obtained through the broker about the seller’s business to directly approach the landlord to seek to take over the lease.

I have been told of parties using the business data and a relationship with a landlord to facilitate them getting a business for no goodwill.  I am told of newsagents who have lost considerable sums because of this.

My advice is that you should personally approve every party you permit to have access to your business data and that you make this decision after careful through and consultation.

Yes, there are unscrupulous parties in our channel who fake interest in buying a business to provide them access to information they can leverage to their advantage and your disadvantage.

I appreciate the temptation to provide data to every party that enquires about purchasing your business because you are most likely keen to sell. Please do not let your keenness blind you from careful consideration of every decision you make through the process. You can’t take back data you have shared. It could be that you realise too late that a party on the other side is not honourable, as have others I have spoken with.

What I have written here is more relevant for shopping centre based businesses than those in high street situations as shipping centre landlords are, in my opinion, more likely to work with other parties to the detriment of an incumbent tenant. I have seen this happen too many times in our channel and in other retail channels, to the harm of the seller.

  • Be careful who you trust.
  • Vet everyone who seeks access to your data.
  • Control who has access to information about your business.
  • Make thorough notes abut every discussion.

I get that some will see my comments here as paranoid. That’s okay. All I can do is share my opinion. I could considerably focus attention by naming names. I won’t do that here because they would sue for sure. All I can sale is seller beware.

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Ethics

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
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