Australian Newsagency Blog

A blog on issues affecting Australia's newsagents, media and small business generally.

Why a newsagency can be a good business to purchase

Mark
February 25th, 2011 · 80 Comments

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.

7 likes

Category: buying a newsagency · newsagency of the future · Newsagency opportunities

80 responses so far ↓

  • 1 Brendan // Feb 25, 2011 at 8:25 AM

    Mark, as you have said, we regularly have customers comment that they found what they wanted with us after searching around bigger centres and retailers.

    The challenge is to educate them to start looking locally before they search far and wide for product we either have in stock or can obtain within a few days.

    2 likes

  • 2 Derek // Feb 25, 2011 at 9:40 AM

    Mark

    A well written post!

    It was good to see you write about Print although facing challenges / changes, print will still be around for a while in its current form.

    I would not want to spoil this genuine positive post as I do agree with you.

    My concerns regarding the current valuation model (unfortunately Mr G. Day did not reply to questions regarding this sometime ago and I can understand this as this is the business he is in), future deregulation of traditional Newsagency services and due diligence when buying a Newsagency, especially a tired one. Maybe that is for another time.

    1 likes

  • 3 Mark // Feb 25, 2011 at 9:53 AM

    Derek,

    Personally I would move away from the current valuation model and develop a model where a multiple of genuine profit is used. First time newsagent buyers get confused with the spin of add backs.

    1 likes

  • 4 Derek // Feb 25, 2011 at 10:11 AM

    Mark – I agree, First Time Newsagents need this type of insight.

    1 likes

  • 5 SBC // Feb 27, 2011 at 4:16 PM

    I would like to know how a newsagency could be considered a good business when the working hours are well over 70 hours per week. The hourly rate must be very low. Im wondering how many hours you actually work, Is it really a good proposition?

    3 likes

  • 6 Mark // Feb 27, 2011 at 4:20 PM

    SBC, The hours can be what you want. A traditionally run newsagency can be streamlined and many tasks trimmed to save time for the owner as well as employees. Smart newsagents are expanding product mix to increase margin dollars per sale.

    Yes, they are a good business to won. Buy for opportunity.

    4 likes

  • 7 SBC // Feb 27, 2011 at 5:16 PM

    Thankyou for the information Mark 🙂

    2 likes

  • 8 peter // Feb 27, 2011 at 7:05 PM

    “The hours can be what you want”. As far as small business is concerned that statement ranks alongside “renovators delight” in the real estate game.

    1 likes

  • 9 Mark // Feb 27, 2011 at 9:03 PM

    Peter, I meant what I wrote. Many newsagents engage in what I’d call busy work, handcuffing themselves to their businesses. There are processes which can be streamlined and some which can be eliminated altogether. It is a matter of proritising and using the right people for each task. An average newsagency does not need an owner/manager unless they want to be there in that role.

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  • 10 peter // Feb 28, 2011 at 7:38 AM

    I disagree Mark. If you want a profitable, well run newsagency, prepare yourself for long hours.

    Particulary with home delivery, you can’t avoid it. The margins are too slim and the cost of weekend labor is too high.

    Moreover you need to be in touch with your business and your customers.

    It doesn’t matter how many bells and whistles your computer system has(I’ve had and used them all), magazine returns are time consuming and staff and customers will still steal.

    Newsagencies are not Mcdonalds, you can’t leave a few pimply faced teenagers in control

    3 likes

  • 11 Mark // Feb 28, 2011 at 8:03 AM

    Peter, my comments are about retail only newsagencies. I got out of home deliveries four years ago and recommended others do the same. The home delivery business is best done by specialists and not retailers.

    My comments are not so much about computer systems as about letting go of old processes, stopping spinning wheels and creating an efficient structure as a modern retailer.

    0 likes

  • 12 Former newsagent // Feb 28, 2011 at 11:35 AM

    Can’t help but comment on this post. Don’t like being negative but anyone interested in entering the newsagency channel needs to do so with their eyes wide open.

    I agree with all Mark’s points although I must say that for someone who’s been banging on for years about the death of print media and how I pads are going to rule the world, you have a temporary change of heart!).

    One critical point is missing … traffic. I don’t care what anyone says about “revitalizing” with new lines such as books, gift ware and ink etc, at the end of the day this is a high volume, low margin category.

    Only businesses that have the good foot traffic will survive. Ideally, good foot traffic in a building that is owned as freehold. And you must be prepared to put in the hours, the more wages you pay the less goes in your back pocket (it’s a simple equation).

    I’d say only 10% of all newsagencies are worth buying – those that can keep fixed costs like rent and wages down and have the necessary turnover to pay for all the other costs. Many people looking to buy a newsagency get conned by the ‘everything is sale or return’ line and think you can’t go wrong. But when you’re only making peanuts on home delivery, 5% on many lottery transactions and 25 cents on a Daily Telegraph is doesn’t pay for all the other costs of doing business. I speak from experience. I got out just in time and the people that bought my shop went under in 18 months. Three newsagencies have closed in the Hunter Valley in the past 15 months.

    Unless you are 110% sure the maths work buy a Subway franchise or a Gloria Jeans – you only have to work shopping centre hours, people always have to eat and your re-sale value is a better bet.

    11 likes

  • 13 Mark // Feb 28, 2011 at 11:48 AM

    Former, I have not claimed that print will die or that iPads will rule the world. No, no change of heart at all.

    My blog post was designed to provide perspective.

    Smart newsagents are driving new traffic. They are also developing a better margin story. There are plenty of success stories out there.

    yes, there are bad stories too. There is no doubt that the channel is undergoing consolidation. It is not over, not by a long shot.

    For the record I note that I think print will continue to decline. However, this will be over time. Right now, smart newsagents have an opportunity to leverage traffic. This is where good retailers can be opportunistic in buying businesses.

    The bigger challenge for the channel than print is the lack of good retail management. On a range of fronts we are our own worst enemy.

    2 likes

  • 14 KMc // Mar 15, 2011 at 1:30 PM

    Late last year we liquidated all assets, including the family home, and paid cash for a medium to large newsagency. We planned and researched for 3 years before we took the plunge. We are very happy but profit wise we are treading water and right now we would have been better off leaving the money in the bank. BUT we are living and learning and we can already see more opportunity than risk. Over 600 people visit our store each day and spend an average of $8.xx each. Plus we generate over $4000 per day in home delivery and sub agent sales. It is a magnificent basis from which to find efficiencies and profit opportunities. The big challenge is staff. We have a great delivery team, but getting good staff for direct customer contact areas is a huge problem. We thought we were buying a business that was big enough for working on, rather than in. But lack of faith in our shop staff and the huge difficulty in replacing them is an enormous unresolved challenge. Any Tips?

    2 likes

  • 15 KMc // Mar 15, 2011 at 1:39 PM

    Wehave great faith in the newspaper model, as a means of news and information distribution, and an advertising medium. Although you can already see a emerging trends in title consumption patterns, across the days of the week news paper sales in our business are in fact increasing in total. People who don’t work in offices (and theres a lot of them) will not take news from a hardware device that they have to lug around. They will always want the portability and disposability of a newspaper.

    If you haven’t bought your business yet look at businesses in bluecollar areas and stay away from affluent neighbourhoods.

    1 likes

  • 16 archie // Apr 11, 2011 at 8:03 PM

    I am currently looking at a newsagency in a small country town which has three licenced outlets. Being regulated, does mean that no more newsagencies can enter the market place,in this town?.

    1 likes

  • 17 Mark // Apr 11, 2011 at 9:33 PM

    Archie, newsagents are not regulated. That said, in a small country town I;d bet you are pretty safe.

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  • 18 shaun s // Apr 12, 2011 at 7:01 AM

    i thought there were restrictions on how close or how many for golden casket ??

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  • 19 archie // Apr 12, 2011 at 6:16 PM

    I,m at two minds at what to think about the newsagency business. It looks good from the out side but maybe to marginal,for the time and effort.Thanks mark and shaun for your comment. By the time you borrow money and then try and make a living out of the business,makes you sit back and take note.

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  • 20 Steven // Apr 14, 2011 at 9:39 AM

    Archie, don’t by a newsagency. Run run run. Keep your money and your sanity. There are lots of reasons why, but I consider the magazine issue the biggest (in terms of cash flow killer). Everything is going digital, the print industry is in decline, the Apocalypse is near.

    5 likes

  • 21 fred // Apr 14, 2011 at 10:59 AM

    Easiest money I ever made In 7 years we bought 2 houses 50g plus in shares new euro car and still with the first wife and 2 kids. As for the internet well bugger me they brought out Nett magazine again, just work at it Kmc.

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  • 22 Herewegoagain // Apr 14, 2011 at 11:44 AM

    Steven, have you owned a newsagency?
    If you manage your magazines correctly there isnt a cashflow problem. With a bit of work you can get a regular cycle going. I dont spend anymore time on my mags than any other part of the business and I dont get hugely fluctuating accounts.. And depending on where you purchase a lot of people will NEVER go digital..

    Stop the scare mongering…

    I love what I do owning and operating a newsagency.. I am grateful I dont own a cafe, takeaway or other business where profits are 50 to 70% down.. We are sitting steady and newsagency channel always seems to do that from talking to different brokers, business people etc.

    2 likes

  • 23 Steven // Apr 14, 2011 at 12:49 PM

    Herewegoagain, I do own a newsagency.

    “If you manage your magazines correctly there isnt a cashflow problem”

    Are you serious? Have you actually had dealings with NDC or GG?
    I guess by that logic, all the newsagents closing because of financial trouble just didn’t “manage” their magazines properly…..

    As you should know, the costs (labour, etc) involved with trying to reduce the magazine flow and send back the crap you don’t want is enough to put a nice dent in the profits.

    Yes, not everyone will go digital, but with publishers around the world (newspaper and magazine) losing money, how long do you expect the current medium to survive?
    Even my 90 year old grandmother prefers reading the paper on her ipad.

    Archie, again, run away.

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  • 24 Mark // Apr 14, 2011 at 3:20 PM

    Steve, I agree that managing magazines is a challenge. Both Gotch and Network do us no favors at all. They will disagree but the evidence stacks against them.

    That said, I know of many newsagents doing well and growing. It all comes down to the overall approach to business.

    At the right price and in the right circumstances I would buy another newsagency.

    I currently own three.

    2 likes

  • 25 Paul S // Apr 14, 2011 at 6:58 PM

    I’m just coming up to my 12 month anniversary of ownership of a combined newsagency/post office. My thoughts are if you’re afraid of hard work : DON’T DO IT. If you’re unwilling to engage your customer base and think a little bit outside the square on how you operate: DON’T DO IT !

    If you do enjoy dealing with customers many of whom you’ll grow friendships with, if you don’t mind grafting for a quite reasonable reward and do enjoy a bit of a challenge and seeing succesful resolutions as a result of your work then a newsagency may be for you.

    For the first 6 odd months I was here I scratched my head daily and wondered what I had gotten myself into. For the last 6 months things have started to fly for me with customer numbers, turnover and profit up on last years numbers under the previous owner. I also have a real feeling of being part of the community and am told regularly by customers what a difference I’ve made and how much they enjoy coming in. That is true job satisfaction.

    Like just about any business you can make of it what you want to. Mark, and I don’t always agree with all his comments, regularly makes points here about different ways to operate and taking off the blinkered historical newsagents glasses and this is what you need to do to be successful. It’s all about how YOU run and manage your business that will make the difference.

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  • 26 Lwp // Jul 23, 2011 at 10:31 PM

    Being looking into at buying one…hoping someone can assist with some info to the following questions:

    1) comment about exclusive territory & not regulated- I noticed there are various “franchisees” (newspower, nextra, newsXpress, etc). Question- does that mean more than two agency can be in the same street? How is the paper run/territory is determined and the lottery rights?
    2) what is the current industry price earning ratio, or say if I pay $100 for the business how many years will it take to recoup my $100?
    3) 25cents per paper delivered then 100 paper to get $25…would it not cost more than $25 (2hours labour, petrol/wear & tear) and plastic wrap)

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  • 27 Mark // Jul 24, 2011 at 7:24 AM

    Lwp,

    1. On the marketing groups, some regulate the location of branded businesses, others do not. You would need to do your own research directly with them. I own 50% of newsXpress and can advise that it would not allow a business in direct competition unless the incumbent member agrees.

    2. There is no easy answer to this question as it all depends on the financials of the business you purchase. Do your homework. Look carefully at the actual business P&L. Do your due diligence.

    3. This again depends on the business and the efficiency of the home delivery runs. From what I have seen, the majority cost more than $25 per 100 papers. Also, I’d note that you don;t always get 25 cents per paper delivered.

    2 likes

  • 28 Steven // Jul 24, 2011 at 10:19 AM

    Lwp.

    in terms of territories, Neither Intralot or Tatts give you any. They can open an outlet down the road, or in the same shopping centre. The do check to see if it would be viable to do so. (supposedly)

    You do have a territory with your newspaper distribution run. This includes all your sub-agents.

    As for the distribution run costs, it depends on the length of the run vs the number of deliveries. In my case, home deliveries are run at a loss. The only thing which makes me keep the contract is my sub-agent accounts.

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  • 29 Lwp // Jul 24, 2011 at 1:02 PM

    Thanks Mark & Steven.
    From what I can see, newsagency has only two 2 major drawcard:

    1) the distribution right to the paper run/territory, hence can I be person that determines who can be my subagent in my territory? Or I do I need permission from the publishers?
    2) the lotto/lotteries rights in my territory or can the lotto/lotteries company share this with another?

    By the way I am from NSW.
    Thanks again to all contributors to this blog. It is most useful to me as I continue to do my research before “taking the plunge.”

    1 likes

  • 30 kmc // Jul 24, 2011 at 3:22 PM

    lwp – Key to this is: don’t think in 100s , think in 1,000s. We home deliver <2000 papers per day. Delivery fees should cover labour and wrapping – we try to keep the margin in the papers. If we did nothing else we could live off that.
    But we need the scale to justify the labour. Retail theoretically is the cream on the cake, but it is very easy to waste money on labour here. keep a tight roster, and you should be OK.

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  • 31 Mark // Jul 24, 2011 at 3:39 PM

    Lwp,

    Newsagencies can have more drawcards than lotteries and distribution. Plenty more.

    You can be the go to outlet for magazines, gifts, stationery, toys, business services, party supplies, local service etc.

    In today’s environment it is vital that you have a Unique Selling Proposition which is outside distribution and lotteries.

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  • 32 Brendan // Jul 24, 2011 at 5:13 PM

    LWp, there are a lot of succesful subagents that do not have distribution and in fact live off half the commission rate. Papers lotto etc are a reason for customers to visit the store but cards, gifts, stationery and for us lately art supplies, are where we make our money. It does depend on what sort of shopping centre the business is located in as to what will be the current and future strengths of the individual business.

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  • 33 kmc // Jul 24, 2011 at 5:42 PM

    One more thing: Dont believe your vendor when he tells you how much the existing staff know. Be prepared to learn everything from the ground up.

    3 likes

  • 34 Ricky // Sep 11, 2011 at 3:48 PM

    Been in here 1 year now. The previous owner told us to let the”girls” take care of the magazine side. We have concentrated on learning other aspects of the business

    After many months of no positive cash flow we are closely looking at all depts.

    We have taught ourselves many things about magazine management in recent weeks. It’s scary, really scary. Iffe we knew beforehand how complex magazines management is may we have been better off to buy another business. WHatever

    2 likes

  • 35 peter // Sep 12, 2011 at 6:15 AM

    ricky, mags dont have to be hard…. and they are definatly something you should monitor yourself.
    use your pos system reporting and keep your chin up.

    1 likes

  • 36 Mark // Sep 12, 2011 at 7:43 AM

    Ricky – newsagents should ‘own’ magazines. They are a key point of difference. Use magazines to build a strong business. I obsess about the category with success.

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  • 37 David // Feb 15, 2013 at 11:56 AM

    Hi All,

    Seeking Advice.

    I currently own a stationery Business located in Central West NSW. Population 40k. I have had the business for 12 years and it has been quite successful for 21 years. 2 years ago an office works had opened up and my walk in trade has dropped by $15K per month.

    I am now trying to get back some of at least the walk in trade.

    Meanwhile there has been for many years a quite successful newagency accross the street from me. Successful based on perseption whenever I went in there.

    3 years ago that newsagency had to move (didn’t renew lease 3 motnhs before due and Katies moved in) and they moved into the back of an arcade. The owner after 6 months tried to sell it to me but I was not interested because of the 3 year lease and its location. It also ment I could not move my courent business into his premisses as it was to small.

    He ended up closing down and someone purchased it in the 11th hour. The current owner is now walking out as they cannot find a buyer and they have lost money and are not willing to renew the lease.

    Although I have not seen figures, but I am only guessing that once electricity, rent, wages are built back into the P&L It would be making a profit.

    So I am thinking about looking further into it and moving the Newagency into my business. I have both off street parking and front street parking.

    There is also only one other newsagency in the main street which is 3 blocks away.

    I would like any thoughts you may have as I no very little about Newsagencies. Are there cost/fees that I am unaware of especially with Lotto.

    Also, if I decide not to take it over or we cant agree on a price, but still think its a good idea for increasing traffic, who do you suggest I contact about starting up a newsagency.

    Thanks for your help and feedback.

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  • 38 Steve // Feb 15, 2013 at 2:45 PM

    David, I can’t speak for NSW but I know in WA to take over an existing Lotto agency cost’s $1000 but to start a new one costs $30,000. So if your thinking of letting the newsagent shut shop and starting from scratch I’d get in contact with your state’s lotto and find out what the difference in cost to you would be. Your also in a town of 40K people so there is probable more than 1 lotto outlet so you want to be sure if the current agent closes you’ll be allowed to open a new one.

    1 likes

  • 39 SHAUNS // Feb 15, 2013 at 2:52 PM

    Also the fit out cost a small fortune 30 grand plus there as well .

    0 likes

  • 40 Steve // Feb 15, 2013 at 6:41 PM

    Shauns is right. the $30k I Quoted in WA gets you a lotto machine and a 5 year agreement nothing more.You would still have to do a fit out to lotteries standard which isn’t cheap. The thing is if the existing newsagents fit out is up to scratch and you can use it in your store the business may have more value to you than you think. The secret to buying a newsagents is the same as buying any business, do your homework and pay as little as you can.

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  • 41 Shaun's // Feb 15, 2013 at 8:28 PM

    We purchased ours for the lotto papers and mag accounts ran it for 2 months as is except we got tower . Packed it all up on a sat and moved it across the road to a new center and reopened on the Sunday .we could not have opend one up across the road without buying the old one because of lotto and also having no idea where to start . The lotto counter didn’t,t look the best but we saved 30 plus grand by using it and it is still being used almost 6 years later ,still have 4 or 5 years left before having to change

    2 likes

  • 42 Mark Fletcher // Feb 16, 2013 at 7:45 AM

    David, regardless of what you do with the newsagency, my experience in regional and rural newsagencies is that you have to reach out beyond your shop to connect with prospective customers.

    This can mean marketing campaigns, getting on local TV or radio, getting someone on the road.

    With respect, Officeworks (retail) is not so much the competitor to worry about. The real competitor in the stationery / office supplies space is the online business. Online stationery sales are booming in Australia – way more so than newsagents understand. The only way to compete is to match (beat) convenience.

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  • 43 June // Feb 16, 2013 at 4:31 PM

    Just a little off topic — I am moving to
    new premises in the next few weeks and
    I have a lot of fittings for sale.
    They are gift cubes, magazine racks etc
    and I am available on 08 83797578 if
    anyone wishes to talk to me about them.
    My email address is jasscar@bigpond.com
    The fittings are only 3 years old and are
    in excellent condition.
    Sorry, I couldn’t find another heading under which this could go.

    0 likes

  • 44 June // Feb 16, 2013 at 4:32 PM

    I should have added that I am in Burnside
    in South Australia.

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  • 45 David // Feb 25, 2013 at 5:36 PM

    Thanks for your advise Mark, Steve and Shauns.

    0 likes

  • 46 Daniel // Nov 10, 2013 at 12:35 PM

    Hi guys,
    Im been looking to start my first business, was interest in bottle shop and newagency & tatt. which bottle shop eliminated after researched. Newagency&Tatt combine is my first choice now.
    I been searching around forums for tips befor step in Newagancy & Tatt business.
    I found here good place where helpful tips came from Newagency & Tatt owners.
    Im looking to buy one, what should i beware of? please give advice into details (not common like: buying Newagency like any other business, do your homework!) im only 30 years old still have alot to learn from older, surely not as much experience like any of you guys here. So much appreciate if you can give me as much details as you can.
    Also, what the advantage of stand alone shop and shop in shopping center? (i dont own the property anymore, will that be a problem to get in shopping center?)
    Should i start off with independent or franchise Newagency?
    Base on what it tell the Newagency have good potential beside a proven income paper? There are varies selling price which some took 2 and half years for invest return, some took 3 and half years. I learned a lession while i looked at bottles shop forsale. Selling price which equally 1 and half years business net income profit, too good for me to be true! Im young man still, i dont want to be coined cause of my tiny experienced.
    What would be an idea for Newagency location?
    Sorry my incorrect grammar if there are as English is my second language.
    Thanks alot for taking time respond my numerous questions!
    Daniel

    1 likes

  • 47 Mark Fletcher // Nov 10, 2013 at 12:45 PM

    Daniel, start by finding a business that suits your situation: live close by, within your price range and has upside (opportunity).

    The price you pay is the price you think the business is worth. You don’t have to pay that the vendor asks. If they want to sell they will negotiate.

    Here’s a link to my due diligence suggestions: http://www.newsagencyblog.com.au/2013/06/27/suggested-due-diligence-for-newsagency-buyers/

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  • 48 Ween // Apr 15, 2014 at 4:14 PM

    I know this is a very debatable issue but with the rise of online availability to newspaper and magazines, are you guys (current newsagency owners) impacted? Also with the implementation of Opal card in sydney, will this affect sales of bus tickets?

    We are in the midst of buying a newsagency and are trying to do our due diligence… would appreciate some inputs from all of you.. thanks

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  • 49 Mark Fletcher // Apr 15, 2014 at 4:21 PM

    Ween, Some yes and some no. It all depends on how you run your business and whether you have introduced new products to attract net new traffic. As for Opal, if I was in Sydney I would not sell it. Transport tickets are not efficient.

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  • 50 Naresh // Aug 26, 2014 at 6:32 PM

    Hi Mark
    I am in start of buying news agency with lotto. It’s in small shopping centre in sydney. I have confusion that how the print media like magazines and greeting cards will still have good future left? I m getting mix review from several people about that. Is it worth to enter in this business now ?
    Thanks

    0 likes

  • 51 Mark Fletcher // Aug 26, 2014 at 8:28 PM

    Naresh, my view for the next three years: newspapers will continue to decline – how much depends on publisher engagement. Magazines will bounce up and down but not decline the same as newspapers – depending on publisher engagement. Cards the same as magazines BUT retailers can influence card sales more.

    The key is to buy well, for the lowest price possible. They add value with higher margin lines, leveraging traffic to build a better business.

    Smart people in this channel have a medium term plan and a long term plan.

    I might expand on these thoughts in a separate post.

    Newsagencies can be excellent businesses to invest in and own.

    1 likes

  • 52 Cath // Aug 27, 2014 at 2:35 PM

    Hi. I am looking at purchasing a laundry service with sub-newsagency. Unfortunately it’s not freehold. The shopfront is a mess. it is in a small centre with mostly restaurants a take away,hairdressers and a hotel. It has lotto rights (apparently). You would have to drive to the nearest competition. I have no other details as I have only just began looking. Any thoughts or advice?

    Incidentally, my other half is a printer of magazines & would tell you that there is a downturn in an over-saturated market but the industry is badly managed but not about to die. That industry also needs to diversify. That’s why you now get product with your magazines.

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  • 53 Naresh // Aug 27, 2014 at 5:59 PM

    Thanks Mark,
    With the news agency business, is it easy to get Post Shop or full post office permission?
    Does it cost lot to set up post office and can add value to business?

    0 likes

  • 54 Mark Fletcher // Aug 27, 2014 at 7:20 PM

    Naresh I’ve never had a Post Office so cannot answer these questions.

    1 likes

  • 55 Mark Fletcher // Aug 27, 2014 at 7:21 PM

    Cath the answers depend on data you get about the business. Sounds like plenty of upside though.

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  • 56 Naresh // Aug 29, 2014 at 5:09 PM

    Hi
    Is anyone know hot to get valuation for news agency business?
    Is there any calculation (formula) for it. Someone told me is some percentage of profit or sales.

    0 likes

  • 57 Mark Fletcher // Aug 29, 2014 at 5:40 PM

    Naresh it can be anything from 1 times to 3 times net earnings. The key is what you use for the net earnings calculation. Make sure it is real and provable. Do your due diligence.

    1 likes

  • 58 Alam // Sep 1, 2014 at 9:00 PM

    Hi Mark,
    I am looking for buying newsagent/lotto shop but little confused after reading this blog. I have found few businesses making 150-200K profit and asking price around 450-500K. If someone buy a business which has more than 150K profit record how can they force to close down in short time?
    Where can I get help to evaluate a business value professionally?

    0 likes

  • 59 Mark Fletcher // Sep 2, 2014 at 6:32 AM

    Alam, Make sure the reported profit is real, do your due diligence. The business is only worth what someone pays. This is what negotiation is all about. Use your own advisor. The broker represents the vendor. No, I am not criticising brokers – just stating the fact.

    In terms of closure, check the lease to understand what rights the landlord has.

    I’d be happy to look at anything for you. 0418 321 338 mark@towersystems.com.au

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  • 60 Naresh // Sep 5, 2014 at 9:15 PM

    Hi Mark
    If business is showing about 50k profit than what show be the buying price of business ( plus stock) ? Is it better to buy business with the lease or should negotiate new lease ? What type of special condition landlord may have which can create risk for business any idea?
    Thanks

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  • 61 Mark Fletcher // Sep 6, 2014 at 8:56 AM

    Naresh, The goodwill is whatever you are prepared to pay. Some are purchased on multiples of 1.5 times net earnings while I have seen others purchased on 3 times. It really does depend of what you think this specific business is worth

    On the lease, if the current lease is good and has good time on it then okay. If not, make the purchase subject to a satisfactory lease being negotiated within a reasonable period of time – and nominate the period of time.

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  • 62 Dorijan // Nov 10, 2014 at 9:22 AM

    Hang on. Are profits from magazines ? Not from the lotto tickets?

    And if lotto tickets do pay how much profit does it make per ticket? Because I’m from Sydney and I have never seen someone purchase a magazine for a very long time.

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  • 63 Mark Fletcher // Nov 10, 2014 at 9:35 AM

    GP from magazines is 25% and lottery tickets between 6% and 7%.

    Get out more to more newsagencies and you’ll see people buy magazines – our channel sells around half of all magazines sold in Australia.

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  • 64 jarrahd // Nov 27, 2014 at 12:04 PM

    The most you should pay for a news agency/ lotto stand is no more than 2.5x net profits.

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  • 65 emmon // Apr 21, 2015 at 9:35 PM

    I want to start a small news agency in local shopping centres selling lotteries stationaries magazines news paper etc. where and how do I start? who and where I will find the suppliers? who will supply lotteries?
    which company set up shops in shopping centres
    which company sets up eftpos and registers

    please advice

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  • 66 FirstTimer // Jun 5, 2016 at 10:13 PM

    Hi Mark,

    Thanks for your post.

    If someone says that net profit before tax is $95k (minimal owner involvement) and asking price is $350k including stock, what questions you think I should be asking? And do you think on the face value with that return, is it something one should consider?

    Your feedback/opinion will be greatly appreciated.

    Thanks

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  • 67 Mark Fletcher // Jun 6, 2016 at 6:47 AM

    FirstTimer be sure to read other posts here about buying a newsagency.

    Make sure the net profit before tax is accurate to your satisfaction.

    Make sure you know the accurate value of the store and make sure it is current stock and not stock from, say, five years ago, which has no value.

    The multiple paid on net profit is one you set. In other words, the business is worth what you are prepared to pay.

    Other factors include location, remaining time on the lease, opportunity for change and your own financial situation – such as how much of the purchase price you would have to borrow.

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  • 68 Colin // Jun 6, 2016 at 8:46 AM

    FirstTimer,

    Separate stock from the asking price and get it professionally valued at the acquisition. Do not engage in any discussions about stock inclusive prices.

    Carefully consider the physical state of the store, computer systems, signage. Newsagencies need investment. Consider the cost of bringing the shop up to date as part of the acquisition price.

    Never forget the broker is working for the seller and his commission. Check all figures carefully and use professionals to verify financials.

    Allow for the unforeseen. Your budget should have a 20% contingency.

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  • 69 FirstTimer // Jun 18, 2016 at 9:16 PM

    I am still taking to the owner. Getting weary about some of the things such as the company which runs the place never lodged a tax return as, according to the owner, all the profits were distributed to shareholders. I found this little unbelievable.
    I checked his records from past years from different owners which checks with his profit story. The place is completely run by staffs (some paid on CIH basis). Main profit is from newspaper delivery to subagents.
    Still very unsure. I have requested a few documents.

    Wishing myself good luck as I don’t hard earned money to disappear just like that.

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  • 70 Mark Fletcher // Jun 18, 2016 at 9:50 PM

    For every business there are records that can be audited and proof of income declared to the ATO.

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  • 71 FirstTimer // Jun 19, 2016 at 9:50 PM

    The owner has provided a set of accounts for this year and past years. I have asked him to substantiate the amounts.

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  • 72 Colin // Jun 20, 2016 at 10:25 AM

    Sounds like you are doing your own due diligence with a seller who has incomplete records. I strongly suggest you employ a professional in this process.

    Do not feel compelled to buy…….there are many businesses out there for sale.

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  • 73 FirstTimer // Jun 23, 2016 at 8:00 PM

    The intention is to involve an accountant and solicitor. But before that I need the owner to atleast provide all the docs for an accountant to look at.

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  • 74 Mark Fletcher // Jun 26, 2016 at 7:30 AM

    Be wary of the accountant as in my experience their lack of newsagency business knowledge can be problematic.

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  • 75 FirstTimer // Jul 4, 2016 at 10:43 PM

    The owner keep hammering that there is a cash component in the business hence the profit on the books are not the actual one. The actual profit is 20 grand more than the presented figures. I am so confused. There are 5 or 6 newsagency for sale and they take long time to sell.

    His asking price is almost 3.5 times his net earnings which I think is way too much.

    However I am relatively comfortable with the cash flow situation. I am thinking about offering 2 times his net earning and see where the negotiation takes us.

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  • 76 Mark Fletcher // Jul 5, 2016 at 5:56 AM

    As long as you can verify the net earnings.

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  • 77 Ken // Oct 5, 2016 at 6:48 PM

    I am thinking about starting a newsagency and Tatts outlet. I want to start in a new mall in a new suburb. How to go about initiating the process? Whom to contact? I’m in Vic for past 3 yrs so need some advice ..

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  • 78 Mark Fletcher // Oct 5, 2016 at 7:18 PM

    Ken you will need to see if Tatts would agree to their products being sold in the location, it Gordon and Gotch and Bauer would approve magazines being sold. They are your starting points. Their decisions or at least guidance are vital before you take next steps.

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  • 79 Nhan Ho // Nov 3, 2016 at 3:54 PM

    Gents,

    Just a quick question: I’m looking to buy a Tatts outlet which partly operated the owner, he works in the business 5 out of 7 days a week. In that case, is the P/L statement supposed to take into account the wages to be paid to himself?

    Regards,
    Nhan Ho.

    0 likes

  • 80 Mark Fletcher // Nov 3, 2016 at 7:33 PM

    Yes Nhan.

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