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.