I was approached recently to consider purchasing a newsagency which had been on the market for a long time. The owners were in dispute and wanted out urgently.
The figures provided were what I’d call creative. While I could see the business was losing money, a first time business buyer might have seen otherwise given how then information was presented.
The shop itself looked good, the shop fit quite new. But it was old school. It would have looked relevant in 1980 but not today in 2014.
The business had lost one magazine distributor direct account. The stationery department looked okay but tired. the card department looked the best.
With plenty of the stock old and given the business was losing money I said I was not interested. When pressed I said if I was to make an offer it wold be based on no goodwill and a payment of around 75 cents in the dollar of the wholesale cost of the stock. I said this knowing the business $50,000 in new stock and around $50,000 in replacing fittings – just to get started. So there was no point to me in rewarding the vendor for their poor management and poor decisions.
It turns out the vendor was told what I would pay – even though it was not an offer and was only mentioned in a highly conditional way.
The business has now been sold for a higher price than I would have contemplated. That tells me the purchaser has paid too much. The question on my mind is – has anyone told them they paid too much for the business? If not, they will experience sticker shock within three months of settlement.
Those of us in the newsagency channel for the long-term owe those coming into the channel honest advice.