Month: April 2012

Banks have changed their guidelines on what they will lend to people purchasing a newsagency. People coming into our channel are experiencing this change.  It is only a matter of time before existing newsagents with considerable bank borrowings feel pressure from the change.

If your borrowings are more than 30% of the current market value of your newsagency you need to be ready to respond to your bank. Indeed, you need to be ahead of their call or letter.

The last thing you want is to have to reduce your debt level in a timetable not of your choosing.

Reducing business debt should be the highest priority in every newsagency in Australia in my view. Sadly, it is not. Indeed, some newsagents thanks to offers of cash from card companies and other sources, go way beyond maxing out bank borrowings, taking their businesses beyond crazy debt levels … and then some blame others when their debts are called in.

So, reducing debt should be the top priority of every newsagent.  If you do not do this you risk someone else driving it for you and that could be unpleasant.

There are considerable benefits throughout the business from a debt reduction plan. Often, the business becomes more efficient and more commercially successful.

The best approach to debt reduction is to consider what you would do if you were given no option but to eliminate 50% of your current debt in a short time. Think about it. Your back is to the wall. The back has written to you and called. You have no option. Selling will not happen in time. You have to reduce debt and free cash right away.

The only option in this scenario is to convince the bank that you are able to improve cash flow and thereby pay down the debt in a reasonable time frame.

Here are some suggestions to get you thinking:

1. Quit stock. Start with stock that is not selling. Move it around, get it together in a high traffic location and run a sale. But not a cheap sale. Give the sale a name, a purpose. Try and free up the cash from this older stock you have probably already paid for.
2. Quit stock part 2. If you have stock stored outside the business consider hiring a local hall (cheap) and running an off location sale.
3. Cut your roster. Every $30 saved equals $100 in sales.
4. Reward your sales staff in a smart way. Let’s say you sell $1,000 in stationery a week. Get your staff selling $2,000 in stationery in a week and tell them they will share in a $100 bonus.
5. Order carefully. Order based on sales data. Stop stocking up without though.
6. Upsell at the counter. Everyone at the counter has to spruik products to every shopper.
7. Chase creditors. If people owe you money get serious about collecting this.
8. Look carefully at your prices. There are bound to be stock items or services you offer which could carry a higher price. Increase your prices. Don’t be crazy. Small steps across the board can deliver good value to the business.
9. Be frugal. Question every dollar you spend. Assess the value it will bring to the business.

This last point is vital. Frugality is key to running a financially lean newsagency. Zero debt must be your goal. This will leave you with lower costs and a better return.

If your debt level feels hopeless do not let this debilitate you. Own the problem, face it and take small steps through the fog. Your small steps will stack up and get you close to the other side.

If you are facing massive debts and feel overwhelmed, feel free to email (mark@towersystems.com.au) or call (0418 321 338). I’d be happy to talk. You’re not alone.