Australian Newsagency Blog

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Suggested due diligence for newsagency buyers

Mark Fletcher
June 27th, 2013 · 5 Comments

My work with newsagents sees me get involved in many changes 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 – in addition to the usual:

  • 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. If they do not compare be wary.
  • Compare expected stock on hand by department with sales by department. Here you are looking for inflated stock – there is no point in paying fullprice for other’s mistakes.
  • 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.  I have seen a situation recently where sales were inflated with fictitious purchases.
  • Review roster sheets and compare these with claimed hours worked in the ‘normalised’ P&L a broker is likely to have provided.
  • 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. Review all of them and cancel any you are not happy with.  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. My goal is to help purchasers purchase based on accurate business data.

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.

Footnote: I have published a list like this several times here. This latest version reflects learnings following recent purchases.


Category: Newsagency for sale · Newsagency management

5 responses so far ↓

  • 1 Dave // Nov 11, 2013 at 4:51 AM

    This is quite interesting and it is certainly theoretically correct. When we bought our newsagency we looked quite closely at 6 or 7 businesses over a period of 6 months. None of them would provide this level of detail. Even when we signed a heads of agreement we couldn’t get any where near this level of information. You might say we should have walked away. But had we walked from every vendor who said no to the information request, we would never have bought. In the end we assessed the business on various other criteria and took a leap of faith. So far So good. We’re still here (after 4 years ) and the loan is almost paid off. By the way the broker ran interference all the way. I would add a comment about brokers and the fact that they work for the vendor to your list.


  • 2 Mark Fletcher // Nov 11, 2013 at 6:33 AM

    Dave where reasonable data cannot be provided to support a requested price then vendor needs to be prepared to negotiate the price. I’ve negotiated a discount for this reason previously.


  • 3 Raj // Dec 22, 2014 at 1:12 PM

    Hi Mark,

    Thanks for your wonderful post and checklist. I have couple of questions to ask :

    1. Who owns the risk of the material which has expiry date e.g confectionery items ?
    2. For the magazines/papers which are not sold, what sort of arrangement one can have with suppliers or as a owner you own the risk to hold the outdated material ?
    3. Is there any indicative guideline which provides % of profit against each category ?


  • 4 Mark Fletcher // Dec 22, 2014 at 1:29 PM


    1. Depends on suppler relationships. Ask the vendor.
    2. magazines not sold and returned within an agreed period of time are credited by the supplier.
    3. Depends on the type of newsagency and any special supplier relationships. For example, many newsagents achieve 50% GP for gifts, some much more and some much less.


  • 5 FirstTimer // Jun 5, 2016 at 10:12 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.



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