Buying a newsagency or any retail shop is a big step. The channel offers both opportunities and challenges right now. You must ensure the price is justifiable.
It should not be an emotional decision. You are investing your hard-earned money. You need a return on that investment.
When I assess a business, I want specific evidence. If a seller cannot provide this, I remain sceptical.
Here’s a new video from me about this:
Here is the kit of information you should request, as covered in the video.
The Financial Evidence
Demand the profit and loss (P&L) statements for the last three years. These should come directly from their accounting software. Do not accept “ad-backs” or “magical” broker adjustments at face value [00:39].
Match this with sales data from their point of sale (POS) system. I also suggest asking for their tax returns for the same period [00:55]. You are looking for a consistent narrative between what they tell the tax office and what they tell you.
Stock and Staff
Check the current stock on hand. I also want to know the age of that stock. I will not pay full wholesale for items older than six months [01:34]. That is not your problem to fix.
Review the roster and employee details. Understand their long service leave and other legal obligations. You need to know exactly what you are taking on [01:48].
Assessing the Risks
Consider how much the business depends on external factors. Lotteries are migrating online [03:45]. Newspapers and magazines are seeing annual declines [03:50]. Factor these risks into your valuation.
Determining the Price
A business is only worth what someone is prepared to pay. Do not focus on the asking price. Focus on what the evidence tells you it is worth [04:44].
Some owners hold out for high prices based on what they paid years ago. That is their issue to process, not yours. Your goal is to pay the least amount possible for a viable future [06:18].
Final Advice
Ask for all this information to be delivered at once. Avoid being drip-fed data [07:28]. Take your time. Be thoughtful.
New owners are the future of this industry, no matter what we call our businesses. I want to see you start on the best possible terms.
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Mark Fletcher founded newsagency software company Tower Systems and is the CEO of newsXpress, a marketing group serving innovative independent retailers who continuously evolve their businesses to be enjoyable, relevant and successful. You can reach him on mark@newsxpress.com.au or 0418 321 338.