In this digital age, the newsagency sector has expanded, necessarily evolving from selling just magazines, newspapers and snacks.
Now with a diverse range of products, tailored to the local demographic, they’re still the shop at the heart of many communities.
The Australian Newsagents Federation (ANF) states that there is ‘no end to the growth opportunities’ available in the newsagency sector and that ‘moving forward with the ever changing retail landscape will be an exciting journey’.
A promising statement for new buyers, and making it no better time to sell.
However, selling your business is a big step, and how you plan and structure your exit can have a dramatic influence on the return you will see from your investment.
After owning and operating 5 newsagencies in the past 20 years, entrepreneur, John Emmery has recently diverted his expertise to helping clients buy, sell or improve their business.
If you’re thinking about selling your newsagency, but have decided to go it alone without a sales broker, here’s his advice:
Make sure you consider your target market. What kind of buyer are you hoping to attract? Try to tailor your advertising to this specific market.
Advertise, Advertise, Advertise
Advertising your business is the first major step towards selling it. Today, there are many marketing avenues to choose from. Pick those that are cost-effective.
‘Make sure you include the name of the suburb to motivate potential purchasers (as would a real estate ad).’
Prepare your sales document - this is normally a 3-4-page document, either given, posted or emailed to the prospective buyer. The sales document should contain the following:
Key Selling Points
What are the main reasons a buyer should choose your newsagency over the competition? These key selling points may include good parking facilities, up to date systems in place, well-trained staff and a loyal customer base.
Photos: Don’t underestimate the power of a photograph. A great set of photographs makes a good first impression and draws in the potential buyers. Consider using the services of a professional photographer, especially for low light conditions and indoor shots.
Potential Opportunities: If you can see potential for improvement, then shout about it – see it as a positive attribute rather than a negative – allowing the new buyer to expand and make the business their own.
‘Include some potential opportunities for the purchaser to increase the sales and profits of your business, e.g. planned local housing developments, categories of goods & services not yet available, system improvements’.
Advertised profit & loss statement: The facts and figures will be under inspection by the potential buyer at the due diligence stage. ‘Prepare an advertised P&L based on the last complete financial year, in the industry-standard format.’
Take a look at the sales and profit margin shown by category, the expenses and net profit of the business prior to the full financial year (excluding GST) and make sure they are as accurate as possible. (Note that the data will probably differ from your official company’s BAS reports or official P&L.)
Things not to include
You do not need to include the wages of two full time employees (this is now industry standard), expenses that are not directly related to the business or those that would not be applicable to the new buyer.
Let’s talk about money
John states the price ‘will be partly based on how quickly you want to sell’ your business.
Do you have a set timescale, or are you willing to wait longer for the perfect buyer? Bear in mind that the buyer is the most valuable customer you will ever have.
Don’t forget to ‘consider the advertised price of other newsagencies in respect to their net profit’ in line with your own asking price. (It is expected that the price will be reduced by 15-25% at the negotiation stage).
Other costs to consider
Goodwill: An intangible asset to any company: the value placed on your brand name, solid customer base, patents etc. What is your goodwill worth? Make sure you get a realistic valuation.
Fixtures & Fittings: This cost is not just the replacement value or book value. It is also ‘what the market will bear’ - for example ‘the current average advertised value is around $60,000’ (prepare yourself to reduce the price at the negotiation stage).
Stock: Make an estimate of your stock value (at cost, excluding GST). Make the assumption that you will have to reduce the stock in the months before the final settlement. As tempting as it is, resist the urge to strip down the shop, as this will affect your last sales and/or the sales of your prospective buyer.
Get your business valued by a credible and realistic source. Once you are happy with the valuation, agree an asking price with your prospective buyer.
At this stage your business is an open book. Make sure you have been as honest as possible to avoid any hiccups in the due diligence process.
The more open you are with the information the more time and money you will save when the data is double-checked.
Both parties are required to sign a provisional contract, including the assumption of approval by the key suppliers and the provision of a satisfactory lease.
The purchaser will be expected to place a deposit of 10% of the goodwill and fixtures and fittings price with the solicitor.
The purchaser will be required to complete a lease application and supplier’s contracts. This part of the process normally takes between 2-3 months.
John warns that in several cases ‘for example NSW Lotteries, some supplier’s contracts are now quite complex and challenging’ so patience may be required.
The day before the settlement, an independent stock taker usually counts the stock. Settlement normally takes place at the end of the week, after a last stock take, and this is when the rest of the money is paid to the seller.
And John’s final words of advice: ‘Your focus should be to market your business, rather than on selling it!’
Ready to sell? You are just 10 minutes away from advertising your business to 1.3 million prospective buyers.