Investing in a newsagency or any retail shop is a significant decision. The local retail landscape currently offers both unique opportunities and specific challenges. If you are considering stepping into business ownership, you must ensure the price you pay is justifiable.
To make an informed choice, you need a solid kit of information. Relying on emotion or a broker’s “magical” adjustments can be risky. Instead, focus on the facts and the evidence. Here’s a new video at our YouTube channel on this: https://youtu.be/VGVdhgT46LE
The documents you must request
When assessing a potential purchase, ask for these specific records. Ideally, all information should be provided at once, rather than dripfed.
- Financial Statements: Request the actual Profit and Loss (P&L) statements from the accounting software for the last three years. Avoid versions with heavy “ad-backs.”
- Sales Data: Ask for the sales data directly from the Point of Sale (POS) software. This should tie back directly to the P&L statements.
- Tax Returns: See what has been reported to the tax office over the same three-year period. This helps verify the accuracy of the narrative you are being told.
- Stock on Hand: You need a current figure and, crucially, an understanding of the age of the stock. It is reasonable to ask for a discount on any stock older than six months.
- Staff and Roster Details: Review the details of every employee, their length of service, and any accruals for long service leave or other obligations.
Determining the true value
A business is only worth what someone is prepared to pay for it. While a seller may have a specific number in mind based on what they paid years ago, that is not your responsibility to fix.
Consider how much the business relies on external factors. For newsagencies, look at the percentage of revenue coming from lotteries, newspapers, and magazines. These are sectors where traffic and revenue are often declining or migrating online. Factor these risks into your final valuation.
Making your offer
Once you have assessed the evidence, decide on a number that works for you. Ask yourself: “If I miss out on this business for 10% more than my offer, would I be upset?” If the answer is no, then stick to your number.
Past performance is an excellent indicator of future success. If a seller cannot provide factual, believable history, be skeptical. The people buying retail businesses today are the future of the industry. We want to see you start your journey on the best possible terms.
Buying a business requires a calm and thoughtful approach. Take your time, verify the data, and ensure your investment is built on a strong foundation.
help@newsxpress.com.au
