Newsagency Purchase Costs
It’s important to understand the overall costs of purchasing a news or lottery agency up-front, so you can determine your affordability, and then concentrate on businesses that suit your intentions & budget. Our exclusively created business Profiles include a Purchase Budgeting Worksheet and we highly recommend using that worksheet to help determine your affordability.
Sellers will commonly ask to see your budget workings when you convey any offer, so be fully prepared to underpin your offer by showing you are organised and considered.
In addition to the cost of the negotiated Goodwill + stock at wholesale value ex-gst, on an average size newsagency, buyers should budget for additional purchasing costs of approximately 10% to 15% of the value of the Goodwill or Asking Price plus Stock of an average newsagency being purchased.
Everyone approaches things differently, however some of these potential additional costs include such things as :-
- government stamp/transfer duty
- buying entity establishment (Pty Ltd, Trust etc if none exists)
- legal attendance to contract advice & accounting due diligence fees
- financier loan application costs (if applicable)
- some supplier application costs
- some supplier bonds
- share of professional external stocktake
- working capital, till & change floats etc
- lottery license application & training fees
Rental & lease bonds are subject to individual landlord requirements, and will be separate to this “ballpark” budget.
NOTE: The $25,000 The Lott application fee you may read about elsewhere, ONLY applies to brand new, unestablished sites. This fee does NOT apply to a transfer of existing ownership.
FUNDING AFFORDABILITY
Whilst we can not provide financial advice, and individual circumstances will influence purchase funding affordability, the below is what we have commonly seen in the current market.
Financiers will :-
- look at what cash and clear equity you are bringing to the purchase
- loan up to 80% against your residential home on a current conservative valuation (less any existing mortgage outstanding)
- loan up to 70% against your investment residential property (less any existing mortgage outstanding)
- loan up to 60-70% against commercial property
- look at your prior work experiences that will comfort them on your ability to be successful as a retailer
As a “rule of thumb”, it is wise to have at least 40-50% of the total purchase cost in Cash or liquid equity.
Regards very small businesses, where no staff other than owners are involved, financiers may or may not loan against your personal property. You generally need Cash or available Line of Credit to buy these bargain opportunities.
Financiers and The Lott will also want to see a history of business, retail and/or customer service experience in your comprehensive resumes.
We highly recommend talking to one of our referrenced Specialist Finance Brokers, or your Newsagencies For Sale Business Broker regards your circumstances
Clients with a Confidentiality Agreement can contact us for a copy of our exclusive detailed summary document ‘Costs & Contracts – A guide to potential additional purchasing costs’