Buying a newsagency
Newsagency Values
Owners Profit is calculated as a return to 2 working owners, doing reasonable hours, before any form of owners remuneration, interest & borrowing costs, depreciation, taxation, amortization, personal expenses and any one off, non-recurring expense (known as Adjustments or Addbacks).
This is also known as P.E.B.I.T.D.A, (Proprietors Earnings Before Interest Taxation Depreciation & Amortisation/Adjustments/Addbacks)
The Lott demand 2 licence holders for every outlet, as most every outlet is open more than 50hrs a week, and they expect a license holder to be in attendance during all open hours, hence 2 persons are required. Accordingly, 2 people need to get a return on thier time which is different to most other business types.
The benchmarked expectation is 2 working owners performing on average, 90 to 100 hours weekly. Some smaller shops can be less. This comes from the formula for Salaried Employees, who are normally paid a set salary, for doing 25% or more hours than the 38hr p/week award. So 38 + 25% = 47.5hrs a week, giving rise to the benchmark average expectation of 90 to 100 hours.
Factors such as geographic location, lease conditions rates & term, type of shopping centre, condition of the shop-fit, degree & quality of fixtures fittings plant & equipment amongst other things will determine the multiple or factor of Owners Profit that buyers are prepared to pay as Goodwill for any particular business.
There is also clearly a difference between “buying a business” and “buying a job”, and values engaged reflect this difference. For a clear understanding of the difference, talk to one of our Business Brokers.
Beyond this, any business is worth what a buyer is willing to pay, and a seller is willing to accept, and the newsagency sale market (like any trading market) sets itself on the precidence of prior sales and level of demand.
The newsagency market is a mature mass market with stable long-term consumer demand for newsagents core product. The continuing and ever increasing life-style driven demand for news and entertainment, information, education and personal services has ensured the Goodwill of newsagencies has been, and continues to remain, high. This Goodwill is further underpinned by the publisher and Tatts/The Lott/Lotto/Casket supply contracts, which all combine to make a newsagency a sound business investment.
The Purchase Price is normally the total of Goodwill (which should but does not always include plant & equipment, fixtures and fittings, etc) plus Stock at Valuation (SAV). The Goodwill of a business is normally a multiple or factor of the adjusted net profit to the owners, or Owners Profit.