In followup to our blog entry here, News Ltd have today announced their plans for delivery & distribution going forward.
The Announcement available here, is also followed up by a FAQ available here. If any of these links are broken, please email us for a copy of the documents.
As suspected, moving forward for the most part, there will be Retail Newsagencies, and separate Delivery & Distribution businesses. Retail Newsagencies will be able to concentrate on their in-store customers, without the tired distraction of having started so early in the morning.
Whilst newsagents work through the changes over the coming months to a year or so, and some will consider tendering for the new distribution area, this blog entry is focused on what this all means to someone considering to purchase an existing newsagents business that may have had a delivery run.
Newsagencies are sold on the basis of expected “maintainable earnings”. The current average home delivery run throws 300 papers a morning Monday to Friday, more on weekends, and perhaps services a round of sub-agents for papers & magazines. As the new model expects 10,000 papers a day, it is highly unlikely any delivery business will maintain as part of an existing retail newsagency business, instead these new delivery businesses will become profitable entities in their own right.
A prospective newsagency buyer needs to understand what the revenue and costs of the delivery aspect meant to an existing newsagency, so they can make an informed judgement on the profitability of the Retail newsagency alone. This has to be worked out case by case. This is something well beyond the capability of most General Business Brokers, so make sure you contact us at Newsagencies For Sale to get the best assessment.
In very broad terms, a newsagent throwing 300 papers a morning with a few sub-agents, would make very little out of their delivery run, especially if the run was performed by staff or a contractor. In simple terms, the gross profit of the run most likely was equal to the cost of performing it. If you then add an average 4 to 6 hours a week of owners time dedicated to taking run customer phone calls, stops/starts, debt collection, accounts generation mailing & reconciliation, writing up chq deposits etc……… In these cases, there will be little to no impact to the Retail business, if anything, it will free up valuable owners time to grow their Retail business.
However, this break-even example is not always the case. Some newsagencies made a loss doing this service, some made a profit from their easier to manage sub-agent drops. Note : This announcement by News Ltd does not factor in what will happen to magazines and non-News Ltd product delivered within the existing territory, often the more profitable aspect of the territory.
We see this announcement as a healthy change. With the trend of print media and digital subscriptions, Newsagents rarely grew their delivery business without taking over adjacent territories; but real growth is available in the Retail shop of a newsagency, from numerous new and embraced revenue streams. This change will allow owners to get a far better return for their time, by concentrating on their Retail space.
On the other hand, it will also eventually create profitable and desirable Delivery businesses.
As someone considering to buy a newsagents business; you need all the facts to make an informed judgement. You should only trust a Broker that truly specialises in the industry you are looking to purchase a business in. Newsagencies For Sale is that Brokerage.
If you are seriously considering a newsagency to purchase, and there are plenty of good reasons why you should, call one of our dedicated Newsagency Brokers today to get an honest evaluation of the potential impact to the business you are considering to purchase.
