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FAQ

Below are the most Frequently Asked Questions

  1. What is Owners Profit ?
  2. Why 2 working owners & not 1 ?
  3. How are newsagencies valued ?
  4. Are Woolworths & Coles getting Lotto in Queensland ?
  5. Are Woolworths & Coles getting Lotto in New South Wales ?
  6. Are Newsagencies still a good business to own ?
  7. Are Newsagencies a dying industry ?
  8. Why are some Newsagencies a 1 times profit and others a 3 times profit ?
  9. What does it take to buy a Newsagency Franchise ?
  10. Are Online Sales affecting Newsagencies much ?

Q. What is Owners Profit ?

A. Owners Profit is the return to 2 working owners, performing up to an expected 90 to 100 hours collectively weekly. Subject to individual shops opening hours, some smaller newsagencies do not need this many hours to achieve their revenue, so each is case by case.

Q. Why 2 working owners & not 1 ?

A. This formula basis has been widely accepted for Newsagencies, for decades.

Tatts also require a minimum of 2 persons, to be trained and hold the relevant soft gambling license (if lotteries are involved). This can be 2 owners, or 1 owner and an employed supervisor or responsible staff member. Tatts require to see an employment contract for any non-owner as license holder.

Q. How are newsagencies valued ?

A. Newsagencies are valued on the formula of PEBITDA, Proprietors Earnings Before Interest Taxation Depreciation & Addbacks/adjustments for personal or non-business related expenses. Beyond that, market values are what a buyer is willing to offer, and a seller is willing to accept.

Q. Are Woolworths & Coles getting lotto in Queensland ? 

A. Highly unlikely. You can read more about why here. Remember, Coles & Woolworths are still sub-agents to a Newsagent who earns commissions off their newspaper sales.

Q. Are Woolworths & Coles getting lotto in New South Wales ?

A. Again, unlikely. It’s important to consider that Coles & Woolworths are more than just Supermarkets though. A more detailed understanding can be found here.

Q. Are Newsagencies still a good business to own ?

A. Sure, print media is going backwards, but at its core, Newsagencies are just eclectic retail.

The general public has a very broad expectation of the products & services they should find in a Newsagency, and the entrepreneurial newsagents have been embracing such change for years !  Gifts, books, tech based stationery, promoting the seasons, all leveraged off significant lotteries foot traffic. There is plenty of sales growth opportunity.

Also, Newsagencies have a degree of protection from competition. Tatts have an incremental criteria that makes it highly unlikely another lotto outlet could open next door, and Newspaper Territories also minimise the ability for someone to open a newsagency in the same centre.

That can’t be said for a coffee house, bakery or most other business types, that could face a direct competitor “right next door” if the landlord had a vacancy; virtually halving your trade overnight.>

Q. Are Newsagencies a dying industry ?

A. All industries evolve, especially in tight economic times. Old traditional Newsagencies are being replaced by new retail focused shops, embracing developing revenue streams such as Gifts & Toys. Stories on the internet almost always centre around the struggling shops by poor operators, while the quiet achievers just get on with making more money, and there are plenty of those.

Q. Why are some Newsagencies valued at a 1 times profit and others at a 3 times profit ?

A. There is a clear value difference when only “buying a job” versus “buying a business”. Financiers loosely define this, by noting, if you need extra staff to bring in that revenue, it’s a business. If there are only the 2 owners, it’s a job. So in other terms, the greater the owners profit, the more valuable the business.

At times, a Newsagency at twice the price of another, making the same 1 year profit, may be much better value than the cheaper opportunity. There is almost always a reason why a vendor discounts their business compared to market value.

Q. What does it take to buy a Newsagency Franchise ?

A. This is a big one.

99% of newsagencies are NOT a Franchise. There are a number of Marketing Groups, and they are not Franchises. You can be a member of a marketing group and enjoy better pre-arranged buying, sharing experiences, and a number of further benefits; but that does not suit everyone. Tatts in southern states are a franchise within the business, but the business itself is unlikely to be a Franchise.

Beyond that, there is a detailed process required in acquisition, that takes 10 to 13 weeks to complete. This process should only be trusted to having a Newsagency Specialist Broker involved.

Q. Are Online Sales affecting Newsagencies much ?

A. The average sale in a Newsagency is $9 to $12 when the average online purchase up to 2015 is US$78. Consumers generally don’t bother purchasing online for such a low average amount.  Consumers generally don’t bother purchasing online for such a low average amount. Newsagencies are also a convenience. Online purchases always take time for delivery.

Did you know that if you purchase Lotteries from the internet, all those purchases are treated as a Cash Advance on your Credit Card, triggering interest ?

 

If your question has not been covered here, contact our brokers and we will happily address any question that helps you make an informed judgement.