Buying a business: Newsagents
A business that will deliver - read all about it
Delivering the early morning papers through sun, rail, hail and snow to earn a few pennies while at school is something many have done, myself included. But what if, further down the line, you were able to expand on that idea and actually buy and run your own newsagent business?
Well it is possible. Newsagents are currently one of the most popular businesses to buy alongside post offices (take a look at our guide to buying a post office for comparison). This is partly due to the fact that the choice of revenue streams – whether it is newspapers, groceries or the National Lottery – has never been greater.
What is it?
Millions of us buy newspapers and magazines, lottery tickets, confectionery, and other necessities from newsagents. This is why newsagents and ‘corner shops' have become something of an institution in the UK. What would happen without that Sunday morning stroll to pick up the paper, a carton of milk and some eggs for your soldiers? Newsagents are always nearby, open when you want them and often the heart of small communities.
These factors and others are a great pull for the many thousands of newsagents that exist in Great Britain and the Republic of Ireland. Around 20,000 of these belong to the National Federation of Retail Newsagents (NFRN). It lobbies Parliament on various issues, offers convalescence benefits, free workshops and trade show entrances, legal fees, regular updates as well as other services to its members.
The NFRN is a very useful and well-established organisation that represents small independent newsagents. It has the ability to deal with large corporations such as newspaper and magazine wholesalers. Newsagents are almost always tied to a particular wholesaler and have little choice over terms and conditions imposed on them, and this is something that the NFRN is trying to redress. Membership costs only a few pounds per week, so it is worth joining up to have someone fight important battles for you.
Having said that, as a newsagent you are independent. You look after your own deliveries and orders, stock levels, wage bills, rental agreement if you own a leasehold property, and must find new ways of promoting your goods.
Running a newsagent is a people and community-orientated business. It takes a great deal of hard work to build up and maintain a steady profit. You can sell newspapers and magazines, sweets, cigarettes, snacks, fresh produce, toiletries and bathroom products, lottery tickets, rail cards and bus passes in some shops, as well as batteries and medical products. You can also expand it to create a convenience store and include a small post office.
One drawback is the hours you may have to work. This is a factor that all the newsagents we spoke to warned about. Your day starts at the crack of dawn with newspaper and fresh produce deliveries, and customers can arrive from around 5am until late at night (depending on your opening hours).
Who is it suited to?
Unsociable hours, hard work and the drive to make the business work can all take their toll on a business owner, particularly if you buy and run a newsagent as a couple. In the words of Charles Fleckney, field operations manager at the NFRN, “being a newsagent is not just a job; it is a way of life”. So who does it suit?
Chris Barker of Sutherbies business agents in Yorkshire believes a newsagent's work is never done. And, if you're not ready for it, it can quickly become a strain on new owners. “You have to be prepared to start work at four or five in the morning and work throughout the day until at least late afternoon, have some business sense and be able to cope with all the pressures involved.”
However, don't let the hours put you off. They often vary depending on whether you run a newsagent in a town or a more rural area, the amount of competition you have, whether the business needs a lot of improvement and added promotion as well as to how much you wish to push your sales.
Barker continues: “The job is well suited to a family or even a couple as they can all work together. This depends on the size of the business but the children can often chip in with the paper rounds, for example. The majority of people who come to us looking to buy a newsagent tend to be older people who have perhaps worked in a shop before or who fancy taking on a hassle-free business.”
But the business is only hassle-free once everything is in place. Kevin Ball, a director at Dowling Kerr business agents as well as an ex-newsagent himself, believes the key to running a newsagent is organisation and commitment. “Being behind a counter and waiting for customers to come in can test your patience and become a hard life in some cases. Plus if you don't know how to organise your staff (13 year old boys can be a pain at six in the morning) and the key aspects to the job such as the newspaper delivery, then I would frankly say don't bother.”
Before you take the plunge
If you are serious about buying a business you need to tread carefully and look at all the angles before putting pen to paper. First, ask yourself a list of questions to ascertain what you really want to achieve. Will this be your only income or a supplement to another type of business? Is this an investment or a career change? Are you prepared to work long hours? And if you have a family, how will they fit into the equation? Will you end up living in or above the business?
Second, take this line of questioning to another level and consider the financial aspects involved. Is this an affordable business for your budget? Have you already got some money put aside to pay for some or all of the business? Or will you have to borrow a sum of money from the bank or a financial institution? Think of all the costs involved in buying a newsagent. If you strike it lucky you may find the ideal business for you. But generally speaking you will have to put some extra cash aside for emergencies, as the shop will almost certainly require attention.
Ball believes the most important area to consider is the funding of the business and the ‘just in case' cash you put aside. “This sounds obvious but going into buying a business struggling is just not advisable. You have to be confident about the amount of money that you have behind you. On top of the purchase price you will need around two weeks worth of sales to cover initial stock and working capital.”
You will also have to analyse and consider whether the business in question is viable, what its weekly turnover is and what condition the building and business is being left in. Do this by asking for a three-year account history of the business in question. If you need help ask your business transfer agent.
Ball says, “A good indicator of what you should look for is to say to yourself that a newsagents should always be turning over no less than £5000 a week. Anything less is sure to be a struggle.”
Newsagents can make anything between £2,000 and £20,000 turnover per week but solid profit can often be hard to come by as one newsagent told us. “£2000 to £3,000 turnover per week is quite tough to live on. If you take out VAT, wages, rent rates and bills you could be taking home a little as £250 per week.”
A further crucial decision in choosing a business is whether you wish to purchase a leasehold or freehold property. A leasehold business is, as the name suggests, leased or rented from a landlord. When arranging a loan or overdraft with a bank or lending institution, they will ask that you provide approximately 50% of the asking price, whereas a freehold property allows you to own the shop outright and will only require that you pay 30% of the asking price. If extra advice is required, your local bank manager will often help out. Alternatively, you can seek assistance from the NFRN, if you are a member.
There is no strict training when wanting to become a newsagent. Once you have taken the plunge, you are free to run, advertise, market, and forge new deals with suppliers. Of course, some retail experience and good business sense is a definite bonus. Fleckney says, “Any retail knowledge is good but fellow newsagents are the most useful source to learn from. Ask them if you can spend a day or more with them and get a feel for the business and for what goes on. Try a few and try to spot the differences between them all.”
The NFRN also operate a self-study training scheme for its members. This covers all the basics such as merchandising, security, how to control stock levels and finance, to name a few. It conforms to an NVQ qualification and is offered to members at a discounted price.
How much does it cost?
Funding such an investment can be done in various ways. Potential owners can bring along their own money, apply for a loan or even apply for a grant from a local business support agency. However, much like house prices, the price of a newsagent can vary from one region to another, if you want to buy; rates can vary too, if you wish to rent. Price will also differ according to the business' size and profitability.
You should also budget for professional costs such as solicitors or accountants who will undertake surveys and valuations. Then comes the cash needed to cover the interest on your loan if you have borrowed a sum of money, initial overheads (telephone bill, gas and electricity and water) damaged and missing stock, wages, repairs on the building, advertising plus general living expenses if you intend to live in or above the premises.
How much can I earn?
This depends on how much work you put in and how many different sources of revenue you generate. If you just sell a basic selection of newspapers, magazines and sweets you may fail to reach your target, but if you expand your operations into other areas such as drinks, the National Lottery, snacks, greetings cards and household goods, these lines could boost profits.
Ball says that extra avenues and smaller goods on the counter can considerably increase profits. “If you have a good point of sale or counter that is full of small items such as stickers, Instants cards, sweets and snacks, then people will buy them in droves. It is a good cash generator but you have to spend to earn and constantly update things with new product logos and promotions and products.”
Peter Cryer, owner of a newsagent's in West Yorkshire, agrees. “A profit margin of between 20% and 25% is the level you should be aiming for. This is a good level but can be increased by extras such as the National Lottery which gives you a return of 5% on the total turnover, but you have to wait for them to approach you and assess whether your outlet is satisfactory or not.”
The margins on basic stock
|Newspapers||Average of 25% of cover price|
|Magazines||25% of cover price|
|National Lottery||5% of total sales|
Tips for success
- Spend to earn – Try to update the stock you have and think of new ways to make money
- Cleanliness and presentation is key – Put the right stock in the right places and customers often buy goods on top of what they came in for
- Prepare for a long day – Make sure you can take the pressures of an early start and a long day – working from dawn to dusk is something you may have to get used to
- Assess your competition – Move to an area where you think the business will bloom – supermarkets can be a killer for small retail outlets
- Look for a bargain – If you see a business for sale that's in a good location but needs a facelift, then pounce on it. You can make your mark – and a profit.