Buying a Newsagent

At a guess, almost everyone in Britain visits a newsagent on a fairly regular basis. Clothes or record shops might have more loyal customers, but it is hard to think of a retail business that is more of an everyday affair.

While potential business people might be attracted to other sectors out of some personal passion, newsagency requires a hard-headed approach – at least at first. In the long run it can offer enviable rewards and even a life of leisure in return for some initial sacrifices.

So, first of all – the bad news.

The main caution to those thinking of buying a newsagents is the need to keep unsociable and stressful hours. Kevin Ball, Director of Sales at Redwoods Dowling Kerr, has several years' experience of running a newsagent himself, and is not sentimental about the trade.

Dedication

"It requires dedication," he says. "It is a seven-day-a-week business, with early morning starts. People need to be prepared to put the work in."

Those starts are even earlier if deliveries are involved, as in many suburban or rural shops.

Organisation is also vital. For example, unsold magazines will have to be sent back before a particular date to avoid having to pay for them. Missing that vital deadline could result in the loss of hundreds of pounds.

As with any business, Ball warns that aspiring newsagents have to think primarily of profit margins. To sustain a reasonable business, a weekly turnover of at least £5k is needed; to sustain a reasonable lifestyle, at least £8k.

The purchase price for a newsagent will be based entirely on this figure. Unlike many businesses, there is very little variation across the country – mainly because a newspaper or magazine costs the same whether it is bought in Kensington or Barnsley.

Ball's main piece of advice to potential buyers is to always insist on the business's accounts before even considering a purchase.

"If up-to-date figures are not available, make sure you get a certificate of turnover from the accountant," he adds, pointing out that it is possible to work out profit from looking at the previous year's books, as outgoings will remain relatively static from year to year.

Do not underestimate spending

You should not underestimate the initial outgoings either. Suppliers, who may be sending you thousands of pounds worth of stock, will often demand a bond from an inexperienced newsagent.

It is also important to make sure that there are no huge outstanding delivery bills before taking hold of the reins. It might be worthwhile asking the current owner to send out a few letters asking long-term customers to clear their debts before the shop changes hands.

All this might leave you wondering whether another type of shop might be a less stressful investment. So now for the encouraging news.

Firstly, a newsagent can offer a more reliable income stream than almost any other business. Ball explains: "The size of the news and magazine account is really important. You can achieve 25% gross profit from newspapers and magazines. It's a good retail base."

Not just news

Then, of course, there is the secondary business.

In every town, there is a tired old newsagent with an ageing magazine rack and a grubby-looking selection of greeting cards dating back to the 1970s. In the middle of the shop is a rack of toys and games which hasn't seen interested browsers since before the war. Amid all those cobwebs, the news bill is still strong.

With a bit of knowledge of who lives in your area and visits your shop, that magazine rack or those cards could be revitalised. The toys could be replaced by pre-packaged sandwiches, a few groceries and soft drinks. That profit margin could be increased dramatically, given the right location.

Ball believes that owners should be constantly thinking about extending or moving on. The stresses and strains of the business are enjoyable for a few years, he says, but after a while the hours can be too much to handle.

If the business reaches the size where the owners can afford to employ some part-time or even full-time staff, the rewards can finally be enjoyed.

"You might have to get up early in the morning to make sure that the papers are out and the deliveries are made, but once the staff are in, you could spend the rest of the day playing golf," he explains.

Essentially, running a newsagent long-term requires a dash of the entrepreneurial spirit. If you can spot an underperforming business and – after a few years of early mornings and long hours – turn it around, move on and expand, you might eventually be in charge of an operation which runs itself. Subject to a few checks and balances, of course.