10 tips to help you secure a higher price: Ready to Sell
February 4, 2016
By David Slavin | Senior Associate, W.B. Grimes & Co.
Owning a community newspaper has never been a job—it is a lifestyle. Forget the 9-5 rat race; a good newspaper publisher remains on-call literally 24 hours a day—seven days a week, 365 days a year. Most community publishers will tell you that the news never stops, and neither do they. No two days are ever the same, and they wouldn’t have it any other way.
But at some point, all publishers do reach that fork in the road when it’s time to move on—and most will soon be pleasantly surprised to find that there is actually life after publishing. But how can you make sure that you’ll be ready when that time is right for you?
Here are 10 important tips to keep in mind when you’re ready to consider the move.
1. Increase profits and cash flow. Cash is KING. Adjusted cash flow is the top determinant when valuing a newspaper. Most deals today are based on a multiple of EBITDA—essentially net adjusted income with interest, taxes, depreciation, and amortization added back in. EBITDA is used to analyze and compare the profitability of a newspaper acquisition because it eliminates the effects of financing and accounting decisions.
Most prospective buyers are focused on how they’ll make money after the sale. Think you’re doing the best you can? It often makes sense to get a second opinion—hire a knowledgeable adviser to review your books and operation for inefficiencies. Many newspaper owners don’t understand how to assess where they are in terms of today’s market, and it can make a significant difference in profitability and final selling price.
2. Increase sales. Why would you want to spend long hours boosting the revenue of a company you’re about to sell? Because, bottom line, you’ll get more money from the sale. Buyers will consistently ask to examine trends for the past two to three years, and are willing to pay a higher price when growing sales are an indication that they’ll be making more money down the road. Prospective buyers are far more enthusiastic about purchasing a growing business.
3. Start to pull yourself away from day-to-day pursuits. Probably the hardest thing for an owner to do when selling his or her newspaper is to become as hands-off as possible. A prospective buyer wants to see that your top managers and employees can run—and continue to grow—the newspaper without you. Buyers get nervous when they find out the owner is handling most of the major advertising accounts. If you continue to remain stubborn about staying involved with every single decision, what will your staff do once you’re no longer there?
4. Get your house in order. Your newspaper will sell at a far higher price if the details of your business are in order. Prospective buyers are looking for no surprises and industry-accepted standards when it comes to your accounting, profit and loss statements and balance sheet. Clean, detailed profit and loss statements make a highly positive difference. Debts and any other obligations should be documented and crystal clear. Uncertainty is your worst enemy.
5. Are your receivables and payables in excellent shape? Buyers may be relying on your cash flow for working capital. That means you’ll need to be able to “deliver the goods”—collected receivables. That’s particularly important if your buyer is also assuming your operating payables.
6. Newspapers that maintain strong household penetration, either paid or free, (50 percent-plus) are way ahead of those who are struggling to keep market share.
7. If you are a publisher who has cut, cut, cut in an effort to paint a more attractive cash flow picture, you’re busted! Be prepared to hear: We want your paper, but we’ll need to add personnel and other resources to jump-start revenues, which will require additional cash flow. Don’t be surprised when a lower offer price inevitably reflects new resources needed to improve the bottom line.
8. Get rid of any “bad” apples. Not only may they be the reason your sales are down and employee morale is low, but they can kill a deal quickly. Buyers quickly warm to a well-oiled machine, running on all cylinders.
9. If you were the buyer, would you want to assume your printing contract or office lease? When is the last time you put your printing out to bid? Are you confident you have the best deal possible regarding your office lease?
10. There are websites and then there are digital platforms. Buyers look quite favorably on newspapers that have developed, and are executing on a digital and mobile plan. No PDFs and a reprint of the past week’s news? Create a digital platform and mobile strategy that drives reader engagement, and the sale of advertiser’s products and services and buyers will flock to your door. And keep in mind: ancillary products and services do matter. Buyers like a diversified product mix as do your advertisers. Doesn’t it make sense to develop a product mix, that advertisers will embrace?
David Slavin heads up newspaper sales for the Southeast and Mid-Atlantic regions for W.B Grimes & Co. Established in 1959, the Company has represented publishers in the sale and acquisition of more than 1,500 daily and weekly newspapers nationwide. David can be reached at 201-230-0848 or at Dslavin@mediamergers.com.