The newspaper industry has seen a reversal of fortune in the past few years,. Although there have been cries of the death of newspapers, there is opportunity in purchasing a newspaper business. However, determining the value of that business is a complicated procedure that depends on a variety of factors. A newspaper might not be worth what it was 20 years ago, but do not let that dissuade you. The potential to turn the business around is real.
Evaluate the potential future performance of the newspaper. The history of the newspaper is important only in determining what your expectations are. Ultimately, the value is dependent on the future revenue of the company, leaving it solely up to your business acumen.
Track the cash flow of the newspaper. The revenue stream will come from advertisers, subscribers, online page views and the number of papers sold in bins or at newsstands. This is one of the crucial factors in determining the value of a newspaper.
Determine the expectation in terms of financial returns. Judging the current cash flow and profit margin will allow you to determine how much the return will be. The higher the return, the lower the cost it will take to keep the business running. A poor, unpredictable profit margin, on the other hand, will require a larger investment, lowering the current value of the newspaper. Because of the current problems with the newspaper business, it is more than likely that the paper has an erratic profit margin, if a profit even is being made.
Create a solid structure for the business deal. Determine how much the seller is willing to finance the deal. The less a seller finances the deal, the lower the cash value of the business becomes.
Meet with a lender to determine the type of assets involved with the individual newspaper business while figuring out the amount of a business loan. The lender's advance rate most likely will be low because of the state of the newspaper industry.
Create an exit strategy. Your business plan is not complete without one. The newspaper could be worth less than it was upon purchase. This should be factored into your final values for investing in the newspaper business.
Travis Ames has written for numerous publications since 2007 and has been writing instructional articles online since 2010. His areas of expertise are wide and include travel, politics, arts and entertainment, technology and finance. He currently lives in Portland, Oregon where he will begin teaching in the fall of 2011.