It’s a story to tell: Communicating value when buying or selling a community newspaper

Introduction

While a community newspaper might tell the story of a community’s past, present and future, it is also a small business. When a publication owner is ready to sell, it is the story of that business that needs to be communicated to a potential buyer.

Jim Moser and Mark Henry of Moser Communications, which owns newspapers in Texas, shared with us some of their philosophies and strategies about how owners and buyers can help each other understand the value of the business in preparation for selling.

With their permission, we share these strategies in hopes that it can help those considering such transactions.

Financial viability

A potential buyer needs visibility into the business and accounting practices of the publication. The seller should understand these needs and provide the documents and history necessary for the buyer to make a good evaluation.

• Detailed financial reports, including monthly and annual profit and loss statements, balance sheets, and incoming payment lists. The more information and detail provided, the better. All should be aware of owner/operator situations where owner expenses like life insurance or company cars might or might not be included in operating expenses.
• Detailed list of employees, including tenure, duties, strengths, weaknesses, relevant history and potential for promotion into a leadership role.
• Circulation and pricing data for both print and online subscribers, as well as single-copy sales for both formats.
• A history of special sections and niche products, including revenues and expenses associated with them.
• Details on website(s), social media, e-newsletters or any online/digital projects.
• Buyers want to be aware of any contractual obligations that will need to be fulfilled.

Buyers need to investigate the entirety of revenue sources like print advertising, special sections, niche advertising, circulation revenue through subscribers and single-copy sales, and digital advertising and subscriptions.

Moser suggested targeting total costs at 75-80% of revenue and allocating the remaining revenue for debt service, capital investments and profit. If a seller can show that expense ratio, or at least that potential, it helps both parties understand the value of the business.

Determining a selling value

Pricing community newspapers can be tricky because of the nature of small, often family-owned businesses.

One industry standard is to value a business at four to five times EBITDA cash flow (earnings before interest, taxes, depreciation and amortization). That might not work well for smaller newspapers where calculating that cash flow can be difficult. An owner/publisher might take a larger salary than industry standard or carry life insurance or a car note through the business, which can be difficult to disentangle.

Another evaluation method Moser has used is to consider yearly revenue and then pay a percentage above or below that based on profitability.

Other considerations

Online presence and competition

Moser highlighted the importance of digital platforms and quantifying their reach online and on social media.

• Buyers want a clear understanding of the newspaper's history and current use of digital platforms, including website(s), app(s), social media accounts, e-newsletters, and other digital projects. Request detailed information on user engagement and revenues/ expenses related to these platforms.
• Buyers should understand paywalls and the accompanying software. If not already established, consider building revenue streams from online readership.
• Buyers should obtain information regarding market competition–what other publications and digital platforms compete for subscription and advertising dollars. 

Understanding the owner's perspective:

Moser said that sellers may not always know what they want, so it's crucial to understand their needs and goals. He also acknowledged recent challenges in buying newspapers, such as increased costs and struggles with staffing.

• Buyers must investigate and analyze the seller and their perspective on the publication’s performance and missed opportunities.
• Take interest in the owner's proudest achievements, major regrets, market outlook, and the newspaper's relationship with local governmental entities, institutions, businesses, and the population it serves.

Closing out

Overall, the current economic and political environment presents a challenge for newspapers, but current research shows most community newspapers remain profitable. Small publications need to adapt to changing circumstances, operate efficiently and educate themselves on lean operations and selling niche products, Moser said. Along with being involved with the local community, he mentioned a need to be engaged with the journalism community. Currently, he sees a challenge in the lack of involvement in industry conventions and continuing education.

About this project

The Rural Journalism Pipeline Project is a research project exploring the landscape of Texas community journalism succession, communicating the challenge based on case studies and research. It is funded through a grant by the IC2 Institute. Special thanks to Jim Moser and Mark Henry for sharing their experiences with us.

Released June 2023

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