The Business This nine-year-old bimonthly newsletter has chronicled offshore life in the U.S. Virgin Islands with only part-time attention from its mainland-based owners, but a buyer in the Caribbean could operate it full-time and boost revenues. An advertising manager sells ads, and stringers on the islands write stories for the more than 1,200 upscale subscribers who pay $39.95 annually. The ideal owner would have publishing, advertising, and marketing knowledge. The sellers are chasing other offshore business leads.
Financial Summary 1992 1993 1994Gross revenues $56,924 $84,736 $99,725Recast earnings before $17,609 $16,700 $936depreciation, interest,taxes, and owner compensation
Price $254,200 (Terms and financing negotiable)
Outlook Newsletters have been rolling hot off the presses in increasing numbers for the past 20 years, and with about 1 million publications in the marketplace, the presses show no signs of stopping. But even for a break-even business, this newsletter is weak. Its 57%-to-69% renewal rate is well below the industry standard, and its 52%-to-48% subscription-to-advertising-revenues ratio reveals too much reliance on ads. Worse, the sellers have confined their focus to only 15% of the islands' 97,000 residents. A wider scope and higher visibility would garner a larger audience. Market research and advertising costs account for the dip in 1994 earnings. Newsletter publishing is a business with few barriers to entry. For a small fraction of the asking price, anyone with a computer and desktop-publishing software could use public records, like tax rolls, to scoop this newsletter.
Price Rationale The asking price, three times 1993 revenues, includes the subscriber list and its computerized database but not the desktop publishing system. Experts use an earnings multiple to value newsletters, however, and they price healthy newsletters at five to six times earnings, making this publication worth only $83,500 to $100,200 at best. Too bad -- the owners have invested $26,000 and have paid themselves nothing for their five years of part-time work.
Pros Live in the Virgin Islands, make a living, slash your taxes.
Cons The price, the narrow focus, the price, the low renewal rate, the price, and the overreliance on ad revenues. Oh yes, and the price. -- Robina A. Gangemi* * *
Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Roger Rumble at Bosch Inc., 616-375-9000. n