At the start of this year, Graham Hales of Locks Newsagents in Portsmouth heard that a nearby Co-op store was no longer offering a newspaper home delivery service. The two shops are just a four-minute bike ride apart, so it seemed like a good fit. Graham certainly felt that the opportunity needed to be investigated.
Graham and I have been having regular phone conversations for nearly 20 years and, naturally, he included a chat with me as part of his decision process. The extra net profit available from the customers the Co-op would no longer deliver to was tempting. Graham understood that there would be around 300 – if he picked up half of them it could be worth around £10,000 a year to his bottom-line.
Of course, there are challenges involved in taking on a bigger HND territory as well rewards. Here are the issues that Graham felt that he needed to work through to make his decision.
- Are there enough deliverers to service the new streets?
His feedback was that there was a problem with recruiting delivery boys and girls in his local area and this could prove problematic.
- How does the newspaper and magazine wholesaler perform on quality of service for both growing copy requirement and meeting RDT’s on an everyday basis?
Not good. The evidence of the recent past is that service times, reruns, standing order amendments and ease of communication are ongoing issues.
- What will the implication for working capital be?
Historically, newsagents that deliver have covered the capital cost of HND book debt. Whilst this is partially offset by the one-week credit on their wholesaler account, extra customers will add to the capital required to cover this business opportunity.
After balancing the pros and cons of adding these new streets to his territory, Graham decided to let the customers come to him rather than canvas the area that the Co-op delivered too. The extra profit while attractive, is not sufficient to encourage him to change his business or life plan.
What challenges have you faced when considering HND and what are the key drivers in your decision making process?