Discussion:Radio Station Purchase Feedback

An associate owns AM Radio Station A 100% - Has been in radio his entire life.

Been talking with me for about a year for potential investors for when other small AM stations become available. Finally has two where they have become solid enough to have further discussions.

According to Associate, radio stations will generally sell for 2X Gross Billings, not including land or building. So basically for Radio Equipment, Tower and FCC Frequency rights.

Current station is in a decent size small city in Upstate NY.

Station is not currently on air as their is a current dispute between the owner and the tower landlord. The current owner owns multiple radio stations and other businesses, so closing due to pissing match does seem logical as studio rent is less than $5,000 per year. The tower rent jumped from $350 to $1,000 per month which prompted the pissing match.

If station is unsold as of December, the station frequency gets taken back by FCC and is gone. So, this should make for a negotiation for purchase price scenario.

Associate has spoken to land owner regarding tower and that appears to be settled. Rent amount agreed on with discussion in place to have an option to buy after 18 months.

Associate already has pre-canned programming that has worked well in other areas and is working well in the radio station he owns. Mix of talk, oldies music, and sports broadcasts <currently NASCAR and Yankee games>.

Associate willing to put his expertise to work 1 day per week, with the understanding that his radio station always comes first <naturally>. He will help with the programming and will train the salesperson/people and overall work as the GM for this new radio until the new owner/investor decides they wish to do something different.

Salesperson estimated salary with commission would be somewhere around $50,000.

Associate feels that annual revenue of $125,000 can be achieved in first year and that within 36 months, revenue should jump to $250,000 using conservative estimate. He is willing to let investor see his books for his station which was virtually in the same situation before he bought it.

Associate will take no salary, but wishes a gradual increase in an equity position over time which would eventually be somewhere between 35 and 45%.

Purchase asking price right now is $125,000 with 65,000 down and then remaining payments of $15,000 each every 6 months no interest.

Anyone with radio experience or just general feedback/criticisms/advice would be appreciated.

Thanks,

Fred