How to Buy a Vending Company
Buying a vending company will require an entrepreneur to consider a few things to make sure his investment has a reasonable opportunity for return. An entrepreneur will need to take into account various factors, such as the routes owned by the vending company, the quality and ages of the machines on the routes, the location of the routes and traffic the routes attract, to name a few. The entrepreneur will also need to examine the profitability of the company with scrutiny over time. Buying a vending company will require the same amount of perseverance as during the purchase of any other business. Lack of due diligence can easily lead to purchasing assets that become liabilities, rather than profit generators.
Other People Are Reading
Instructions
-
-
1
Speak with the locations regarding the current relationship with the management of the vending. Find out how satisfied the locations are in allocating space for the vending machines and how the locations feel their customers' experience is made better with the addition of the machines. If you find that in many cases the locations express annoyance for the machines or with the current management, this is a red flag that many locations might be in jeopardy.
-
2
Examine the machines on all the vending routes to see how old the machines are and how well they are being maintained. If the machines are very old or if the locations complain that the machines break down constantly, this may be an indicator that you will need to make a significant investment in replacing those machines. Note how easy it is to stock and service the machines. Machines that are hard to stock or service will cut into productivity on the route and eat away profit from the business.
-
-
3
Ask the current management to provide you with the sales trends of all routes over the last five years. Look for consistency in the sales trends. If you notice significant dips in sales, with a steady drop over the years, it is a signal that the business is not longer pulling as much profit as it could. If management cannot provide this information, walk away. In such cases you are dealing with a mismanagement and it is likely that the business is in jeopardy. This means you will inherit the problems of the vending company; not debts perhaps, but unsatisfied customers and locations that would rather see the machines replaced by another company.
-
4
Request your accountant or a qualified financial attorney to review the vending company's financial records over the past ten years, in addition to the sales trends. Verify the profitability of the company. Just because the company performs great in sales, does not mean it is profitable. If it takes too long to service routes or if customers are happy because even though the machines break down regularly the company always gets them fixed immediately, the company may very well be losing money. If replacing the machines is too large an investment, you may want to walk away.
-
5
Schedule to go out with the drivers of the best and worst routes you uncovered. Take note of how long it takes to service the locations and to gain a better understanding of whether the vending company can help meet your business goals.
-
1
Tips & Warnings
The usual asking price of a vending company is about 70% of gross revenues for all routes. A vending company that pulls in $1million annually in gross revenues will normally sale for around $700,000. If a company is asking an unusually low number in comparison to recorded sales revenue, question this thoroughly with company management. If you are not satisfied with the response provided, look elsewhere.
References
Resources
- Photo Credit Scott Quinn Photography/Stockbyte/Getty Images
