Industry Updates - Vending, Micro Markets and Office Coffee Services
We have buyers!
GREAT news of 2021? - This industry has some new buyers! Due to the Covid narrative hurting many food service operations, we have interested companies looking for acquisitions – especially in vending. We are seeing Micro Markets replace cafeterias and food service locations. The easiest and fastest way for food service providers to continue growth is to acquire talent through acquisitions. We have buyers
From a real customer that I sold the business in April, 2020:
"I want to personally thank you for all of your help in facilitating the sale of our business. Thank you for answering all of our questions, and for explaining everything so well.
Everyone at XXXXXXXXX ( Buyer) we met are wonderful people, and we feel very comfortable and blessed to be turning it over to them. Everything went splendid with introductions and conversations with them at our accounts. It was a fun business, although a lot of hard work, and we will miss aspects of it and all the wonderful people that we have been blessed to service.
We are SO excited to have it done!!"
"Thank you so much!!
God Bless You!"
On my last M&A update from November 2020, there were 2 vaccine providers announcing they were going to be available soon. Now in March of 2021, there are 3 vaccine providers, and record amounts of people are getting the vaccine. This can be great news for the vending and office coffee industry as office workers return to the physical workplace instead of working from home. During the bad times of 2020, I wrote articles that basically said to NOT sell during the Pandemic based on fear (and yes, I make my living off of selling operators). While you may have watched your value of your business dwindle down due to shutdowns, then was not the time to sell. 2021 however, could be the right time if you are wanting to table the risk and investment as people start to return to the workplace again. There have been some interesting and creative ways to handle sales that have not returned moving forward, in hopes the sales will return over the year.
Hopefully, your business survived the pandemic and sales are climbing back up. They may not be as fast as you would like it, but sales going up is always better than sales dropping like they did in 2020. Many operators took advantage of the slower times to refine their operations. Many made improvements to existing operations such as price increases, converting vending over to Micro Markets, implementing LightSpeed Automation to speed up the prekitting warehouse picking process and cut labor, and invested in the “Level” inventory system from LightSpeed Automation which manages your entire purchasing and inventory systems for product movement. What does managing inventory have to do with selling your business? A LOT! If you have no control over your inventory, and your system is based on “trust”, then most likely your profit margins are not as good as they should be, thus making your business worth less. Your inventory, or costs of goods sold, is your highest expense by far. It represents 30-70% of your sales (depending on margins), yet most operators do not have accountability. Inventory such as candy bars, chips, pastry, drinks are the same thing as hundred-dollar bills sitting on your shelving. Inventory = CASH. A strong bottom line creates value for your business when the time comes to sell.
I talked to an operator last week who asked me if I would do a valuation of his business. His comment was: “I paid an accounting firm $10,000 to do a valuation on my company, and they said I was worth close to zero”. Needless to say, he was upset with his valuation from the accounting firm. This is the first mistake some operators have made. While the value may be worth zero to an outside industry investor, generally this is not the case when we sell operators to other operators.
Most valuation reports would include
Discounted Cash Flow
Capitalization of earnings
Multiples of earnings
Business brokers from outside the industry may base it in EBITDA (Earnings Before Interest, tax, depreciation, and amortization), or a multiple of EBITDA. Vending is a different business in that you have assets all over town, trucks, markets, non-contracts for clients and it is mostly a cash business. Some vending operators may not report 100% of their cash in sales figures. Many businesses do not have an EBITDA to report. So, to get a true valuation of your business, you should use an industry expert who can discuss this with you. Your business may be worth more to a local current operator who can tuck in your business into theirs, thus cutting the overhead, salary, and expenses and generate their ROI (return on investment). I do have some buyers who are looking to expand into other areas that they are not currently in. I have even made deals where the buyer also buys the real estate and keeps the owners and employees on to continue to grow the business. Acquiring talent is one of the best parts of an acquisition, and many buyers need experienced talent.
So, you survived the pandemic, are you ready to table the risk and exit the ownership of the business? If the answer is no, then we would recommend you refining your business into a profitable, well ran operation so when that time comes, you will be ready. If you are ready to sell, you should reach out to an industry expert to see what your business may be worth. There were several acquisitions that took place towards the end of 2020, and already in 2021. If the time is right for you to make an exit plan, you should take the proper arrangements to get the most out of your business.
Mike Ferguson, owner of VMAC Solutions, LLC is a former Vending and Office Coffee business owner and operator, turned specialized Intermediary Business Broker. Who better to discuss the selling of your business than from a former business owner himself? Mike has sold millions of dollars in businesses and is very positive about 2021 being great. Mike always says, “I speak fluent Vending and Office Coffee”. Mike can be met at most major NAMA events and is also an authorized LightSpeed Automation sales agent. You can reach Mike at 713-569-6463, or email Mike@VMACsolutions.com.