Two heads are better than one. In today’s difficult economy, there’s any number of reasons an operator will hire a business consultant. If narrowing margins are making it difficult to grow profits, a consultant with experience in vending and innovative business practices can help an operator improve efficiency.
A consultant can suggest new technology or find alternative products that will increase sales.
A consultant can also offer tips for determining a sale price for a vending operation, as well as recommend practices that will get the operator the price he or she wants.
CONSULTANTS PROVIDE EXPERTISE
In this industry, there are consultants that specialize in mergers and acquisitions, consultants that improve profitability, and then some that do both.
As the industry has become more challenging, and demanding of more management disciplines, operators will find consultants experienced in various disciplines a benefit. One area of expertise that has emerged as a specialty is technology.
When an operator is facing tough times, it’s easy to feel afraid of losing money on a new idea. It’s important for operators to know there are people they can pay to provide sound business advice, from an industry background, that will improve profitability.
“For us, it starts on the phone,” said Jon Ford, partner, Edison Strategies, based in Ballwin, Mo. After more than a decade of informally helping operators with sales and growing their businesses, Ford decided to start Edison Strategies with partner Andy Hayes as a way to formalize the process. Ford also owns Allstate Manufacturing, which sells remanufactured and new equipment.
According to Ford, a consultant focuses the initial discussion on the operator’s goals, which range from operating strategies to acquiring or divesting all or part of the business.
TODAY’S CHALLENGE: PRODUCT PRICES
Right now, one challenge is the price of chocolate and soda. “Operators are struggling to get agreements that work in their favor,” said Ford. He notes big operators are not simply reducing chocolate facings, but investigating other strategies, such as contracting placement fees with manufacturers.
Ford knows operators who’ve negotiated with a manufacturer for better pricing or got them to pay for new technology in exchange for a certain number of facings. He warns there can be pitfalls in manufacturer contracts. “I know an operator who signed a 2-year contact,” he said. Prices have gone up three times in the first year under the contract.
The first conversation with a consultant does not usually cost anything, and doesn’t commit the operator to working with the consultant.
After reviewing the company’s documents, communication continues face to face. “From there, we tailor what we do to help them,” Ford said. He cited an example of how a company looking to improve its coffee strategy benefited from his services. He suggested private label because not only would it be more economical, but also provide a unique proprietary product.
Although private label has long been available to operators, many think it is difficult to implement. Ford was able to show the vending operator it was not, and has some great benefits, such as monetary savings, higher sales potential and increased profit opportunity. Each quarter, Ford was able to capture and report the operation’s monetary savings and increased business due to investing in private label.
SALABILITY IS GOAL
Improving operational strategies to grow profitability affects a company’s salability, which should be the ultimate goal, according to Ford. Valuation provides operators goals
by which to measure their performance. It is not only a selling price, but also a management tool for running the company.