I have reached out to several operators all over the USA to discuss the impact of the coronavirus on their businesses. I have talked to some who are as much as 90% down and some that are around 30-50% down; 50% seems to be the middle ground of business loss.
The ones who depend on colleges and schools have hurt the worst. With colleges and schools not returning from Spring Break 2020 and likely the whole summer, they can only hope that they will reopen for the fall semester. Also, many offices transitioned to “working from home.” Most employers will say that productivity has decreased since employees were sent home to work, mostly due to home distractions. What we may see though, is the employer’s weighing in on the costs of rent, utilities, property taxes, and unfortunately office coffee and pantry services. Maybe they lost production but losing overhead costs may balance out the same.
So, what do I do now?
While you may think selling your business could be a way out of this, now is not the time. Chances are, a cash buyer may not buy your business based on 2019 sales due to the current crisis. The risk is too high until they can see there are no restrictions in your city or state, and sales resume back to the new “normal.”
Also, do not forget that the buyers have suffered a great loss as well and they will need time to recover. I had a smaller operator call me and say that he would take a “fire sale” offer just to get him out of this. I had to explain to him that with his sales down 80%, no buyer would want to take the risk of his accounts not coming back, even on a fire sale. The buyers would just be buying up a bunch of equipment on empty office locations that they probably do not need for their business. I told him to wait, tough this out and look at this again at this once the U.S. comes back to work before he considers just giving it away.
If you can, continue running the business so that you will not have to settle for a much lower sales price. The better choice for now is to build up your business better than it was before the pandemic and prepare to sell in late 2020 (depending on the economy, of course) or 2021.
What can I do to diversify moving forward?
If you have a vast customer mix, you are already ahead of the curve. But, if your business is majority invested in schools and colleges, white collar offices, and seasonal locations, you should consider diversifying into traditional customers like blue collar accounts and adding OCS and filtered water units to your existing accounts. Micro markets will become more popular than vending, especially for the “no-touch” user-based apps from the leading micro market kiosk companies. Moving forward, a touchless way to buy will be more popular than the traditional vending machine. This will make your business worth more when you decide to sell, as well as being well diversified for current operations.
The operators who are down around the 30% mark all seem to have one major thing in common, which seems to be a mix of customer “types.” You have heard the old expression, “Don’t put all your eggs in one basket,” right? That holds true in vending and office coffee services as well. If your customer base is well diversified, you will be better off. If your company has accounts like Amazon, hospitals, Walmart, Target, grocery distribution, FedEx and UPS, your sales should be up during the pandemic on these accounts. Blue collar accounts have always been better for vending. Many blue collar operations never missed a beat during this crisis. You talk to some of them, and their lives did not change much during this crisis. Maybe the corporate office workers went to working from home, but the factory workers kept on working at facilities.
Reality check
Be wary of old school or non-industry brokers who offer discounts or gimmicks to help sell your business. This industry will rebound, and your company evaluations will rise if you stay focused and ride this out.
However, no buyer will want to buy an operation that has crumbled. Do what you must do to survive – whatever that entails for your business. Buyers in the future will want to buy quality-built companies with great employees and talent, not a poorly ran operation that they will have to spend years and money rebuilding back up. This is a good time to clean out your buildings, refine your routes, re-train and cross train your employees, and do things that don’t cost you money but will help operations in your business. I am always available to discuss any options or questions that you may have – for free.
Using an intermediary with real owner operator experience
I have over 31 years of hands on industry experience as a Vending and OCS owner and operator. Business intermediary brokers who have not been Vending and OCS owners cannot offer industry operational advice because they lack the hands-on ownership experience. Our industry is not like most other industries and I always try to stay industry specific when I write or speak. When it is the right time to sell your business, make sure you choose a broker who only works for you, and not both you and the buyer. You want your best interest at heart when being represented.
I am always honest and upfront and may not tell you what you want to hear, but certainly will access your operation for free and guide you down the right path.
Mike Ferguson is the founder of VMAC Solutions, LLC. VMAC stands for Vending, Markets and Coffee and only specializes in selling vending and OCS operators to qualified buyers. He can be reached at [email protected]. Learn more at VMACsolutions.com.
