As a former vending and office coffee service business owner for many years, and as I’ve talked with operators across the U.S., I know one of the top worries has always been losing an account. They cancel for many reasons, such as bad service, price increases, nationwide consolidation of venders, or unwillingness to add equipment or micro markets. But there are situations when the operator should consider firing the customer.
If an account doesn’t produce the sales and profits needed to keep them as a customer, you may need to tell them to find another vending provider. As a vending business broker specializing in selling vending and OCS companies, I have encountered a common problem with having small accounts. Some small operators are okay with keeping smaller accounts, but when it comes time to sell the business, will the buyer want to buy those accounts?
Smaller accounts can vary from operator to operator, but in general, most buyers don’t like to purchase vending accounts with sales that are less than $5,000 per year, and some require $10,000 as a minimum to buy the business or accounts.
In some instances, the seller may need to pull the small accounts before the closing or sell the accounts to a second willing buyer. This complicates the deals, because now the seller must take action to remedy the small accounts. Some warehouses lack the space to store the pulled machines, and most buyers do not need to buy the surplus of machines. Many vending machines have been replaced with micro markets, further creating a surplus. Most buyers will already have their own surplus of machines and will not need to buy the extra machines that the seller may have. It always depends on the machines, whether they are new machines, the manufacturer, and if they are already equipped with credit card readers.
If a small account is linked to a larger account, this is generally accepted by buyers. The best advice would be to pull any accounts producing under $10,000 yearly sales and use that equipment to gain a better account. This will make your company more profitable and marketable when it comes time to sell the business.
With all the kiosk technology in micro markets, you may be able to convert those smaller accounts to a micro market, thus cutting out the vending machine expense. If you have a mini kiosk or app-driven kiosk, a snack rack and a cooler, rather than two vending machines, your sales generally will be better. If you price the items higher and collect the sales tax on top, your ROI should also be better. It’s even better if you add in office coffee service.
If a customer doesn’t let you increase your prices, this is also a consideration for firing them. With the rise in inflation, no retailer or grocery store absorbs price increases. A common issue I’ve encountered when I sell a business are the prices in the vending machines and markets. “Absorb” is a dirty word in vending. If grocery stores and retailers don’t absorb their price increases, why should you, the operator? Customers are used to seeing everything go up in price, so operators should be increasing their prices as well to stay profitable. I have heard that vending operators will get price increases in early 2024 from the suppliers and manufacturers. If your customer will not let you raise prices to stay profitable, fire them – this isn’t a hobby.
ABOUT THE AUTHOR
Mike Ferguson, owner of VMAC Solutions, LLC, is an intermediary business broker who has owned and operated a vending and office coffee business for over 25 years. Specializing in selling office refreshment businesses, he has over 34 years of combined industry experience. Ferguson can be reached at 713-569-6463, email [email protected] or at VMACsolutions.com.