Trust but verify: A broker’s warning to operators

In my experience, most office refreshment owners are hands-on, and many wear several hats in business. But, there will come a time when you grow the business and need to hire a general manager to help with daily operations. Part of growing a business is teaching others to do what you can do, so you can focus on the overall business and not deal with the daily grind of running an office refreshment business.

The following real-world examples are from clients I have worked with as a business broker.

Ownership doesn’t end when you hire a general manager

Many people dream about owning a business and having somebody else run it for them. Far too often, I run across operators who want to sell the business but have become heavily dependent on one or more employees to run it. If that person or employee leaves the business, the owner is left with a company they know very little about.

Generally speaking, a non-owner employee will never run the business as the owner will. It is okay to delegate authority, but you should stay hands-on and know your business numbers and operations. As an owner-operator, you should be able to track your sales and profit margins and understand how to use the technology to run your business. Larger corporations have the financial bandwidth to put people in charge of running nationwide and larger operations.

I have been in this industry since 1989. Every time I think I have seen it all, I am wrong. As a former owner of an office refreshment business for over 25 years, I remained heavily involved, even though I had managers handle daily operations.

As a broker, I have had owners contact me about selling their businesses. Yet, they could not even answer the most basic questions, let alone provide me with any information except what a CPA can provide. I always offer to extract the data they need by providing me with VMS login credentials, which can be very helpful and expedient. Some of these owners didn’t even know how to use the VMS.

I had another instance where the general manager of an operation started his own vending company while still working for the company. He had “free machines,” “free products,” and even stole some of his own employer’s customers from within.

I asked the owner, “How could this happen?”

He said, “Oh, I have a separate office away from the warehouse.”

This general manager basically ran the company while the owner was in another office and was very hands-off. He lost a ton of value when he sold the company.

I worked with another company that was on a buying rampage a couple of years ago. The owner bought nearly all of the companies I had to sell to him. Great for me, but perhaps not for him.

As a broker, I make my money by selling companies. Still, in this case, I told the buyer that he should take a break and clean up the operations he already had. He’d bought companies and real estate that he never set foot in.

In vending, there is such a thing as growing too fast. The larger corporations have the manpower and financial means to grow that fast. As it happened, the quickly growing company was using funds intended for another business line to buy vending companies. In the end, the empire crumbled, as most empires that grow too fast do.

Again, know your numbers and where your money is going. Stay involved, and to quote a famous president, “Trust but verify.”