Throughout this year, I’ve been sharing 10 tips that will help your business run better, operate more profitably and create value when it’s time to sell. In this edition, I'll talk about why account size matters when you want to sell your business and how to improve your business to increase your sale price.

I get calls from smaller operators, such as mom-and-pop vending operations, looking to sell their businesses. While I try to help everyone I can, I also have to be realistic about the business's value. If Mom and Pop are running the routes, chances are the account base is made up of small accounts, and it can be challenging to find a buyer. Depending on annual sales, profits and the number of accounts, I sometimes direct them to sell the business on their own. Larger buyers likely will not be interested in a vending operation this size.

I am not saying that they did not make a decent living. But when it comes time to sell and exit the business, it has to be worthwhile to the next potential owner.

Account size matters

Having your business built around a majority of smaller accounts will make it more difficult to sell your convenience services business. Larger cash buyers generally are not interested in accounts that generate less than $5,000 per year.

When selling a business, accounts that generate $10,000 a year or more in sales are optimal. Most operators have some accounts with multiple locations that want to use the same provider. But having the majority of your accounts be smaller accounts is going to make it more difficult to sell the business. If you have a mix of smaller accounts and higher-volume accounts, buyers will generally be OK with the smaller accounts, but try to keep them to a minimum.

Some operators continue serving smaller accounts because they think they make more money keeping the account than pulling it. But if you pulled the account, it would allow you to use that equipment to gain a larger account.

If you plan to sell within three years or less, that’s a good time to convert the smaller accounts to markets, or just pull the accounts. Chances are, the buyer will need to pull these low sales accounts anyway.

Increase sales volume at small accounts

You can take mediocre vending accounts and convert them to micro markets. This usually increases sales by a significant amount.

For instance, evaluate whether any of your $5,000-a-year vending accounts can be converted into micro markets. Many operators have told me that when they convert an account from traditional vending to a micro market, sales can double.

When it comes time to sell, micro markets seem to be what larger operators want versus traditional vending. So, converting those locations to markets not only increases your sales, but also makes the company more attractive to a buyer. The buyer doesn’t have to spend the money and time to convert those accounts to markets.

If done right, micro markets can fetch a higher sale price or valuation than traditional vending accounts. Installing a micro market can also significantly increase same-location sales. You can also add office coffee and filtered water services to increase sales at that location.

As a sales-side business broker, I have had several instances where I had to split off the larger customers and sell the smaller customers to a different buyer. This doubles the workload for everyone involved in the sale and is rarely a clean way to sell a business.

Optimizing value

When evaluating an office refreshment business, buyers look at the entire operation, including mix of business, profitability and the bottom line.

There is generally a hierarchy in how buyers value the three primary service categories. Office coffee tends to receive the highest valuation, followed by micro markets and then traditional vending. So the more you have in coffee and markets, the better you may do.