Most operators I talk to always like to set the larger accounts, and for good reason. I am writing 10 articles on what “NOT” to do in the office refreshment business in order to optimize the value of your business when the time comes to sell the business. One of my last articles was about not keeping smaller accounts because a buyer will not like to purchase the smaller accounts. Now I am going to discuss why it is not good to have a large account make up the majority of your sales.

Selling an office refreshment business has so many variables. I get questioned all of the time, “what are vending companies selling for these days?” This is like asking what are Chevy trucks worth these days? I would need to ask, what year is it? Is it four wheel drive? Does it have leather seats? How are the tires? What is the mileage?

I can cast a net over the average sales price, but that doesn’t mean your operation fits into that range. We would need to look “under the hood”

When an owner is ready to sell the business and they come to me to represent them, I have a long-detailed list of information that they need to gather up for me. Some of the initial information are items like your financial statements, YTD financials, vehicle lists, asset list, machine list, and a sales by customer report, among many other things needed.  A true VMS software (Vending Management System) can provide the inside information needed. You are not doing yourself a favor by skipping the technology that is out there for your business. A VMS can provide so much needed information on your business.

One of the reports needed is a “sales by customer” report. This gives the buyer great insight into your business right away. This report lets them know your largest volume customer to your lowest volume customer. Of course, customer names are generally reserved for after the deal is agreed to and signed for. When a buyer sees that one or two of your customers represent the majority of your sales, the first thing that pops up is if they buy this business, they could risk losing this large account and could potentially harm their investment.

When building your business, it is never a good idea to have your largest accounts represent 25% or higher of all your sales, The reason is, the risk is higher for the buyer if that account goes away before you are paid out. The best scenario is to have a blended base of accounts and not one account be the majority of your sales. To a buyer, the risk could generate a longer holdback period based on the longevity of that large account. A holdback period is a portion of the purchase price, held back for a period of time, in order for the buyer to verify sales in their own system and operations. It could even pass on the deal due to this. This happened to one of my clients and they were out over half a million dollars from the sale of their company. Their largest client went up for bid right around the time the company was to be sold and the closing was set. The deal had to be restructured at the last minute, causing anxiety for both the seller and the buyers. The buyer ended up losing that customer therefore their holdback was less than what they hoped for.

Try to diversify your account base.