Need Expertise? It's Available for Hire

Two heads are better than one. In today’s difficult economy, there’s any number of reasons an operator will hire a business consultant. If narrowing margins are making it difficult to grow profits, a consultant with experience in vending and innovative business practices can help an operator improve efficiency.
A consultant can suggest new technology or find alternative products that will increase sales.

A consultant can also offer tips for determining a sale price for a vending operation, as well as recommend practices that will get the operator the price he or she wants.

CONSULTANTS PROVIDE EXPERTISE

In this industry, there are consultants that specialize in mergers and acquisitions, consultants that improve profitability, and then some that do both.

As the industry has become more challenging, and demanding of more management disciplines, operators will find consultants experienced in various disciplines a benefit. One area of expertise that has emerged as a specialty is technology.

When an operator is facing tough times, it’s easy to feel afraid of losing money on a new idea. It’s important for operators to know there are people they can pay to provide sound business advice, from an industry background, that will improve profitability.

“For us, it starts on the phone,” said Jon Ford, partner, Edison Strategies, based in Ballwin, Mo. After more than a decade of informally helping operators with sales and growing their businesses, Ford decided to start Edison Strategies with partner Andy Hayes as a way to formalize the process. Ford also owns Allstate Manufacturing, which sells remanufactured and new equipment.

According to Ford, a consultant focuses the initial discussion on the operator’s goals, which range from operating strategies to acquiring or divesting all or part of the business.

TODAY’S CHALLENGE: PRODUCT PRICES

Right now, one challenge is the price of chocolate and soda. “Operators are struggling to get agreements that work in their favor,” said Ford. He notes big operators are not simply reducing chocolate facings, but investigating other strategies, such as contracting placement fees with manufacturers.

Ford knows operators who’ve negotiated with a manufacturer for better pricing or got them to pay for new technology in exchange for a certain number of facings. He warns there can be pitfalls in manufacturer contracts. “I know an operator who signed a 2-year contact,” he said. Prices have gone up three times in the first year under the contract.

RISK-FREE CONSULTATION

The first conversation with a consultant does not usually cost anything, and doesn’t commit the operator to working with the consultant.

After reviewing the company’s documents, communication continues face to face. “From there, we tailor what we do to help them,” Ford said. He cited an example of how a company looking to improve its coffee strategy benefited from his services. He suggested private label because not only would it be more economical, but also provide a unique proprietary product.

Although private label has long been available to operators, many think it is difficult to implement. Ford was able to show the vending operator it was not, and has some great benefits, such as monetary savings, higher sales potential and increased profit opportunity. Each quarter, Ford was able to capture and report the operation’s monetary savings and increased business due to investing in private label.

SALABILITY IS GOAL

Improving operational strategies to grow profitability affects a company’s salability, which should be the ultimate goal, according to Ford. Valuation provides operators goals
by which to measure their performance. It is not only a selling price, but also a management tool for running the company.

“We implement strategies where vending operators can do it (determine valuation) more often without bringing someone in,“ said Ford. He recommends determining the company’s value at the beginning of the year, then at mid year evaluating it again to see if it has increased. “Not all business is good business,” said Ford. If an account is not as profitable as anticipated, the valuation gives the operator the ability to see that and make the necessary changes.

SELLING STARTS WITH PROFITS

Merger and acquisition consultants also offer advice on profitability. Rick Piper, founder, Piper
Group International based in Lake Oswego, Ore., has offered growth strategies to a number of vending companies to help them obtain a better selling price.

Piper has more than 20 years of merger and acquisition experience and speaks on calculating the sale value of a business.

“I was once referred to a company owner who wanted to sell, but profits didn’t justify the price he wanted,” said Piper. In instances like this, Piper shows the operator how to value the business. “I work with them year to year to help get value up,” he said. He usually does not charge for that. Piper also offers a workshop that covers improving the business. The seminar, “How to increase the value of your business,” includes 40 improvement ideas.

One challenge Piper believes is facing operators is the shift in consumer habits. People tend to want more wholesome food, he noted. Even fast food restaurants offer salad. One strategy to recover disappearing candy sales is to offer more wholesome snacks.

EXPERIENCE IS A MUST

While reasons to sell a company can vary from a lack of cash flow, no succession plan or even a poor return on equity, hiring an experienced consultant is highly important. When seeking help selling the business, a consultant focused on mergers and acquisitions can provide insight into financing, integration of operations and assets, as well as structuring sales agreements.

“We should all learn from our mistakes, but this can be very costly. A consultant with experience in the industry as an operator, buyer and seller, has learned from their previous transactions,” said Gary Pretzer, director of mergers and acquisition services, Consolidated Services Group’s western regional office in Green Valley, Ariz.

In his 40 years in the vending/OCS industry as an owner-operator and consultant, Pretzer has helped businesses by buying and selling routes, as well as entire companies.

ALWAYS CHECK REFERENCES

According to Pretzer, it’s important for an operator to inquire about the consultant’s time in the industry, business references, as well as the background and experience of individuals they will be working with.

CONSIDER THE SALE STRUCTURE

Pretzer recalled a time he assisted a seller in finding a way the selling arrangement would benefit him beyond the sale price. The arrangement was set up to generate the most net dollars after taxes. The buyer needed to see how the acquisition would benefit him and provide the best return on investment, not just the price. “Both parties benefitted by looking beyond the sale price of the business to how the sales agreement and allocation were structured,” said Pretzer.

Formal, written documentation is important in a consultant agreement. “We insist on an ‘exclusive listing agreement,’” said Pretzer. It assures both the buyer and seller that all communications are consistent with their intent. Also important in this document is a “termination of the agreement” clause to protect both parties in case conflicts arise. Having a confidentiality agreement is also essential. According to Pretzer, it states that all privately held information will be held in strict confidence.

CONSULTANTS CAN REMOVE BLINDERS

One reason an experienced consultant is so important is because what the consultant says may not be what the operator wants to hear. “A consultant sees what different operations do to achieve success in their markets. Most vendors don’t have that experience,” said Chuck Treister, founder, U.S. Vending Management LLC, based in Brea, Calif.

Five years ago, Treister decided to take his more than 30 years of experience, owning vending machines and working for a large manufacturer and vending operation, into consulting.

A challenge Treister works on with vending operators is integrating technology into the organization. Technology has developed quickly in vending, and keeping up with the capabilities has become difficult for most operators. Hence, a consultant familiar with the technologies can be a great benefit.

According to Treister, the biggest hurdle to raising profitability is change. “Operators want to hear what you have to say, but they don’t always want to implement it,” he said. The resistance can be due to the monetary investment, or simply discomfort with change.

“People contact consultants when they need outside help on internal details,” said Treister. He has spoken with operators who want to exit the business, but don’t trust their kids to run it, or who didn’t train their staff to run the business effectively. “A consultant can help inform and enlighten to help them make a good decision for themselves,” said Treister.

IMPROVEMENT REQUIRES COMMITMENT

Operators who aren’t ready to make serious change and hard decisions probably won’t benefit from the services of a consultant, according to Tom Britten, owner, Britten Management Services, LLC, based in Zephyrhills, Fla.

Britten started Britten Management Services after working in every conceivable position in the industry, from route person to executive positions, domestically and internationally.

“Having an outsider look at your business, particularly one that understands your business, can be an eye-opening experience, albeit often dramatic,” said Britten. The consultant should not tell an operator what they want to hear. It’s a consultant’s candor and objectivity that make them beneficial to a business.

Britten likes working as an advisory board member where he can bring in his unique business models and analytical tools to help the company.
“The help most operators need is usually not in the functional areas of vending, foodservice or OCS.

The help that is most beneficial and where the greatest bottom line impact can be made is in combining solid business practices with the existing technical expertise,” he said. Britten has done business orientated tasks, such as review proposals, critique financial statements, or create a template for tracking route productivity, as well as being a sounding board for prospect pitches, or conflict resolution with big accounts.

ALTERNATIVE: ONLINE CONSULTING

Britten admits consultant fees can be steep, especially when travel expenses are added in, but the services are still valuable. His solution is to begin serving clients on a remote basis through teleconferences and e-mail. “A few years back, we all probably would have thought this arrangement was weird and unworkable,” said Britten. “I admit that it is just another example of how the world has changed and how methods are adapting.”

In this tough economy, it’s easy to get stuck in old business practices that aren’t working and not be able to pull enough useful knowledge from the seminars and literature about business. Consultants can give operators that third party clarity that is industry specific.

For more information, contact:

Tom Britten, Britten Management Services, 813-469-5437, [email protected]
Jon Ford, Edison Strategies LLC, 812-240-1854, [email protected]
Rick Piper, Piper Group International, 503-620-1800, [email protected]
Gary Pretzer, Consolidated Services Group, 520-300-5072, [email protected]
Chuck Treister, U.S. Vending Management, 877-524-2485, [email protected]