How vending operators can build net worth

It looks like 2021 has proven to be a comeback year for the refreshment services industry. The industry has had many acquisitions in 2021, even more than in 2019 before the pandemic struck. Many operators looked at acquisitions as ways to offset lost sales and build value. I am seeing more interest in acquisitions and now have more buyers than sellers.

However, it could take as long as 2025 before the general at-work population returns to 2019’s level. As the industry continues its recovery, here are some ways to rebuild your business, and raise its value and your own self-worth.

Can you offer new equipment, great service and cheap prices?

If do you all three of these, you are going to have growing pains – in a negative way. And you won't be able to do this very long before you contact me to sell your business. Buyers of vending and OCS businesses do not want to be the bad guys who raise prices. They could lose accounts belonging to the business that they just bought. Therefore, they will tend to pay you a lower price for your business as they will in turn need to raise prices. If you continue in the convenience services business, you need to be profitable. Remember, this is not a hobby.

Here are a few ideas on growing your business organically and profitably.

Never sell new accounts on price

If you win the account on prices, you will lose the account on prices – when someone beats your prices.

Don't be afraid to go up on prices when selling a new account

There is usually a reason why a contact is talking to you about changing vending and coffee service providers. Explain to them what’s emphasized above, “I can't provide NEW machines, GREAT service and CHEAP prices. But I can provide newer machines, dependable service and market store prices.”

Add credit card readers to your machines

Most operators have added cashless acceptance to most of their machines by now. Adding multiple ways for a customer to pay will always increase your sales. Don’t be afraid to charge an extra 10¢ per credit cards transaction. This will help cover processing fees by the credit card companies. Additionally, there are payment apps that allow the customer to purchase products from vending machines, which do not need to be online to accept payment. Operators should consider using these mobile payments, too..

Convert vending to micro markets

When converting an account from vending machines to a micro market, always go up on prices. A micro market often requires greater risk, additional capital investment and more product SKUs. That said, sell markets for what they are: onsite mini convenience stores.

I hear this all the time, “I can't raise prices because of my competitors.” You can if you have the relationship with the client and follow some of the advice mentioned above. If you can't make the right margins, then pull the account and find a place for the equipment, somewhere profitable. Remember, this isn't a hobby – you are doing this to make money!

Long-term goals

I encounter many operators whose goals are to grow large and add more accounts. It depends on your long-term goals on how large you want to grow your business. Some operators just want to make a good living and are happy running the business themselves. Some want to build as big as possible to sell it one day. We are starting to see more and more larger operators buy other larger operators, and even capital and equity firms getting into this industry to provide the cash for growth. Many of these suggestions will increase your self-worth, and the value of your business.

A good way to grow is internally. To create internal growth, pull your low-volume accounts, raise prices to c-store levels, add OCS and pantry, and consider micro markets. And run a clean and well organized warehouse. Vendors and visitors to your location talk to each other – the last thing you want is having a reputation for running a filthy operation.

Don't ‘factor’ your commissions

"Factoring" commissions paid to accounts means cheating on the agreed upon amount that is reimbursed to accounts based on sales. For example, if you bid to pay a college 25% but only pay them 10%, you are cheating in a big way. This is an ugly subject. Just because your competition is doing this doesn't make it right for you to follow suit. Nothing is more frustrating than bidding against a competitor, and knowing they are renowned for factoring commissions, only to have them win the bid.

In my line of work, fraudulent factoring will come back to haunt an operator when they try to sell their business. There have been numerous lawsuits from companies that have bought operators who have cheated their customers on commission payments. Generally, the buyer is not going to put themselves at risk and continue to cheat customers. If you come clean and concede to the buyer that your company has been cheating its customers, don't expect them to buy you. And if the practice is not disclosed to the buyer, then you could be sued when it’s discovered. Evenmore, if you are caught defrauding government or college locations, you could be sent to jail.

How to beat a 'factoring' competitors?

The first way to separate yourself from what your cheating competitor is to guarantee that your smaller commission checks will be higher than those issued by the current provider. If your true commission check is lower, offer to write a check for the difference. In my experience, when I offered a lower percentage on commissions, but offered to pay the difference in a competitor’s higher percentage range, I never once had a client ask me to pay that difference.

For example, tell the customer, "My 10% commission check will be higher than the 25% from your current provider." You can look at the customer's pricing and be able to tell pretty quickly if they are factoring the sales. If the prices are high enough to cover higher commissions, then they might not be factoring. But if you see unusually low prices where an elevated commission rate paid, then there could be some factoring going on.

The customer generally will "get" what you are talking about. Most vending management systems prevent factoring, but there are workarounds. During my many years in the vending business, I never once got called out when going up against a competitor know for cheating. When you do a proposal, don't bid a commission that you can't live with and make money.

Use an appropriate email address

The days of AOL and Hotmail are long gone. Don't run your business under these granddad email domains. It is very easy to have your company name in an email address to give it a professional look. You can purchase and register a domain with GoDaddy, Google Domains, Hover, Network Solutions, Register.com and Wix, among dozens of other service providers, to create a fitting email address.

What are the three parts of an email address?

The local part (Mike).
The @ symbol.
The domain, like outlook.com, gmail.com or your own (mine is vmacsolutions.com).

Having a professional domain creates a professional impression. When you own a professional email address, people consider you to be more secure and invested in your business, and it doesn’t look like spam. For example, my email address is [email protected].

Of course, the domain can be used for your website, too. When creating your company website, use pictures and images of your customers and staff – avoid clip art and reusing images from other sites. People like to see images that are unique to your business, and it shows them how your equipment looks like in an actual environment.

If your company name is “Custom Breakroom Supply,” buy the domain name CustomBreakroomSupply.com (if it’s available). Then you own that name to use in your email address, instead of using @aol.com or @yahoo.com, etc. If it is already taken, you can always try registering the name with an altermative domain extension – like .NET, .CO, .BIZ or .US – or use a different variation of your name. Search YouTube for ways to do this yourself or ask your website provider. [email protected] looks better than [email protected]. Be bold and original.

Have a web presense

A website is a huge reflection of your company. While you may not want to spend several thousand dollars on designing one, at least shop around and have someone build a one- or two-page temporary site. Many operators cut corners on this. Most don't know that Google "crawls" web pages. So, if your website is not updated with new content, your Google ranking sinks to the point where new customers won't find you when they’re searching for an operator in your market.

Face it, most people “Google” everything these days. If you invest in a great-looking website with effective SEO tools, and have it professionally managed and updated regularly, your Google search results will do well. So, new customers looking to change vending, micro market or OCS providers will find you. This is WAY cheaper than hiring a salesperson to go “old school” and cold call. Buyers will generally keep your website going for lead generation, so investing in an robust site will add to your company value.

Use social media

Social media is free. It costs absolutely nothing to create a LinkedIn and Facebook page, or set up a Twitter account. LinkedIn and Facebook get crawled by Google, too, so they will help you get found when a potential customer is searching Google to find an operator. To make it look professional, there are numerous tutorials on YouTube that can help you create and enhance your social media pages, or ask your website provider to set it up for you. Many will include it with the build of your website.

Post as many pictures of new installations on social media as possible. Most new customers will look at your Facebook page. They need to see weekly posts and constant pictures of your staff and new installations. This will give them the confidence that you are a growing business and can take care of their needs.

Keep your social channels updated regularly. If visitors see that the most recent post was made in 2016, they will most likely click away and go to another website.

You own it

Owning your own business will build self-value if you do it right. Owning a business, however, is not for everyone. Most people like the security of working for a company and getting a regular paycheck and 401K contribution. But when you build a business right, it will add to your self-worth, so when the times comes to exit the business, your payday will come.

About The Author

Mike Ferguson is owner of VMAC Solutions LLC, a brokerage firm serving buyers and sellers of vending, micro market and office coffee service businesses. Ferguson is also a former operator. VMAC is also an authorized LightSpeed Automation sales agent. Ferguson can be reached at (713) 569-6463 or [email protected].