Guide to the Successful Purchase of a Vending Machine Route or Business

Guide to the Successful Purchase of a Vending Machine Route or Business

Although it is possible to start vending machine business from scratch, many entrepreneurs look for existing routes or businesses for sale. This option to take over an established company is much simpler than doing everything yourself. Also, a geographic area may already be well-stocked with vending machines and service companies so there is really no room left for another one. Competition is sometimes fierce when it comes to getting the best locations in the vending industry, but challenges such as this can be handled.
 
Buy a Complete Vending Machine Business
 
One of the best reasons to purchase an established vending machine business is the immediate source of income it provides. If you start from nothing, it will take a considerable amount of time to establish a route and develop relationships that can leave you to make a profit.
 
Although there are many possible benefits to buying out a vending machine business in action, there are plenty of questions to ask before you sign ownership papers or pay any money.
 
Having an existing personal or professional relationship with the current owner of the vending machine business you wish to acquire can help. Research about their business success, the routes they have and relationships with both vendors and location managers should be done well before you even consider making an offer on the company. This camaraderie also helps you know if the person is honest and trustworthy and whether they keep the vending machines in good repair.
 
What happens if you do not know a person who wants to sell a vending machine business? How do you find one to buy? By reading the steps outlined below, you can easily identify and locate a successful business to buy out.
 

1 - Find out why the current owners wants to sell the business.

 
There are both good and bad reasons to sell a vending machine company. Of course, some people may try to unscrupulously unload a failing business, but successful businesses can also be for sale. Perhaps the owner has reached retirement age, is getting a divorce or wants to move to another part of the country. Perhaps they just want to change their career or need a chunk of money for a medical procedure, their child's college education or a new sports car. When you are researching potential vending machine business is to buy, always ask the current owner this question. Do a bit of investigation to find out if the answers he gives you are true.
 

2 - Ask about the current route and research locations for possible problems.

 
An honest vending machine business owner should be happy to let you ride along on the route to examine both the vending machine operation itself and the professional relationships he has with the site managers. Another option is to receive a location list and contact information for the people that sign the vending agreements. You can then visit each to check out the machines' condition, number and time of the vending transactions and any information the people there can share about favorite products or service.
 
3 - Give all vending machines a thorough inspection.
 
A full inspection of all the machines that the vending business has for sale is necessary to understand what you are getting for your money and to make sure everything is operational in order to realize a profit. If any of the machines look unsightly, worn out or have many "Sold Out" labels, the location may be undesirable or the machine itself may be too old to attract sales. These are just some of the red flags that indicate neglect or for maintenance by the existing owner. It can also lead to negative impressions by the location staff and accounts that may close or failed to make money. Contacting whoever agreed to have the vending machine there can help you determine their opinions and whether they welcome the continuation of service.
 
4 - Examine 3 to 5 years' worth of tax statements and profit sheets.
 
Examination of the tax returns and accounting profit sheets for at least 3 to 5 years is essential to determine whether the vending business operates in the black and can therefore make you money if you buy it. If you are not experienced at owning a vending business, this paperwork can also help you understand operation costs and company structure. Other financial information is important to know: commission percentages to location owners, total revenue, profit percentages over cost and any assets, including the machines themselves, that are held by the company. Comparing the profit sheets and inventory reports with your prior information about sales at different locations should give you an honest look of the situation.
 
5 - Go over the current contracts.
 
A vending machine business is only as good as the contract held with location owners or managers. Examine all existing contracts to see which are most lucrative and which may need to be re-signed if you purchase the company. Also, be aware of any "Change in Control" clauses in the contracts that allow a location owner to cancel the contracts if vending company changes hands. This is especially important as you want continuous profit from the start of your new ownership.
Some vending companies do not own the machines they use, but instead rent them from third-party sources. These leases must continue if the company is sold to you, the new owner.
 
6 - Contact the Better Business Bureau to check for complaints or other issues.
 
Check for any existing or repetitive complaints or negative complaints at the Better Business Bureau website that pertain to the vending machine business you might buy. Searching for any problems with this tool is completely free.
 
7 - Research public court records for past, pending or current legal trouble.
 
Purchasing a vending machine business can cost a lot of money, and should not be undertaken without due diligence of any potential legal trouble it had in the past. Contact local and state clerks to access public records that pertain to the particular company. Look for judgments, liens and any past or present litigation processes that have been filed. If you go on to purchase vending machine company anyway, you will become liable for any legal damages determined from these court proceedings. If you want to make a profit with an honest company, starting out with a troubled one is a bad idea.
 
8 - Be sure to get a "Clearance Letter" for the company prior to purchase.
 
Many states will issue a "Clearance Letter" outlining any current or former taxes that have not yet been paid by the vending machine business you are considering for acquisition. Vending products do require sales tax payments in many places, and these must be remitted to the state government as necessary. This letter will give you a clear impression not only about how much sales tax is usually do every month or quarter, but also whether any outstanding taxes may affect your bottom line when you buy the company.
 
9 - Understand company value and stick to your budget.
 
After you have completed all the previously mentioned research and due diligence, it should be easier to decide if the vending machine business in question will be a profitable venture for you or not. If you do decide to go ahead with making an offer and potentially buying out the machines and routes, you need to know how much the company is worth altogether. Paying too much can be just as much of a mistake as buying the wrong business to begin with.
 
Your best bet is to hire a lawyer who specializes in business acquisition and has some knowledge or experience dealing with vending businesses in particular. Professional accountant may also help to go over paperwork and determine value. If you would rather not employ outside help and figure out everything on your own, it might be a better idea to start by purchasing a smaller business with only one or two dozen vending machines already placed at active locations. I have developed an application to give you a generalized view of how much a particular vending machine business is worth. Simply type the financial data into the appropriate spots and run the app to get an indication of how much a business will cost and how much you should offer.
 
Making a first offer on a business purchase should always start at least 10 to 15% below your budget in order to leave room for negotiation. Always keep your maximum dollar amount in mind so you do not pay too much for a company or spend more money than you have access to. The negotiations should be carried out honestly and in good faith so both parties are satisfied with the end result.
 
10 – Include transition help from the older owner in part of the purchase.
 
Although many companies sales hand the reins over to the new owner immediately after money is paid and paperwork is signed, it is a good idea to negotiate a transitional period with the sale. This means that the current owner would assist with all transition tasks for a period of a few weeks or even one month. This not only allows people new to the vending industry to learn the ropes from a seasoned professional, but also allows even experienced vendors to learn more about the particular route and contracts in place. This time can include route optimization, machine maintenance assistance or education and introduction to key location managers and customers.
 
These 10 tips for finding and purchasing a quality vending machine business to buy do not cover everything an entrepreneurship know. However, it provides plenty of valuable information about how to get the best value for your money and how to identify and take over a business that will be successful immediately and in the future.

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