Valuing a Vending Business

The vending industry has struggled in recent years through tough economic times. Right now it is difficult to find any operator, distributor or supplier who has not been challenged to maintain the financial integrity of their organization over the past years.

As s result of the difficult business environment, there are some operators who are contemplating selling their business. The Natural Choice Vending Program by Antares Corporation has been providing operators with the right choices for their vending business, and as a result they have generally been successful with their vending business

The need of a sound valuation method

Their expectations do not always match reality. The difference in what the buyer is willing to pay and what the seller is willing to accept can be a point of contention and frustration to both parties. The final selling price of the transaction should be determined by thorough negotiation between the buyer and seller of the Antares vending business.

Step 1: gather information

You can do this by listing five years of income statements and then enter the income statement so that the results of each year can be compared side by side.

Step 2: make adjustments

This is to normalize the earnings of your Antares vending business, which means adjusting the income statement to generally accepted accounting principles and industry standards. Another item to consider during the normalizing process is a transaction that can distort earnings because the owner of the business is also the owner of another separate company which the vending company conducts business.

Step 3: project cash flows

Here you will need to convert normalized earnings to net projected flows for your Antares vending business. To do this is to make adjustments for gains, loses and expenses that do not affect the cash flows of the operation.

Step 4: capitalization rate

On this step you will need to determine the capitalization rate. There are many ways to do this. In one method an Antares vending operator can develop, with some help from his or her accountant. The method is called the Build Up Model. The formula assumes constant earnings, and if the earnings are expected to grow, a growth factor needs to be deducted from the expected return.