How to value a vending business
An interesting vending topic that comes up is how to value a vending business?
As far as we know, there isn’t one hard and fast rule but have seen a few simple methods applied. Most people use the Per vending machine method as it is the simplist
Some of the vending business valuation methods we have seen used exmplained below.
Per vending machine method
This is where the value of the vending business is calculated by multiplying the agreed price of one machine by the number of machines in the business.
For example:
Agreed price of one vending machine - $500
Number of vending machines – 100
Value of vending business = Agreed price of one vending machine x number of vending machines
Value of vending business = $500 x 100
= $50,000
The agreed price of one vending machine is based on factors such as comparable sales and the cost of a new machine. It is a negotiation between the buyer and seller
Multiple of sales method
This is where the value of the vending business is calculated by multiplying the yearly revenue of the vending business by the industry multiplier. Depending on the industry, the industry multiplier can range from 0.25 to 1 or higher and depends on the business itself. To obtain the industry multiplier you’ll need to analyse sales of comparable businesses or ask a business broker/agent.
For example
Your vending business has $60,000 of sales yearly.
A comparable vending business was sold for $40,000 and had yearly sales of $30,000. Therefore it's multiplier is 1.33 times. You decide to use this industry multiplier as it is a similar busines to yours.
Value of vending business = Yearly sales x vending industry multiple
Value of vending business = $60,000 x 1.33
= $79,800
A business broker / agent is able to assist with sales / profit multiples as well as vending business valuations.
Multiple of PBIT profit method
This is where the value of the business is calculated by multiplying the “PBIT” (Profit before interest and tax) by a market multiplier. Depending on the industry, the market multiplier can range from 1 to 5. To obtain the industry multiplier you’ll need to analyse sales of comparable businesses or ask a business broker/agent.
For example:
Your vending business has $20,000 of yearly PBIT
A comparable vending was sold for $100,000 and made a PBIT of $33,000. Therefore, the market multiple is 3. You decide to use this market multiple as it is similar business to yours.
Value of vending business = Yearly PBIT x market profit multiple
Value of vending business = $20,000 x 3
= $60,000