Valuation Of Vending Business

In recent times, there has increasing amount of pressure on the vending business operators due to rising products and machine prices, competition and changes in government policies. Not only operators but also vending machine distributors and manufacturers have been challenged to maintain the financial stability of their companies.

Some have even been forced to exit the industry to escape losses due to low-performing business. Under such circumstances, there is need to estimate the correct value of their business and prevent under or over valuation. Often your expectations don’t match the reality. This results in a much lower offer than what you expected or estimated. Such differences between the buyer’s offer and the seller’s acceptance price can lead to conflict and dissatisfaction for both parties.

As an Planet Antares vending machine operator, you need to use a sound system of financial valuation that has logical base, both theoretical as well as practical. This can be an effective tool for estimating the selling price correctly.

The most popular and common method of doing such valuation is the Earnings Method. To understand its working, read the below listed steps.

• The first step will be to gather relevant information about your Antares business. in order to derive a reasonable value for the business, you must make necessary assumptions and use the pertinent data effectively.
• After assimilating the information, you need to normalize earnings i.e. adjust the income statement according to the generally accepted accounting principles and standards. Also, you will have to remove the non-reoccurring and unusual items.
• Next, you will have to adjust the normalized earnings for gains, losses and expenses that don’t affect operational cash flow in order to convert the earnings to cash flows. The resulting figure will be the ‘net projected cash flows’.
• The final step will be to calculate the capitalization rate. This can be done in different ways. You can take the help of your accountant to develop one such method for determination of the rate of capitalization. For example, the build-up model assumes constant earnings, with requirement for deduction of a growth factor in case of growth of expected returns.

Following the above steps will help you in calculating the right value of your Antares vending business. There will be better negotiations as the price will be mathematically deduced. The buyer can be convinced easily through such logical figures and financial data.