Acquisition #3

It was Saturday morning.

I was home a lone with the kids for the weekend.

My wife finally got some time away with friends.

We had just gotten home from our morning soccer games.

I get a notification on my phone, someone listed their vending machines for sale on KSL, a local classifieds app.

I have automatic notifications for these because once in a while a machine with a location will come available.

I hadn’t bought from anyone on KSL before, but I watched it the way a teen waits for TikTok notifications.

Additionally it gives me a pulse on what’s going on in the vending market, how routes are performing and more.

→ Where do people have locations

→ What is their monthly revenue at specific locations

→ How they found those locations (I’ll engage conversations)

→ Who has machines in Utah valley and how many (who’s my competition and what are they dong)

and a lot more intel…

I opened the KSL app to check it out as I always do.

As I read through the details, my heart began to race.

“Ok, how can I make this work. I’m home a lone with the kids. How could I go see these…” I thought to myself…

I text the seller immediately with no anticipation of any action on my part, just kicking tires.

Within minutes, he text me back asking if I could come see them within the next 2 hours.

Of course, I replied “absolutely.”

I had to hype up the kids. They wouldn’t want to go see vending machines on a Saturday.

I ran into the cardboard base where they were proceeding to unravel $40 of duct tape on old delivery boxes from vending inventory.

They were constructing their evil base where the bad guys will live.

“Ok, I have the best idea ever… who wants to go to a trampoline park!!!”

They all crawled out of the base screaming to run and put their shoes on.

We had just one slight detour on the way there…

Luckily, they were supportive.

The listing:

~$3,000/month gross revenue

2 machines - ($7k machines each new only 18 months old)

$12,000 listing price.

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The meeting

When I showed up, the man letting us in the door clearly had security access to this location.

Turns out, he’s not a vending guy.

He’s the facilities manager of the location.

As we talk, I get to do a lot of discovery:

• How long has this business been here? (15 years)
• How many employees do they have (200 but going to 500 end of next year. They were just bought by DuPont and are growing quickly)
• How long do they plan to be in this building? (5 years left on the lease and they are trying to buy the building next door for expansion)
• How often is he filling these machines (every day 😳)
• How much was he charging for the high volume items ($1 for coke can, $1.25 for chips)… huge upside.
• How long is the facility open? (24 hours a day, 7 days a week)

I quickly realize the potential here.

There’s not even a gas station with 1.5 miles of this place. Nowhere to eat.

I observe the employees in the break room. It’s clear they are on a tight schedule for breaks, they are in n out within 10 minutes. This means fast, quick snacks and meals.

After spending 30 minutes talking, I gauge the companies interest in building a micro- market…

This is what they look like:

The beauty of a micro-market is you can offer fresh and frozen foods. This means you can take the average order from $2.75 per transaction to over $8 with more people buying food and drinks at the same time.

“Funny you should ask that, we just got acquired a few months ago by a huge company and they brought in a new HR team. They just brought this up last week as we’ll need to expand our headcount significantly next year…”

Bingo.

I let him know we’ll bring in more machines to manage the volume for now but we’ll plan to build a micro-market in the coming few months to provide fresh food options to employees.

As we walked out the building I let him know we’ll take it and immediately sent him a down payment.

I need to validate the revenue a bit before committing fully and I knew these transitions were a bit more time consuming than just signing a piece of paper and walking away.

The next Monday he text me to let me know his HR team was excited to get a micro-market in there soon.

A few lessons

1. Vending is competitive what’s your advantage?
2. At closing, he told me he had over 15 people reach out. He even had 3 people offer over the asking price and one willing to drive up from Las Vegas that next day to buy them. You know what sealed the deal, IMO? Speed to lead.
3. Speed to lead
4. He said I was the first to reach out, ‘within seconds’ in his words. ‘And the fact that you came to see it within a few hours showed you were very urgent and could buy it, not just a tire kicker’. This works with most deals on the market IMO. Be ready to move when something good comes available. The only way to do that is to know what you’re looking for. The only way to know wha you’re looking for is to look at a lot of deals and determine what you don’t like.

I took this screenshot at 9:08pm

The listing went live 12 hours ago which would make it ~12:07pm.

My text to him was at 12:07pm.

I wasn’t kidding when I said I text him within 60 seconds.

1. Closing the deal
2. I initiated a close on the spot. Why? Cause I knew there would be vultures all over this deal. I had to secure some way of him feeling committed to our deal. Sending him $1,000 while I was standing there showed good faith on my part and his willingness to accept it wouldn’t let him back out as easily. Worst case scenario? He’d take my money? But I knew where he worked every day at this point, I’d get it back.

Financing Details

The best part of all this is we’re building a flywheel of cashflow.

We kept nearly all the earnings of this business in it since we acquired it.

This means we used the current cashflow of the business to reinvest into this purchase.

Wrapping up

If you’re looking for a business to buy, don’t rule out local classifieds.

There’s a lot of very small businesses on local classifieds and you’ll be less likely to find the ‘40 year old business’ doing >$1m a year.

Do your due diligence, make sure it’s a legit business.

When you find your niche and learn the metrics of what ‘good’ looks like, you can find tuck in deals often.

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