An Operators Most Valuable Asset Remains Under-Analyzed And Often Underutilized

Very recently I was chatting with a veteran operator about assets. He was adamant about where he saw his place in the coin-op industry and the business world at large. Interestingly, he neglected to include locations when he was discussing his many and varied assets. Putting aside the accepted rules of accounting for just a moment, locations can legitimately be considered an operator's most valuable business assets.

This can be good news for those operators who have grown used to fearing the future and recalling those happy days of what is all too often an imagined past. (It's even better than finding a $20 bill in a pair of pants you haven't worn in a year.)

While it's true an operator doesn't actually own a typical location, he does have the kind of access that is highly valuable. This is particularly true for bulk vending operators who may have a 1,000 or more accounts on their books. Depending on how well they have managed their routes and relationships with location owners, these assets could be worth quite a bit in potential income.

Seen in this light, it is surprising how many operators don't conduct a regular accounting of their "location assets." Yes, they are usually ranked in terms of the level of income they generate, but rarely are they grouped in term of business type, demographics, available square footage or dozens of other categories by which they can be defined.

Of course, this is not a new concept. Bulk vendors have been talking about route and account management forever. Several savvy operators I know regularly review their accounts, looking at the top and bottom earners on a regular basis. These operators typically look for ways to maximize the profits at the top, while considering the elimination of a percentage of the bottom earners for the sake of efficiency. These operators, however, are the exception rather than the rule, and mostly conduct their reviews in a very simplistic manner.

The vast majority of operators unassumingly go about their business as usual, thankful for the high earners and hoping the slowpokes will eventually pick up. And many, remarkably, are the same ones who keep the most fastidious books. Yet, they continue to overlook that key asset -- their locations. When they examine their businesses they tend to see routes, or geographic sections of routes, but often ignore individual locations. It seems very much a case of not being able to see the trees because of the forest.

And why are locations often overlooked as an asset worthy of study? I would have to say it's because it involves looking for potential, along with accepting additional risk. This is tough stuff in uncertain times. Evaluating a location for the potential addition of an ATM, skill crane or photobooth, among other expansion opportunities, requires some tough thinking about foot traffic, demographics and location management. It also necessitates accepting a certain level of financial risk that is much more difficult to calculate.

On the upside, the rewards can be great. Close examination of a route -- location by location -- can lead to a profitable strategy of increasing density, as well as diversification of equipment types. Once again, this is nothing new for many street operators, but could mean a bright future for those too accustomed to looking to the past.