What if I told you WE can be your cash provider for $1 a transaction? The entire issue with “not having enough money for the machines” goes away. You’d be a bit excited right?

Details:

• Cost: $1 per transaction OR $400 minimum per atm (whichever is GREATER)
• All your locks need to be CENCON locks (since all money will be sent via armor car). If you need to get these locks, they can cost anywhere from $600-$900 for the lock and installation
• Processing – You will need to transfer your processing to the company providing the vault cash. You would get a buy rate of .20 all the way down to .12, depending upon how high your transaction count is
• Escrow – 1.5 months of costs need to be put in escrow
• Outside of the cash, you still service the machine (paper jams, reports, etc)

Scenario

You have an ATM in Atlanta doing 300 transactions a month at $2, you pay the store owner $100/mo flat fee. Chances are, you go through about 15k a month on this machine. That money is now all yours (freeing up cash flow to grow your business). Your existing profit was $500, plus the cost of your 15k (plus travel, expenses, headaches, etc).  Now, if you paid us the cost of being your vault cash provider, you still profit $100 a month, plus a percentage of the back-end.

Key Points

• If you need cash flow (for whatever reason), this is bar none the best option
• If you have locations that don’t qualify (making at least $500/mo), don’t even bother!

So is this for you? As with anything in the atm business, each situation is different. The details above are general guidelines that we go by to provide vault cash to ATM businesses
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In terms of maximizing the deal for the buyer AND the seller, you need to purchase routes where you are local to the area. Once you start purchasing locations that are not close, you start incurring costs of doing business that will devalue the deal for you and the buyer. What many sellers forget is that their bottom line number will be different than the buyers. If its not tilted in the buyers favor, the deal falls apart. Furthermore, in the atm business, there are naturally more potential buyers than sellers (the keyword is potential). Sometimes a simple lock on the atm (changing over manual locks to elocks for instance) can be enough to through a sale off.

At the end of the day, the buyer has the power when buying atm portfolios. The biggest mistake an ATM seller makes is simple, they never created their businesses with an exit strategy. As a result, the buyer can easily find holes that will enable him to lower the valuation, if you know where to look!

It all comes down to mitigating risk, and within the atm business (especially from the buy side), that’s my specialty!

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The one area that should be looked at is, where does most of your profit come from. If you have 100 machines, and 50% of your revenues come from 10% of your location, then you might want to heavily consider insuring that 10%. Its obvious to say that you shouldnt be insuring machines that are at the low end of your profit margins. Just dont make the mistake of putting a one month cash load on the machine (at least in areas where the risk profile is higher)!

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One atm machine: $2000
ATM Installation (outsource) : $350
Maintenance Call : $75
Phone Line: $20/mo

Thats about the extent of most atm owners spreadsheets. Ah… I know many of you with any sort of financial sense sees the disasters here. The cost of money… regardless of the economy, needs to heavily be thought about. If any atm needs 25k a week, you have interest cost and armor car cost. If you dont have a full grasp on these two variables, your company will not grow and survive (you will get to a point that you can not grow anymore, and for that sales guy, it will kill you personally!).

This brings me to the investment opportunity. ATM companies will offer an outside investors 15-20%  returns. Now, in the present world of Madoffs, you look at that number and become skeptical. While this is smart, with some understanding of the atm business, you can see how you can mitigate this risk while earning a hefty return.

Scenario:
ABC ATM is looking to secure 100k in a cash loan @ 20%.
XYZ Investor if highly interested, but demands the following (which will help you mitigate the risk).

1. The cash can ONLY be used for vault cash purposes, not for hardware. Extremely important
(Your cash is always liquid and never tied to a depreciating asset).

2. XYZ Investor initially shout be of a portfolio that uses armor car services. Why? Accountability. Cash being delivered by armor car gives the Investor protection against internal theft (you’re dealing with cash people, and lots of it!)

3. If armor car is not an option, ask the ATM owner to provide insurance on the atm machine. Now, this is where things get tricky. While this seriously lowers the risk for the investor, its an added expense (sometimes hefty) to the atm owner. Chances are the atm owner will now do this (as from a portfolio standpoint, its actually cheaper for an atm to be stolen than insure every highly profitable machine)

4. An atm owner will ask that you keep your money with the company for X years. They will also ask to provide Y months before removing your cash.  An investor will have a hard time to get around this, as the atm owner needs to know that the cash is there for him to grow. If you are ok with these types of  terms, then the investment is well worth it

5. Contingency: My favorite contingency surrounds non payment. In your contract, have a clause that states if the ATM owner does not provide interest or principal payment within Z days of due date, Investor has rights to surcharge / interchange revenue. Now, not many times will this be executed, but having this as an option protects you in the future. After all, contracts are in place in the event of failure.

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Some tips to think of:

Vault Cash: Many times, companies do not use armor car. While this cuts down on costs, it makes the value of your location less. For instance, by not having your atm setup for armor car, you are forcing that new owner to retrofit the atm with a new lock (ie cencon) or needing to replace the atm machine entirely.  This will greatly effect the valuation.

Contracts: This is the gold part. To unlock the most value, you need a solid contract with multiple years left on it. A good rule  of thumb is to have at least 3 years left on the contact, ideally 5 years. With more years left on the contract, you run a greater chance of getting a higher buyout price. Additionally, you can earn a even higher value if you can get the existing atm location to sign a new contract with the acquisition.

History: The longer the transaction history, the greater the value. If you have less than 6 months of transactional data, you will have a very hard time to sell it. Ideally, you want a solid year of transactions to show the seasonaility of the locations to the new owner.

ATM Hardware: If you are using an older model atm, or there seems to be issues with the atm, you might want to upate the parts. Or better yet, replace the atm entirely. When a new owner is looking to purchase, they look at ways to lower the price by additional work that they need to do.

So How Much Will I Get?
Ah, the question all atm owners want answers too. If you have

1. Solid Contract – 5 years remaining
2. ATM Machine is Armor Car Ready
3. At least one year of transactional data

I can get you 15-18months of gross profits.
Example, you average 500transactions a month, $2 surcharge, with .50 per transaction going to the owner, that leaves you with a gross profit of $750. Assume .30 on interchange, brings us to $900 gross profit. This one location would get between 13k-16k

If we take that same example, but you it doesnt have armor car set up and/or has a small dispenser, the valuation could drop to 12-15 months.

Those are generally not the deal breakers. The deal breakers generally revert back to the contract. This will make or break the valuations of your portfolio. Many atm companies feel their locations are worth more. Thing is, its only worth what someone is willing to pay for it. By trying to cater to the buyer AS MUCH AS POSSIBLE, you run an excellant chance of coming through with a proper sale!

If you have portfolios you are looking to sell, or would like some additional information on setting meetings up with buyers (all under an NDA), feel free to contact me : Contact the author:

If you want to do it right, make sure you cover ALL your basis. Make sure services and performances are written carefully…. its notmally the easiest way for store owners to get out of atm contracts.

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My personal favorite is the ability for a sign to determine your sex, and estimate your age within a 7 year range. Very powerful from the advertising and marketing perspective. Another neat item is the “stretch screen” from LG. You have a “stretched” out screen with a minimal height. Helps generate user focus given the appearance

Make sure you have a good relationship with the store owner. Not just some monthly statement and check being sent out. A vendor will come in to sway that store owner with better payouts, fancier signs, and additional promises. It’s imperative that you have a good relationship with the owner. Period