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Route/Equipment Valuing - Good Deal?


louis61288

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Hello! I am new to the industry and looking to add some supplemental income with a vending route. I have come across the following route and was hoping I could get some input and advice on this offer:

  • 14 locations with 22 machines (I have a full list I can share if interested, but most are Dixie Narcos, USI, Witten. No Seagas or Anteres.)
  • 2 of the machines are owned by Pepsi
  • $36k gross in 2015, $38k 2014, $30k 2013
  • 3 locations with commission, 1 with contract
  • 1 location making up 20% of gross sales has no machines, seller drops off soda/snack and bills the company
  • Seller states net to be $900/mo for 2015. (For what it's worth, the seller does strike me as honest)
  • States he has weeded out older machines with newer refurbs over past 8 years of route ownership
  • States he works 1 day a week for 6-8 hours. (1/2 machines serviced weekly, ½ bi-weekly)
  • Asking $28k.

 

Again, I’m new and would greatly appreciate any input anyone can provide. What other information could I gather from the seller that could help me properly evaluate this route?

 

Thank you!

Louis

 

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This sounds too high.  The average sales for 22 machines over 52 weeks is only $31 per week.  Keep in mind that this average is inflated, per machine, because one location doesn't have any machines though those sales are included.  If you remove the 20% that this location accounts for then those 22 actual machines are only averaging $25 per week. 

 

Even if the gross sales are accurate and he's truly netting, free and clear, $900 per month, it will take almost 3 years to get your investment back and in that time you're sure to see some negative changes in these accounts.  It's way too risky to invest that kind of money if there's no way to get your money back in 18 months or less.  Even if you view this strictly as an asset purchase, you'd be paying $1400 per machine which is going to be more than the machines themselves are worth.

 

Only you can determine if this is right for you.  Good luck in your endeavor.

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I egree that the asking price is way high. Details on the equipment (make/model/changer/bill acceptor/card reader) play a large factor in determining worth. While technically, you're buying a cash stream, it's the equipment generating 80% of that cash stream. If the accounts are lost or close, the equipment is all you have left to liquidate.

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Thank you both for the replies. Attached is a list of all the machines. If the serial numbers tell anything about the age of the machines, I have those too.

 

What would you believe to be a more appropriate price for this route? AZ Vendor, you mention that I would want to get my money back in 18 months or less. So if it's netting $900 x 18 months = $16,200 max offer?

 

Any additional information that you would recommend I gather from the seller to help arrive at a price?

 

Thanks! 

post-11290-0-15576600-1453755022_thumb.png

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Everyone has different ways to value a route. In my opinion 14-15k is all I would do on this one. I think you will be in over your head at anything higher

 

 

$16.2K is almost the high end of reasonable.

 

 

This sounds too high.  The average sales for 22 machines over 52 weeks is only $31 per week.  Keep in mind that this average is inflated, per machine, because one location doesn't have any machines though those sales are included.  If you remove the 20% that this location accounts for then those 22 actual machines are only averaging $25 per week. 

 

Even if the gross sales are accurate and he's truly netting, free and clear, $900 per month, it will take almost 3 years to get your investment back and in that time you're sure to see some negative changes in these accounts.  It's way too risky to invest that kind of money if there's no way to get your money back in 18 months or less.  Even if you view this strictly as an asset purchase, you'd be paying $1400 per machine which is going to be more than the machines themselves are worth.

 

Only you can determine if this is right for you.  Good luck in your endeavor.

 

Thanks everyone. I'd like to approach the seller with this lower counteroffer of somewhere around $14-15k. You mention that everyone has different ways to value a route, would you mind telling me what some of them are?

 

I'd like to offer the seller a rhyme or reason as to how I got to the number I'm offering.

 

Thanks!

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I personally pay around 35-40% Max of gross annual sales. Then I inventory machines, changers, and other inventory and pay for those. I do this because I want to know exactly what I'm paying for...Im not going to pay for out of date merchandise or low change funds.

My number for this was a little lower because the average machine sales are low. This way you have invested only what the machines are worth if the locations don't work out

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I personally pay around 35-40% Max of gross annual sales. Then I inventory machines, changers, and other inventory and pay for those. I do this because I want to know exactly what I'm paying for...Im not going to pay for out of date merchandise or low change funds.

My number for this was a little lower because the average machine sales are low. This way you have invested only what the machines are worth if the locations don't work out

 

I am sure others would disagree but I would not buy this "route" with a $25.00 a week average per machine. No way, no how. 

 

As far as how to "value" a route their is no hard fast rules because you could have low revenue but new or like new equipment. You could have high revenue and older equipment. You might have high revenue but terrible pricing (profit) high commissions, etc. You may have great revenue, great pricing and like new snacks but all or the majority of the drink machines are bottler owned.

 

You have to take everything into account and assess the entire situation of that "route" or business. I can tell you I have accounts with good pricing, new or like new equipment and no way I would take 30 to 40% of gross for them. I would use "net" as a base price and then factor in assets, etc. Like I said each situation is different. No real hard fast rules but some general guidelines and that starts with gross revenue average per machine. If that is out of wack then you are just buying assets at that point and not really worth pursuing in my opinion unless it is a good deal and you need equipment.  

 

You do not give the models of the equipment so hard to say what value that plays a part. 

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I am sure others would disagree but I would not buy this "route" with a $25.00 a week average per machine. No way, no how. 

 

As far as how to "value" a route their is no hard fast rules because you could have low revenue but new or like new equipment. You could have high revenue and older equipment. You might have high revenue but terrible pricing (profit) high commissions, etc. You may have great revenue, great pricing and like new snacks but all or the majority of the drink machines are bottler owned.

 

You have to take everything into account and assess the entire situation of that "route" or business. I can tell you I have accounts with good pricing, new or like new equipment and no way I would take 30 to 40% of gross for them. I would use "net" as a base price and then factor in assets, etc. Like I said each situation is different. No real hard fast rules but some general guidelines and that starts with gross revenue average per machine. If that is out of wack then you are just buying assets at that point and not really worth pursuing in my opinion unless it is a good deal and you need equipment.  

 

You do not give the models of the equipment so hard to say what value that plays a part. 

The list of equipment is shown in an attached picture in one of his replies.

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I am sure others would disagree but I would not buy this "route" with a $25.00 a week average per machine. No way, no how. 

 

As far as how to "value" a route their is no hard fast rules because you could have low revenue but new or like new equipment. You could have high revenue and older equipment. You might have high revenue but terrible pricing (profit) high commissions, etc. You may have great revenue, great pricing and like new snacks but all or the majority of the drink machines are bottler owned.

 

You have to take everything into account and assess the entire situation of that "route" or business. I can tell you I have accounts with good pricing, new or like new equipment and no way I would take 30 to 40% of gross for them. I would use "net" as a base price and then factor in assets, etc. Like I said each situation is different. No real hard fast rules but some general guidelines and that starts with gross revenue average per machine. If that is out of wack then you are just buying assets at that point and not really worth pursuing in my opinion unless it is a good deal and you need equipment.  

 

You do not give the models of the equipment so hard to say what value that plays a part. 

RJT, attached is a list of machines. I also have serial numbers if that would tell you anything more about the machines...

post-11290-0-01152000-1454605062_thumb.png

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RJT, attached is a list of machines. I also have serial numbers if that would tell you anything more about the machines...

 

I looked at a few of the machines and most are not worth a lot of money. 

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