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Need expert opinion on selling my route


leo7068

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You are definitely being lowballed. On the other hand, $7K for the route is way too much. If your route really makes $3K/yr, an offer of about $2K or so is fair.

However, you've stated you won't disclose anything about the locations and are moving away so someone needs to put a lot of trust in you to purchase these.

Based on that, if someone offers $1500 I would say that is fair. This is still much more than you were offered, tho.

Kevin

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leo,

Have you thought of using a business broker? You don't have alot of time left to sell the route. If you're moving too far away to ever come back and service the route you may just have to take what you can get. On the other hand if you will be somewhat able to run the route until it sold I'd consider a broker. I understand what you're saying as far as what it should be worth based on the income it's producing. However the people here in the forum are probably not ever going to pay even close to your asking price. A broker on the other hand can find someone not familar with vending and have a much better chance of getting a higher price. Let the broker sell the route and the increase price will pay his commission or you don't except the offer. He may find someone that has been looking at other business opportunities which may make your deal seem cheap. It only takes one buyer. I like to steal something when I'm buying but wait for the right price when selling. If you can, I'd suggest waiting while a business broker gives some buyer all the bs about the business needed to get the right price.

nam

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Kelly,

Bs is a general term in pretty wide use here and everywhere. I didn't say to screw anyone. You did. Selling used machines or your route for the best possible price is just good business. If I can sell some of my used 1800vending machines for $100, I'm not going to say wait and let me tell you where you can buy them for $40.

People use brokers to sell their businesses all the time because they are professionals at finding buyers and getting a higher price. Often what a salesman tells a potential buyer may be referred to as bs, line , pitch or whatever term you choose to use. It again is simply very obvious you are trying to start a issue with me. Send me a pm if you have an issue.

I don't think if Leo sold his route for his asking price that he is screwing anyone.  The value of a business to a large extent is based on it's income.  Using that as a basis, which is what a broker would use and tell a potential client, it's a fair price.

I think all of us would like to sell whatever it is we are selling at the best price we can get.  If I have someone looking at a car I'm selling I'm not going to say " wait and let me help you find one cheaper!"  I also doubt anyone honest with them selves would do that either.  It's one thing to intentionally try to "screw" someone to use your term and yet another to sell something at a good price.  Leo's price is a fair asking price based on income.  I wouldn't pay that for it because I can buy those machines cheaper and locate them myself.  However alot people pay more money because they can't do it themselves.

If I were telling someone what to pay for a used 1800 machine I'd tell them to offer as low a price as they can say with a straight face.  Hoping to buy for around $50.  If the same person asked me what they should sell their used 1800's for I'd tell them to ask $100 and hang in their because you might get it too!  I just can't believe anyone would say but "you can pay me $50 each instead of $100 each because I'm a nice guy and don't need the money"  Come on!

Kelly, you are the one that needs to stop the bs trying to start a problem all the time with your posts.

nam

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Not trying to start (or continue) a war, but I agree with Kelly on this one. I think the best deal is when both parties get a fair price. While someone may be willing, or even happy, to pay $7K for a route that makes $3K, that is far from a fair deal.

I think you are taking advantage of people when you do things like this. Because someone is ignorant of the facts is no reason to take advantage of them - even if they are happy/willing to be taken advantage of.

I understand that businesses are in business to make money and not make friends, but I also believe in certain business ethics.

Nam, I appreciate your posts and think you give a lot of good information. Please don't take this as a personal attack - it isn't.

Here we just disagree on business ethics. I don't think either one of us is right or wrong, we just have two different opinions. I've been in business for myself now for 13yrs. This is how I've chosen to deal with my customers and employees and it has worked out well. Others I know take a different approach and it has worked out for them too.

Kevin

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Here is another way of looking at it from a buyers prospective. I like to get 3 different numbers when reviewing another route for sale.

1. Asset Value. Inventory all equipment on location and in storage and then determine a fair market value for it. Ebay is a good source for determining that.

2. Location Value. Inventory all locations and determine an "appropriate" locator fee that a "professional" locator would charge.

3. Cash Flow Value. Determine how much the route is really making and what that is worth to you - a not so easy task!

As a buyer of routes, I usually only pay for item number 1. This is because most vendors can not be trusted and have virtually no financial records to prove their claims. Some vendors will dump many machines in crappy locations just to say they have "X" number of locations. The more I can learn about a route, visually inspect locations and the more I can trust the vendor, then the more I am willing to pay for item number 2. However, there must be an extremely high degree of trust and documentation for me to ever pay for item number 3! I have never paid for item number 3 and most likely never will due to lack of trust and documentation. Even their tax return is insufficient since they most likely under-reported their income and inflated some expenses - of course NO ONE HERE would ever do that now would they??!!

Not sure if that helps, but the point I am trying to make it that the more information and documentation and visual inspections you can provide about the route, the more you will most likely get.

Also make the potential buyer sign a non-disclosure agreement before giving out to much information.  If you are unwilling to give out too much information for fear of getting burned by the prospective buyer, then the most you can expect is cost number 1 plus a little of cost number 2.

 

Jax

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Kevin

I think the key difference in our opinions is what is a fair price. Hopefully in the example I used of the 1800machine you would agree that $100 is a fair price to ask. Most people start out asking a higher price expecting to have to come down. We will have to agree to disagree on Leo's deal being an unfair asking price. I say that first because I think he ask that price hoping to get it but willing to come down. People rarely get their asking price for anything so they start on the high side. The second reason is because people will compare the investment to what they would pay for other businesses. Seeing other businesses for sale at 3 times income would be expected so I can't see this as any different. I wouldn't pay it but others would and that is their decision as a buyer. I don't think you should try to deceive someone to make the sale but I do believe it is the buyers responsibility to make a decision with due diligence.

I enjoy your posts very much as well and can appreciate different points of view.   :)

nam

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LOL, I agree - we can appreciate each other's points of view.

In reading your post I think we are differing on the word "fair". I believe you are using it more to mean "smart" (correct me if I'm wrong). I am using it to mean "if that is the final sale price, did both parties get a good deal".

You are correct in that many other businesses are long term investments. But that is really apples and oranges. The reason many other businesses have such high multiples is that it takes time to build them up.

For example, you can't open a dry cleaners and have an established client base within a couple of weeks. You can do that with vending - via self locating or paying someone to locate.

That is why vending has such a low multiple - it is easy to start up. Or, maybe I should say *easier* to start up than other businesses.

I also agree about due dilligence on the buyer's part - in theory. However, the reality is that the vast majority of people simply are not smart about those things. They shouldn't be "punished" for this.

I don't think we are too far off :)

Kevin

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Kevin,

I think we are really not far apart but the difference would come from our personal feeling as to what is a fair price.

Leo's business isn't that much different than the dry cleaners, pizza house or other businesses because so often we do business with people we like. You can't lock the customer base into using the new owner. Leo's vending accounts have been there a couple years so I'd say that is a respectable period of time. I think a buyer would have as good a chance of keeping those accts. as one buying a dry cleaners.

Basically, I would and think Leo should sleep very well at night in selling his route for $6995. He spent alot of work building up that route just like someone would building up any business and think he deserves as much as he can get within reason. Meaning if he had a 92 yr old man with more money than sense and Leo could get him to buy it for &69,995 then I'd say that wouldn't be fair and wrong!

I'm not advocating taking advantage of a widow selling her dead husbands machines and trying to buy them for a buck apiece. lol But I think you know that or I hope so. When I go to buy someones car, vending machines or whatever. I'm there to get the best possible deal I can get. I don't take a gun with me.  :)  They accept my offer or they don't.  Same when selling that car.  I'm gonna sell it for as much as I can get out of it - without telling them it gets 30mpg when it only gets 15mpg.  That would be again unfair and wrong.  Now I'm not gonna tell them I bought the car for $2,000 and spent two days cleaning it up and now want $4,000.  That's just business.  No different than selling gumballs for 25cents that we buy for 2 cents.  I;m not gonna post a sign saying I'm sorry for making too much off their childred.  lol

We're not far apart I hope Kevin.  Maybe some but not alot.  :)

nam

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I like the conversation between Kevin and Nam, because I can see both sides of the issue, and their voices help me flesh out the situation and understand how to proceed. You can't truly understand your own opinion, until you also understand another.

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A fair price for anything is what both parties agree on.Whether it be routes,cars,houses,etc.The only real thing I would be concerned about is being kicked out of some, or every location after buying the route.That would really make me feel like I was "holding the bag."Something to think about when buying or selling a route when it comes to price.

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A fair price for anything is what both parties agree on.Whether it be routes,cars,houses,etc.The only real thing I would be concerned about is being kicked out of some, or every location after buying the route.That would really make me feel like I was "holding the bag."Something to think about when buying or selling a route when it comes to price.

So, if I sell you my house for $100K even though it was appraised at $50K then it is a fair price because you agreed?

Or, if I sell you my car and claim it works well and price it as such but I know it will die in a few months, then it is a fair deal because we both agreed on the price?

I don't think you intend your above statement to mean this, tho :)

From reading all of these posts about "fair" (and there have been multiple threads on it), it is obvious we have a wide range of opinions. I think most of that comes down to the different demographics we are in and our personal life experiences.

Definitely interesting...

Kevin

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A fair price for anything is what both parties agree on.Whether it be routes,cars,houses,etc.The only real thing I would be concerned about is being kicked out of some, or every location after buying the route.That would really make me feel like I was "holding the bag."Something to think about when buying or selling a route when it comes to price.

That is why I try to only pay the asset value of the route (item #1).  So if you are stuck "holding the bag", you can usually sell their equipment and get all of most of your money back.

Jax

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I've heard so many horror stories from vendors that have bought existing routes I think Jax is right. Never pay for more than just the value of the equipment. If I'm the buyer I'm not buying anything I can't sell for more money than I paid for it.

Now if I'm the seller it's gonna be a different story. I would expect to be paid something for the value of my locations if I were selling an existing route. I don't think Leo should sell his machines for basic wholesale and receive nothing for his work in building the route. Unless he is selling it to me.  :D

This change in attitude is what anyone buying and selling real estate, cars or anything else is gonna do in business.  Every business has to make a profit.  A clothing store may buy new shirts for $20 and sell them for $40.  It's our choice as a buyer to buy them at $40 or not buy them.  Now if the owner  bought these shirts on the black market and the labels are fake and he knows it, this is dishonest, not fair and hopefully he would be caught.  But as a seller it isn't his obligation to tell you these shirts that I want $40 for only cost me $15 or that they are on sale down the street for only $20.

I'll bet Leo never expected all this when he made the first post. 

nam

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When you buy a route, you are basically buying income. If a route only earns $3000, I will low ball around $1500. I want a 10 month return on investment. $7000 imo is way too much. My highest offer would be about $2600. It is slightly higher than the 10 mo. ROI that I want in an investment.

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i think that anything you are expecting over 4800 is not gonna happen. also, I think this guys offer is a bit low. he ONLY wants the income producing units. those are the ones that are more valuable in my opinion. I would say try to get about 3000 out of the located ones. actually, I would go a little higher, cause of the spirals. but I wouldn't expect too much more then that...1000 bucks is a joke. maybe if this guy landed somewhere in the 2500 range.....

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So, if I sell you my house for $100K even though it was appraised at $50K then it is a fair price because you agreed?

Bad example :X. So how would you feel if he turned around and sold it the next day for 2Million? Now what's "fair"?

 Appraisals are so variable it's unbelievable. Get to know your appraisers, use the low ones when appraising for taxes or purchases, and the high ones when appraising for selling.

I have never seen an art auction where the artwork sold for it's "appraised" value.  In fact if something were to actually ever sell for it's "appraised" value,  I would think someone messed up and appraised it too low!

 An actual value, or a fair price, is what someone will buy it for and what someone will sell it for. Don't confuse average for "fair" "actual" "appraised" etc.

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alyssamma wrote: 

 Appraisals are so variable it's unbelievable. Get to know your appraisers, use the low ones when appraising for taxes or purchases, and the high ones when appraising for selling.

Tell me about it. According to the tax appraiser, my home value increased by $20,000 in a matter of 3 years. I thought home values had gone down.  I've heard that bulk routes are worth about 1 years gross income. I didn't notice that you had unlocated machines too. Unfortunately, unlocated machines aren't worth much about 25-50% of the new price. Good, luck with selling the route.
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Nam, one thing you and I agree 100% on: Leo never expected all of this :)

I love it!

Kevin

You are correct Kevin. Thanks everyone for offering your take on it. Great insight.

I believe the bidder is a member here also if he is not too shy to identify himself...

I really don't need to sell it right away, because my girlfriend has been running the show for 70% gross for nearly a year, and I get a totally passive 80$ (30%) per month. She will be in college and able to continue until Jan. 2011, so I could just wait to sell in 19 months and get an easy $1500 over time before selling. Since it is totally passive I am kinda leaning this way.

I do also like the idea of using a business broker, and I think it would sell well right now with everyone worrying about job security, and no one getting a raise at work.

This would also keep the GF happier, since she rather I just keep it so she can have her once a month super job. She is so attached she wants 10% of the sell price.

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So, if I sell you my house for $100K even though it was appraised at $50K then it is a fair price because you agreed?

Bad example :X. So how would you feel if he turned around and sold it the next day for 2Million? Now what's "fair"?

 Appraisals are so variable it's unbelievable. Get to know your appraisers, use the low ones when appraising for taxes or purchases, and the high ones when appraising for selling.

I have never seen an art auction where the artwork sold for it's "appraised" value.  In fact if something were to actually ever sell for it's "appraised" value,  I would think someone messed up and appraised it too low!

 An actual value, or a fair price, is what someone will buy it for and what someone will sell it for. Don't confuse average for "fair" "actual" "appraised" etc.

Bud, you totally misunderstood my post :) My point was is the price fair if I sell you something for $X when I know it is only worth 1/2 of X? You understand these are hypothetical situations - let's not quibble over what an appraisal is or isn't. Let's just agree that houses have something called "fair market value" and the FMV for this particular house is $50K, although I have managed to sell it for $100K.

Just because two people have agreed on a price doesn't mean it is fair.

If you would prefer a real world example I'll give you one - price gouging. It happens all of the time. There is a seller who has an inflated price and a buyer who agrees to make the purchase. If having a seller and buyer agree on a price was all that was required to make the price fair, then price gouging would be fair.

Or, if you sell a Vendstar for $500 and find someone stupid enough to but it for that price, is that fair?

Some may see it that way, but I don't. My point is that fair is more than just a buyer and seller agreeing on a price. It is actually a difficult concept to nail down because some things may be worth more to some people than to others. Art is a good example of this.

And you could stretch just about anything into being "fair" by taking this knowledge to the extreme. I am a billionaire and love Vendstars and want all I can buy so $500 is fair to me.

But when people come here asking for advice, they are looking for "normal", "real world" advice and not extremes.

For vending routes, selling at a multiple of 3 for yearly gross is simply not fair. This doesn't mean you shouldn't try to get as much $ as you can - that is a business decision.

So, why do I say it isn't fair then? Because only someone who knew nothing about vending would purchase that route for that much money. Anyone who is educated about vending would not make that deal.

Yes, there is the billionare or some other extreme example :) But, for 99% of vending educated people, they would not make the deal.

Kevin

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Nam, one thing you and I agree 100% on: Leo never expected all of this :)

I love it!

Kevin

You are correct Kevin. Thanks everyone for offering your take on it. Great insight.

I believe the bidder is a member here also if he is not too shy to identify himself...

I really don't need to sell it right away, because my girlfriend has been running the show for 70% gross for nearly a year, and I get a totally passive 80$ (30%) per month. She will be in college and able to continue until Jan. 2011, so I could just wait to sell in 19 months and get an easy $1500 over time before selling. Since it is totally passive I am kinda leaning this way.

I do also like the idea of using a business broker, and I think it would sell well right now with everyone worrying about job security, and no one getting a raise at work.

This would also keep the GF happier, since she rather I just keep it so she can have her once a month super job. She is so attached she wants 10% of the sell price.

Why don't take your yearly gross from the route, multiply by 90% and finance/sell to your GF? (I typically see routes selling for 75%-90% of their yearly "income") Since she loves it, wants to keep it, and already knows the numbers are real.

alyssamma Your my Bro, but I disagree of your definition of "fair". Let's both just stick to using other words.

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