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I'm in negotiation...need advise


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I am talking to a guy that is selling off part of his route.  He has 90 location, but said about 1/3 needs to be relocated because of performance.  He bought the route awhile back and does not have very good records.  He believes the machines are xyz, which is ok with me.  I wish the route was more organized and had better records, but I am still very interested in buying the route.  This is what I have:

90 locations;  all triple head xyz machines

income to be between 1200-1500 per month( I'm ok with 15 per mo avg=1350 per mo)

Asking 18,000

WE have negotiated down to 13,500

Next step before I buy is to go out on the route with him and see first hand how things are going.  We are doing that starting tomorrow.

What do you guys think before I make the plung.  I currently have just a few machines, but would like to ramp up my income.

Any advise?

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I am no expert as I am just starting, but I have read several things the past 4-5 weeks and these are the question I would be asking.

Are you going to be doing a one days route with this person?  If so before you get to the first location ask him if a certain route does better than another?  My reasoning would be if the first few machines don't do so well he could come back to say "well this is my lower end route, my other routes do much better"  How would you know but ask up front before entering any of his machines.

Also ask him when the last time he service this route?  My reason for asking is to see if he is out of anything, if machines are broken or very dirty.  I am a very paticular person when it come to details and I would hate to see someone pay that price if it really is not what you expected to see.  Don't get me wrong everything could be great and worth the price.  Not having records of his sales you may want to ask a little less at first and then go up if he is not going to come down at all.

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My formula for buying right now is 60% of Yearly sales. In this case 11K. Your not that far off. My main variable is the amount of driving it's going to add to my route. If it helps my density, I'll go up.

Going with him on the route is the right way to do your due dilligence.

My advice to you is to make honest comparisons between you and this guy. Will you be able to do better than this guy?:

Are you a better salesman than him? Will you be able to find new homes for the dogs.

Will you keep the machines cleaner than him?

Will you be able to tinker with the merchandising and do better than him in this department?

If so sales will go up and you'll have a good deal on your hands. Be honest with yourself.

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Well this guy has been in the business for 18 years and is some what of a pro.  The thing I have found out in a short time with talking to this guy is this, he has been up front about the route and has not been painting some pie in the sky/ goldmine deal here.  The route needs some work to get it to it's full potential.  If the machines are good quality and in good condition, then I think it maybe a  good deal.  I think the price reflects about what the machines bring in in about a years time.(13,000-14,000 per year.)  From my experience in other business if adding something to my business, services or piece of equipment it had to meet the 18 month rule.  That is it had to pay for itself within a 18 month period in order for it to be a good addition to the business.  The reason I am inquring is because I am new to this business and want feedback from those who have been in it for a while that have experience.  Thanks and keep the respones coming, this is the best way to learn.

chris

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My problem is if he has been doing this for 18 years why does he not have good records from when he bought the route forward? Ask how long ago did he buy the route and why does he want to get rid of it? How do you not know what machines you have on a route? How much of the route will you see before you buy it? I would make notes as you go along and go over them afterwards at home. If something sounds strange throw it to us to see what we think about it. I hope it works out for you.

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Well I just got back from going on the route, this area had 15 locations.  It has been 3-4  months since they have been serviced and I was not real happy with the results.  Out of the 15  I would say only about four were good producing locations.  Those four were doing between 15-20 dollars avg per month, the other 11 were way less, a couple of the machines had less than a dollar in them.  That does not even avg .25 per month.  This was an eye-opening experience.  He told me early on that 1/3 of the 90 location route would need to be relocated, I'm thinking well over half would need to be relocated.

This is the deal with why he his wanting to sell, he bought this route in Nov. 07,there all xyz machines and all set up with a charity, well his routes that he has built are done based on commission.  He feels that charity location are not as good and wants to get rid of his charity locations.  He would rather pay a commission to the owner that way it keeps the competition down. Rather than relocating all 90 to commission based accounts , he would just rather sell.

I was really wanting these locations, but I'm not so sure.  WE are at 13,500 for all machines and location w/candy, but I would need to do a lot of relocating, this comes out to 150.00 per machine.

90 machines and shipping from xyz would be about 10,000.00;  2000.00 worth of candy in place; and 1500.00 for locations is where the 13,500.00 total comes from.  What do you guys think?

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I would say he is lucky none have been kicked out for being serviced so sparingly. I guess they were not out of product the way it sounds. It looks like more then a third need relocating. If you string it out you had 25% running about the national average and 75% way below and needing relocating. Are you going to see more of this route to get a better idea? Charity vs commission is a whole can of worms there. Lets say then you averaged $5 a month for those dogs and $20 for the good ones. That gives us $135 for 15 machines or $9 per machine. If you are not going to see anymore of this route then I would have to figure on just these numbers. It is about $810 a month or $9720 for the year. Value at 70% of the route and you get a sale price of $6804. Unless he is moving the same product in his other route his back stock may not have too much shelf life left. I would think long and hard about buying it and I would tell him that. You can say that the machines are maybe 2 or more years old and with wear & tear plus having to replace so many locations, all you can really offer is in the $6000 - $7000 range. Leave it at that and say your sorry and good luck to him and if he is interested at the revised price to give you a call.

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OK Guys and Gals....Another one for you...

The opportunity..13 Vendstar 3000 machines(I know...most of you despise these machines)

10 in place with a supposed $250-$400 take on a monthly basis....3 machines not placed...

Locations are pretty decent...Machines are in v.good condition...they appear to be a year and a half old...bought from a biz op by these guys...

all candy in the machines..6 extra cannister and "other stuff"...not sure what "other Stuff'" is..but

SOoooowhat would you pay for this.....

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I would want to see the collection from that route first hand. $25-$40 per machine per month seems too good. If it verifies then that is $3000 to $4800 a year. At 70% it is $2100 to $3360. So I would think offer about $2000 if the money is there but not over $3000.

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Jay-Son,

My 2 cents on buying a charity route.

It's never easy buying another route.  I have bought 4 of them over the years and each one was an adventure.  I no longer base my offer price on the so-called revenue claimed by the seller.  There is really no way to verify those numbers and you don't really know the ethics and honesty of the seller.  Besides from fudging the numbers, many sellers will also seed their route with $3/month duds just to say they have X amount of locations for sale.   They will also begin to neglect their route and not service it properly since they believe that they will be selling (or dumping) it soon.  That in turn creates irate location owners to deal with when you arrive.  Many sellers will not even allow you to visit the locations to inspect them beforehand - a big red flag.

The only tangible asset you will get is the equipment and some product.  So now I simply base my offer on the fair market value of the equipment plus a reasonable locator fee if necessary.  I never pay for "extras" like spare parts or products.  This example is more for charity spots and not commission rack spots - which I believe is your situation.

There are two numbers I like to look at.  First do the research and determine the fair market price of the equipment - ebay is a good place to do that.  The "No Risk" offer would be in your case (13 used Vendstars times $70 average ebay price) about $910 for the equipment.  I call this the "No Risk" offer since if the seller were to agree to it, you could simply resell the equipment and get all of your money back if the locations were really crappy or if you wanted to swap out and place your own equipment.

Some seller's will actually sell at that price if they are desperate to get rid of it.  Most sellers will not sell at that price however.  So the second number to determine is the value of the locations.  Not as easy since you really have no guarantee that any location will keep your machine (unless there is a formal contract) there.  So I base that  number on the current location placement fee used by reputable locators doing charity vending placement.  Let's just say that number is $40 per charity location.  However, I would not pay for all locations!  You can expect to loose 10% of them in the changeover and figure another 30% are either duds or evictions waiting for you when you arrive.  So I only pay for 60% on the locations assuming I will either lose or don't want the other 40% of them.  So the location value of 10 spots in your case is (6 times $40) $240.

So my "Reasonable Risk" offer would be $910 (equipment) plus $240 (locations) for a total of $1150.  If you pay any more than that, then you assuming more risk due to the uncertainty of the seller's numbers and honesty.  How much risk do you want to take?  Well that's your call of course, but you don't want to pay for his mistakes either.   Now the seller will most likely NOT like that offer either since they were taken by a biz-op and want to recover their money.  So you have to gently explain the math behind your offer (sort of like a car dealer determining a trade in value) and maybe wait them out for 6 months since they will most likely be unhappy but will not get a better offer unless they can find someone as naive as they were.

I personally never offer more than the "Reasonable Risk" price unless there are other unique circumstances in my favor.  Such as the quality of the equipment and the location's potential to name just a few.  Every buyer's and every seller's situation is somewhat unique and other factors can go into the price.  But this has been a good starting point for me on charity routes.  Remember, never pay for someone else's mistake.  Best of luck.

Jax

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JAX,

Are we Twin brothers of different mothers???...That was pretty much my oringinal thoughts..I wanted to see what other folks in the business thought..I am fairly new..but my gut was telling me that much.

If his $$ are even at the low end...$250 for 10 machines he has paid for his machines....The question then is what typpe of profit is he willing to take...:cool:

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