Owner Financing?

[joebob051977]

I was just reading one of the vending ebooks in the library, and they were talking about how they would purchase routes by owner financing. They would use the profit from the machines they were buying and use it to pay off the route. It seems logical to me. It sounds like you can grow your route for essentially free. Run the route about one year for free and it is yours. I was just wondering if anyone has ever tried this?   

[naraol]

Very good question.  I also read this about a week ago.  I have been on the boards for a while now and have never read a post regarding someone buying a route that way on the boards anyway.

[Jay-Son Vending]

Just a thought...I will play devils advocate...

If I am the buyer..

I would argue that "If you believe in your route and the $$ are honest...then you would consider the plan"

If I am the seller...

I may consider this plan..IF..

         1.) the size of the route is large enoufgh= larger purchase price...

         2.) more importantly..You buy in with some form of a good faith investment..ie; 10-20% of the purchase up front

As the buyer/seller...I would want to have this drawn up by my attorney to protect all involved....

 

[joebob051977]

 I am the seller...

I may consider this plan..IF..

         1.) the size of the route is large enoufgh= larger purchase price...

         2.) more importantly..You buy in with some form of a good faith investment..ie; 10-20% of the purchase up front

As the buyer/seller...I would want to have this drawn up by my attorney to protect all involved....

 

I have to agree with you. If the seller has faith in the route then he will be more willing to sell it this way. He would know you would have the income to pay. A good faith investment is also a must. It shows that you have a vested interest and aren't going to just stop paying.

I would definately involve an attorney to build a contract with our terms and conditions. The machines would remain the sellers property until paid off, but wouldn't have rights to the machines during the contract term -  1 or 2 years. It'd be like a mortgage. You don't want the bank to say they are the real owners of your house and  need to use it for a party. So I think an attorney would be a neccessity.

[caserri]

I'm glad to see that you all are enjoying the library and starting great topics about the information you find there.  I wasn't sure if anyone was actually reading the material.

Maybe I should give a pop quiz!

Steve

[g_r_vending]

I am lucky enough to find a seller that i work with that is willing to sell his bussiness of 74 locations to me with owner financing. The route is grossing around 19k a year, with some week locations that I know i can improve on, so I am looking at 21K or more in a year, although the route might only be worth 16-17k if I bought it outright, I am goona offer 18k and have sole ownership in 10 months. The really big help is he Knows we get another big bonus check in Aprial when I will pay the thing off in Full (7000). I will keep you all updated as to how things go

[Jay-Son Vending]

Maybe I should give a pop quiz!

Steve

Steve,

Sorry...Schools Out For Summer....

[joebob051977]

I'm glad to see that you all are enjoying the library and starting great topics about the information you find there.  I wasn't sure if anyone was actually reading the material.

Maybe I should give a pop quiz!

Steve

I absolutely love the library. If you continually feed yourself information eventually some of it is going to come out. My Bible study leader used to say "Garbage in...Garbage out! Good stuff in...Good stuff out." I've found that to be true in every aspect of my life. I used to continually read books on weath such as the Millionaire Next Door and I feel I am slowly but surely getting there. I can read the same things over and over again...and if I apply 1 thing I learned, I'm doing better than most. The difference between a baseball player making $500,000/year and one making $5,000,000 a year is only a little more than 1 more hit out of 20.  I'm just trying to get that extra hit.

[joebob051977]

I just tried to negotiate an owner financing deal for 12 machines on location. The owner was on board with the deal, however, my wife isn't. I talked them down from $2500 down to $1500. It would be 18 months no interest.  Since my wife said no, and she is more important than my business...this was just practice. I am really disappointed. I want to grow fast...she wants me to grow slow and steady. It drives me nuts....I want to get this going full speed ahead.

[g_r_vending]

I have the same problem with my partners wife, doesn't respect this as a REAL job, but likes the money that come in every month, glad I am single and don't have to hear that stuff all the time or WE would have problems, thats a great deal you made. Whats the problem? You would be taking the monthly payment out of the machines not out of the family budjet?  Good luck

[gdbutler]

Another idea to consider would be to offer the seller all of the profits for a certain amount of time or up to a total dollar amount.  If they agree to that, you have a lot less risk on your hands.

[dperry]

I'm glad to see that you all are enjoying the library and starting great topics about the information you find there.  I wasn't sure if anyone was actually reading the material.

Maybe I should give a pop quiz!

Steve

I absolutely love the library. If you continually feed yourself information eventually some of it is going to come out. My Bible study leader used to say "Garbage in...Garbage out! Good stuff in...Good stuff out." I've found that to be true in every aspect of my life. I used to continually read books on weath such as the Millionaire Next Door and I feel I am slowly but surely getting there.

I highly recommend "The Richest Man In Babylon".  It's a short read and told as a narrative.  It's almost like a mini novel.  You can find online versions, but they are highly edited.  Get the actual book.  It's only about 100 pages or so.

[joebob051977]

Darryl,

I look for the book. Now, if I could only convince my wife to get on board. I'm sure I can build this business up to $100,000+ in 2 years. People everywhere are itching to get rid of their routes and machines and will practically give them away to you for free. It is driving me absolutely nuts that my wife wants me to do this slow and steady when I know a faster way to get to ny goals. I feel like I am walking across the country when I have my car right next to me and all I have to do is step into it and go.

[joebob051977]

In my last post, I was quite harsh on my wife. My wife has been very supportive of me doing buik vending. I am usually ready to jump into the deep end of the pool head first before making sure there is even water in it. Fortunately, I have a wife who is much more grounded in reality than I am. Although, it is frustrating when you want just dive in and you are being pulled back, it must be just as frustrating on the other end of the rope when you are trying pull someone you love back to a safer place. 

I think family is very important when running a sucessful business. Everyone brings their own personal qualities which helps make a business well-rounded. Caution, and risk taking are generally 2 totally different personalities. Between my wife and I we have both which works out great. Eventually, our kids will make great coin counters.

Joe 

[T BIRD]

In my last post, I was quite harsh on my wife. My wife has been very supportive of me doing buik vending. I am usually ready to jump into the deep end of the pool head first before making sure there is even water in it. Fortunately, I have a wife who is much more grounded in reality than I am. Although, it is frustrating when you want just dive in and you are being pulled back, it must be just as frustrating on the other end of the rope when you are trying pull someone you love back to a safer place. 

I think family is very important when running a sucessful business. Everyone brings their own personal qualities which helps make a business well-rounded. Caution, and risk taking are generally 2 totally different personalities. Between my wife and I we have both which works out great. Eventually, our kids will make great coin counters.

Joe 

I am like you Joe.  I never look to see if there is any water.  I never have and probably never will.

[joebob051977]

It's good to know I'm not the only one. Now that I'm not buying a route, I am now impatiently waiting to grow my route some more.  NEED MORE CAPITAL!!!

Joe

[MountainMan]

Hey all,

I was reading this and feel for ya. It must be really tough. It will also lead to success, just slower. I also felt like you explained exactly why your wife is being as cautious as she is. "100,000+ in 2 years" Says it. I am sure it scares the heck out of her. you would be mortgaging your children to do that LOL. What I think and it is just mho here, is that you both could rethink the business. Make a business plan and follow it. If you come down out of the clouds, perhaps she will feel safer and meet you part way. You could not probably buy 12 machines for that amount of money and they are on location already. The guy should have books that you could show her. You would have owner financing, so the payments would not be out of the family budget. If you default, you lose the machines, but not the house etc. If you got these 12 machines, your business would probably qualify as a true part time one, with what you have now. (I forget how many you have currently) I have just a few out now, but if I added a dozen more, I could justify the one day a month route easily by the quarters I brought home!

My business plan calls for 25k in 5 years. That is using a spreadsheet I found in the plus section and using assumed profits to purchase more. My wife is very on board with that. Of course, we are also building her concession business. It is similar. They tell you that you will make millions every year. Well, we made 143 dollars yesterday,, and were thrilled because it is all in the black.

[joebob051977]

I have revised my business plan, which is still ambitious, but isn't as stressful or scary. For the next 12 months my focus will be on local industrial sites and large businesses. These places are not very well tapped in my area and provide a very high ROI. I have acquired a 4-5 factory contract which each site will gross $60-$80+ per site. By locating in these high return areas I will be able to earn enough capital to expand fast enough in the mid-range market to go ful-time within 3 years if my wife and I decide it is the right time. 

Thanks Mountain Man. You always seem to have very good insights.

Joe 

[markvend]

One thing I did that worked for me was to buy a company by purchasing a percentage of the company for cash and putting the rest of the company under an option (not an obligation) to buy.  I bought routes from a designated area at the startup phase and was obligated to buy a certain number every year until the end if I wanted to keep the option on the whole company alive.  I could always walk away with the number of machines I had bought at any point.  I also required a non-compete agreement with the sellers in the counties where I purchased their routes.  It has worked well for me and might be an option for some of you provided you have startup / expansion capital.

Best of Luck,

Mark

[Jay-Son Vending]

Mark,

That is a great way to work your way into the business at a rate that allows you to aclimate to the work load and the cost of business. 

I would ask..How did you find the business to buy...was it offered for sale or did you approach a going entity and make the offer unsolicited?

If you have a boiler plate and /or generic contract for purchase that you could/would share ..this may be of interest to others here..like me...

if you would, the vending tools area is the place we have these items placed.

[markvend]

Jay,

My wife actually was a contractor for the owners who were wanting to retire after working it for 11+ years.  After she began working I had the bright idea of trying to buy the business.  We were able to see the numbers from the inside out and saw it was a steady business with good cashflow.

As far as a contract, I used a lawyer to draw up the specifics as there were a lot of stipulations on both sides that needed addressing.  I think both parties were "detail" people and we had to come to an agreement not only in price but how the interests of both parties could be protected as the purchased progressed through all the routes.

I think you could do a very similar deal much easier.  This was NOT a hardship case in that the owners had to sell.  It was a real run ultra documented company with years of accounts on excel spreadsheets to look through. Not your average deal, I know, but others will be out there.

I would say to other to pick up the phone and call your competition and try to buy them out if you feel you are capable of expanding.  Financing will be the biggest barrier as banks do not consider the machines "fixed assets" like real estate.  I have used bank financing, but did so using a home equity line of credit which gave me added tax benefits on money borrowed against my home.  This is not as easy to do right now in the midst of the credit crisis but may be an option for those of you who have quite a bit of equity in your home.

Hope this helps. 

If anyone ever runs across a deal and would like advice I would be glad to help you brainstorm.  We hit many obstacles before we finally were able to work it out. 

Hope this helps.

Mark

[Jay-Son Vending]

Mark,

Thanks for the offer of assistance..I am likely a while away before I take that plunge...My "other job" is a full time Realtor in Central Connecticut.  after 23 years the day to day wears on you..But I still enjoy many parts of my job.

If the right opportunity were to present itself I would surely have to consider it...I have been slowly building what I have and hope to be at 50 locations by the end of the year..

[markvend]

Jay,

Ah, Real Estate - my other passion! Funny, that's my goal - to roll cash flow from vending into income-producing real estate in about three years from now. I've been out of real estate for a while now that I'm focused on the vending but know the power of it for wealth building.

Good luck to you in both venues.

Mark