How to value vending locations

[royal]

How do I value snack and soda vending locations. Is it the FMV of the equipment placed in each location, or is it based on annual Net Cash Flow from each location?    

[TKK]

This has been discussed many times. You need to search as this has been beaten to a pulp. If.your looking at an individual route post it.up or.info

[moondog]

How do I value snack and soda vending locations. Is it the FMV of the equipment placed in each location, or is it based on annual Net Cash Flow from each location?    

Generally, it's a combination of the equipment value plus the monthly gross.  I use FMV plus three months gross - others use ten months gross.  Both formulas usually end up about the same, but I put greater emphasis on the equipment value.  That said, avoid low grossing accounts unless they're dirt cheap and you can use the equipment elsewhere.  What constitutes a profitable account depends greatly on where you're at.  Here in So Cal,  I consider $500 per month gross the minimum but if I were in a more rural area where the cost of living was cheaper, I would readjust that number. 

[AngryChris]

I'm assuming that you are asking how to figure out how much money you can spend on a location to make it profitable.  I agree with these guys that you need to use the fair market value for the equipment first.  That value will vary from market to market though.  However, if you already have equipment available and you wouldn't make money with that equipment otherwise, it can be worth it to put higher-valued equipment in a lower-valued account (with the intent of still making a profit).

 

To figure out how much an account is worth, it takes a lot of research/knowledge about your market.  Will this location pay higher or lower prices for products?  Is this a high-yield blue-collar location or a low-yield white-collar location?  Is this location next door to McDonald's or is it 15 minutes away from any fast-food restaurant?  All of these need to be known just to get an idea on how much they might gross.

 

Next, you have to figure out your retail prices, your cost of goods sold (COGS), and your cost to service (every other expense you have to pay for to get the product delivered, including gas, labor, wear-and-tear, etc...).  Once you have figured out your profit margin (by estimating your retail prices - COGS AND cost to service), you can then estimate how much an account is going to gross (again, you have to know your market for this.... a rough idea is $1.25 per person PER WEEK for an office and $2.00 per person PER WEEK in a factory).  Once you've figured out the gross weekly/monthly/annual sales, you can then multiply that by the % that you should get in profit (let's say you make $0.35 of every dollar in profit).   So if the account should gross $100/week, or about $5,000/year, and you expect to earn 35% of that in the form of profit, your net profit would be $1,750.  This account could easily justify a used bottle machine + used snack machine that are both in good shape.

 

All of this should allow you to realize that there is no simple answer to your question.

[mission vending]

There are many methods of valuation. When my partner and I were splitting up we had a formal appraisal done of the business and the appraiser came back with 20 comps from reported sales across the country. The median value came out to 78% of annual sales, without real estate, but this was for a complete business.

 

Around here a location, or a small route typically goes for about 6 months gross plus inventory.