Have you purchased a route before...looking for some advice

[vending4528]

Route metrics

 

$187,000 yearly sales consistently over last 4 years

$85,000 net yearly profit, after all expenses, consistently over last 4 years

70 locations

300 Northwestern bulk machine heads

20 cranes

 

I am looking for opinions on what you would pay for this route? 

[TheLion]

A off topic question, how much do crane machines make? do u know? thanks

[musser]

Commissions must be very low! Ask to see tax returns and p&l.. Remember that what ever the real net is must be good enough to pay off the purchase cost and your time.

And read some posts these issues are currently being discussed on another thread.

[rdinta]

Sounds like a good established route. If numbers are consistent over last 4-6 years I would offer no more than 1.5 times yearly sales or 3 times yearly net profit, whichever is less.  Thru my research this seems to be a fair price for an establish profitable small business.  Since I am new to the business others that have been in this type of business longer can chime in on my evaluation

 

Good Luck

[Rick]

Well, on a route this size the payment structure could have a significant impact on what I'd be willing to do.

 

But straight cash?  $75,000-85,000 depending on condition of equipment.  I could go as high as 100-110 depending on multiple factors.

[Action Vending]

Things come back to supply and demand folks and the problem (for the seller) with most of these routes is that other potentially interested buyers dont have the money and CAN't get financing. If you can buy it out right that is a very big negotiating tool on any route or business. 

[Rick]

Things come back to supply and demand folks and the problem (for the seller) with most of these routes is that other potentially interested buyers dont have the money and CAN't get financing. If you can buy it out right that is a very big negotiating tool on any route or business. 

 

Bingo.  We tend to forget once you start talking about a route this size there's probably only a handful at most of people who would be both willing and able. 

[Pingbinks]

Based on business buy/sell metrics for businesses that are under $500,000 annual sales, you could look at the value of this route in the following ways:

$187,000 (based on 12 months gross).

$280,000 (based on 18 months gross).

$170,000 (based on a multiple of 2 x net sales).

$255,000 (based on a multiple of 3 x net sales).

Factors that could justify the larger or smaller values above could be: condition of equipment, geography of route, relationship with retail establishments, documentation, etc.

I have never seen any routes discussed on this forum that have gross/net sales anywhere near what you are describing. It seems as though his profit margins are very high. I realize he has thirty cranes but if you back those out of the equation, that leaves 300 gumball/candy machines/heads that are generating what appears to be much, higher than the national average, which I think is $120 annually, per head. 300 heads x $120 equals $36,000 gross sales on just gumball/candy machines. Assuming national averages, this means that his 30 cranes would have to be producing $151,000 annually, or $5,033 per crane per year (or $419 per crane, per month, or about $14 per day). I don't have cranes, but this sounds high for cranes.

Can anyone chime in here to help this guy determine what the value of this route would be?

[musser]

Can't obviously not enough information for anyone here to evaluate this route. I would suggest that if you are asking questions so basic you are in no position to successfully operate the route anyway. I don't believe for a minute there is that much profit after commissions, product, repairs, taxes, travel cost, depreciation, wages, insurance, etc

[Pingbinks]

@Musser: Let's assume that vending4528 has the sellers tax documents and P & L to back up the figures that the seller is claiming. I think there is probably enough information to make an educated guess as to what the route is worth. I personally think the range could be $187,000 to $255,000. Whether anyone has that amount of cash or they able to secure financing for that amount, is a big question (just as Action Vending and Rick have said). What additional information would you like to see to make an educated guess?

[musser]

Assumptions are myths created to rationalize faulty beliefs,

[vending4528]

I meet with the seller of this route today and he wants $235,000.  I am thinking more like $180,000.  Thoughts???

[Tbuford]

Since we're spending your $. 100k if what he's saying is true. Then you got a good deal.

[musser]

I dont think that the $85000 profit figure is realistic. But even if it is how will the route pay for it self at a price of $235k? Financing if you can get it ( not going to happen) would put you at around $93608 a year for a three year note.  Five year ( you wont get it) would be around $62275 a year. The interest I guessed at a 12%-13% range for this kind of deal, I really dont see any 9% financing for something like this (aint going to get anyway)

 

How does any of this work? If you can self finance you can charge any interest rate you want to yourself for any term. You might get your payment to the $30k to $32k a year range. This wont work either unless you want to work ten years for nothing because durning that ten years you will need to replace of at least refurbish the equipment.

 

If I could sell what I have for one and  one quarter times gross I would be retired.