Selling a Route

[bil10219]

I'm looking to plan for "down the road" and wondering how to value a route for selling it? I have a combo of bulk and Soda/Snack machines. Most are older units. Some on location and some in the garage. Is there a formula or method for pricing it. Should I use a business broker or use Craigslist?

Thanks in advance for your input.

[moondog]

I'm looking to plan for "down the road" and wondering how to value a route for selling it? I have a combo of bulk and Soda/Snack machines. Most are older units. Some on location and some in the garage. Is there a formula or method for pricing it. Should I use a business broker or use Craigslist?

Thanks in advance for your input.

The best way that I know of to establish the value of your route is to keep a record of each machine pull each time you service them.  I use a simple spreadsheet for this.  In addition to the value of your equipment, this will allow you to set a value, say three months gross. on the locations themselves.

 

If you can accumulate this info for at least a year,  it will provide any buyer a good basis for determining the value.

[bil10219]

Thanks Moondog. I actually have sales by location for 13 years. Three months gross seems kind of low. I have seen people on here asking for advice on routes that they are looking to purchase and asking for 2x annual sales. Of course everyone says to "lowball" and try to steal it and offer way less. I'm looking to get what is fair. Please look at this as if you were selling your own business.  I also have several machines in my garage and parts as well. I have a mix of bulk and Soda/snack. There is inventory out in the locations, etc.  I'm not looking to sell right away but I am looking to plan ahead. I'm not getting any younger last time I checked the mirror.  I'm looking to come up with a reasonable way to set up an asking price as well as a price that I won't go below when I am selling.

Thanks again for your input

[bhfisher]

You have not really told us enough about what you are selling.  I don't think you'll get a satisfactory answer with your OP. Like you said, without knowing the particulars about what you are selling, then you'll get 3 to 18 months gross answers.  What I think to boils down to is return on investment (ROI).  But there are other factors such as how long they have been in place, placement agreements, commissions, mileage and etc.  You said the equipment is old, so I assume they have been fully depreciated. So, I don't think you'll get much for the equipment.  What you are really selling is the ability to make money.  Thus return of investment.  The locations are a big factor. But you don't own those locations and you can't guarantee the new owner won't be kick-out. So, there is no easy answer.  I'd ask you what would you pay for the route if you found it on Craigslist?  I wouldn't says people are trying to low ball or steal it from you. Again, you are selling the ability to make money and the selling price needs to be in the buyer budget vs how long he would wait for a 'break_even" (ROI). I could ramble on and on, but you get the idea.

 

Bart

[bil10219]

Thanks BHFisher. I guess what I'm looking for is some sort of generalized metrics. (ie x times annual sales, plus y times number soda machines, etc) if there is such a thing? The equipment types that I have are Dixie Narcos - 368s and 501s, USI, LCMs and Antares for snacks and combos, and U-Turns for bulk. Some are on locations, some in the garage. Any thoughts?

[bhfisher]

I don't believe there a special metrics to calculate a sale price.  Uneducated guess...  6 to 18 months gross in general terms.

 

I would ask you, what YOU would pay for YOUR route?

What would it cost to duplicate it?  (http://www.usedvending.com/  for equipment prices)

Are you willing to split the route - full service vs bulk?

How quick or bad do you want to sell it?

Can you back-up with documents as to your numbers with bank or tax docs?  (I don't think excel spread sheets count)

 

I've looked at routes with 3 years ROI and turn it down because not enough documentation.  - I duplicated that route for about 1 years gross in 8 months

 

Bart

[orsd]

dang, you got some pretty varied equipment in terms of quality

3 mos gross puls values of mahines

[bil10219]

Thanks for your input Orsd. While that might be what you might be willing to pay for my route, what I am looking for is for you to look at it from the other side of the coin. If you were selling my route (or your route) how would you value it to begin negotiations. And what would you settle for. This is the perspective I am looking for. I suspect most of you may be in my shoes some day as you age and need to plan ahead. Most of the input I see on the board relates to someone buying a route. Everyone says to lowball the offer. I could use some input from the opposite perspective.

[bhfisher]

OK, I understand...  you want someone to tell you what your route is worth.  There is no easy answer. It come down to what a Buyer is willing to pay; simple as that.  And I am no expert. 

 

However, you can do things to get a better price. 

 

1) Keeps good records - be able to show the the Buyer some documentation of the route - Provide a history.

2) Provide proof on income - Spreadsheets don't count as proof.  Tax Returns, Sales Tax reports, Bank Deposits and expenses such as product purchases

3) Make a Profit Loss and balance statement for each month - At least for the past 12 months.

4) Demonstrate ROI for the Buyer - How does and how long to get his money back?

5) Run your business like you are going to sell it from the first day.

 

Sellers tell me it's a cash business.  "I don't report all my income..."  - Hmmm, you cheat the government, you'll cheat me - but more importantly, you are cheating yourself out of a good selling price.

 

Missing any one the above will get you offers of 6 to 24 month gross.  Demonstrate ROI for the Buyer and you will get what the route is worth.

 

Bart

[bil10219]

Thanks Bart. How do the rest of you plan to "value" your routes when the time comes to sell them?

[Rick]

Don't care. I know this probably isn't the right minset to have, but I'm plannig to make all the money I'll need from operating my route, not selling it. My goal is to be able to hand it down to my children, grandchildren or even donate it to a youth group or women's shelter so they never have to count on community funding again.

[bil10219]

Does anyone else have a metric that they would use to value their business if they were selling their route?

[HHV]

Where is the route located anyway-maybe one of us will be interested?

[bil10219]

It is in Massachusetts. While I would never say never about accepting an offer... It is not for sale at this time. I'm just trying to do some planning ahead to that day and I see people knocking down any offers on routes for sale all the time. IE: "I would offer him a third of that" or  "half of that". So, I'm curious how you would value your own routes if you were selling. And how you came up with the figure.  I'm looking for any kind of formula you would apply to value your route. I'm not asking you to divulge your individual business' value. IE: 1 years annual sales plus value of equipment not on a location.

Thanks again for all your input.

Bill

[bhfisher]

Here is an example http://orangecounty.craigslist.org/bfs/4367297880.html

 

Selling 23 locations for $5000 (plus 2 extra machines @ 150 ea). All U-Turns

 

1 year Gross = $4451  (370 per month)

1 year NET   = $3339. (278 per month)

 

So if we take the selling price of 5000, less the 2 extra machines (150 ea) the route value is $4700.

So selling price is 12 months gross or 1.5 years NET

 

What to note is the details this person provides in his ad.

 

So your answer is 12 months gross with machine and location.  Problem solved

 

Bart

[musser]

The only thing I care about is gross. I plug that figure into a spreadsheet that reflects my business process. I do this because no two businesses are operated the same thus they have different costs ( a sellers net figures are meaningless) I take my hypothetical net and weigh it against what it will cost to bring the business up to snuff and how it will be financed ( self or seller).

 

There has to be enough money available in the business to operate itself, pay for any immediately needed improvements, replace aging equipment as the purchase price is recaptured, and the recapture itself.

 

I have known more than one operator that financed a buyer but also gouged the buyer on price and ended up getting a very big mess back.