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how to determine route value


capndave

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I am looking at purchasing routes in the area. How does one determine a reasonable value for a route? It looks like most of the routes for sale are way overpriced.

 

I am using the guideline of a route’s purchase price should equal the replacement cost of all of the machines being in good condition, with the machines breakeven points where monthly net revenues  are amortized over 6 - 10 months. Then I add a 25% premium of the net annual monthly sales for the value of each location.

 

Is this formula realistic or am I smoking that hippy stuff.

 

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I am looking at purchasing routes in the area. How does one determine a reasonable value for a route? It looks like most of the routes for sale are way overpriced.

 

I am using the guideline of a route’s purchase price should equal the replacement cost of all of the machines being in good condition, with the machines breakeven points where monthly net revenues  are amortized over 6 - 10 months. Then I add a 25% premium of the net annual monthly sales for the value of each location.

 

Is this formula realistic or am I smoking that hippy stuff.

You are correct, most of the routes you'll find for sale are overpriced.  This will be a game that requires patience as most locations for sale will be somebodies' dog he just wants to dump.  Your evaluation method is not bad.  I use fair value of the equipment plus three months gross.  Establishing the true gross is the tricky part as most sellers tend to inflate this number - odd how the best month they ever had becomes the monthly average in their minds when they decide to sell.  Look for blue collar accounts with 50 plus people.  Avoid white collar accounts and don't touch anything with a combo machine involved.

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thanks for the input. i am trying to figure out how i can sort through some of the miss information and determine a realistic value that does not turn me into some one elses sucker.

 

i spoke with one guy who had 65+ bulk candy machines on locations. he wanted $45k for all of them. i could not understand how a used $50 machine could be worth $450, when the entire route was only grossing $2k a month. i understand location, location, location, but those numbers don't make sense using any type of math.

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thanks for the input. i am trying to figure out how i can sort through some of the miss information and determine a realistic value that does not turn me into some one elses sucker.

 

i spoke with one guy who had 65+ bulk candy machines on locations. he wanted $45k for all of them. i could not understand how a used $50 machine could be worth $450, when the entire route was only grossing $2k a month. i understand location, location, location, but those numbers don't make sense using any type of math.

I can't readlly speak to value of a bulk operation but I do know that a route that grosses $2000 a month probably nets about $1,500 - still not worth 45k in my mind

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thanks for the input. i am trying to figure out how i can sort through some of the miss information and determine a realistic value that does not turn me into some one elses sucker.

 

i spoke with one guy who had 65+ bulk candy machines on locations. he wanted $45k for all of them. i could not understand how a used $50 machine could be worth $450, when the entire route was only grossing $2k a month. i understand location, location, location, but those numbers don't make sense using any type of math.

Even if you post the details of this bulk route in the bulk forum you will find that no one would touch it for even a fraction of that price.

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that is what i thought. even though they are asking rediculous prices for routes it does not mean that they will not accept less. that is why i am trying to figure out a general formula to calculate a reasonable offer. before i move on to the next deal.

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The price I paid for my route when I first started was WAY higher then I would ever pay for a route ever again, but I still think it was the best thing I ever did I guess you can say "it got me in the game".    The advise I can say is to buy a route that is already established but keep it really small to start maybe just a few locations with soda and snack or 5 or 6 with just Soda so you can get a feel of the industry and see if you even like vending.

 

 

Of course if you have connections with business owners already maybe friends or previous employers or even your local mechanic that you have been going to for 10 years that would be the cheapest way to start......

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