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Pointers for a newbie looking at a business


jcavend

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I am going to look a business that is for sale. Key elements I have picked up by reading around here is to see bank statements, have machine models and find out as much info as possible about the locations. Any other red flags I should be looking for, both positive and negative. thank you for your advice and help.

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I am going to look a business that is for sale. Key elements I have picked up by reading around here is to see bank statements, have machine models and find out as much info as possible about the locations. Any other red flags I should be looking for, both positive and negative. thank you for your advice and help.

Look for signs of vandalism - I don't care how much money the account takes in,  if you have to fix everything each service cycle, then you'll never make a dime.  Unchecked vandalism is a prime reason why many otherwise great accounts are sold off.

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good advice, thank you. How is a purchase price typically calculated for a route? The seller's asking price is strictly based on the total gross sales for the route. I tend to think that net profit is a better indicator of the value of the route.  I have not seen the machines at the locations yet but he states they are Automatic Products and Vendo pop machines. However, he did say when we met that a few that are in service at locations are combo Purco machines, which I understand from other posts is not a positive thing.  Any advice appreciated.

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The Purco machines are Office Deli machines actually built by the substandard Seaga company. That right there reduces the value of the equipment. They are only distributed by Purco, whoever they are, and are poorly supported.

It's common for sellers to ask for one year's gross, but that should only be a starting point. Any deficiencies in the business should be subtracted from that.

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There are several things that you need to look at.  Tax returns will give you a lot of information, but there are a few things I can add here that will give you much to think about.

 

1) Individual account performance: If the accounts can't push over $40/week, you probably won't be able to manage them well being a newbie.

 

2) Overall route performance: How much sales will the entire route generate?  If it only grosses about $100/week from 2 accounts, you might not really have enough to even sell a few variety packs without having a lot of expired products.  I really feel like you need to generate at least $300/week between soda AND snacks to get beyond major quantities of expired products.  It takes a lot of micro management.

 

3)  PRICING:  If everything is selling CHEAP, you simply won't make enough profits.  PERIOD.  In MY area, Candy must be at LEAST 90 cents just to make it worth selling.  Unless they are an excellent account, if they won't go up to $1.00, they are going to be stuck with cheaper things like crackers, oreos, and other non-chocolate items.  Here is what the MINIMUM pricing should be in my area for new accounts:

 

     Cans:  65 cents.    LSS Chips (2 oz bags): 85 cents.    Regular Chips (1 oz): 60 cents.   Cookies: 75 cents.   Pastries: 1.00.   Oreos, nuts, Granola bars, etc: 75 cents.   Candy: 1.00.    Bottles (20 oz):  1.35.    Bottles (16.9 oz):  1.10.    Water (20 oz.):  1.00.    Water (16.9 oz):  75 cents.

 

Your pricing may be cheaper than the prices I listed, but if you see anything like... Candy for 75 cents or Cans for 50 cents, then you need to know right off the bat that you aren't going to make enough to ever get your money back unless you raise prices significantly, and doing so might lead to losing accounts.  I dealt with a guy 5 years ago who had cans for 50 cents and Candy for 75 cents.  I told him that the prices would need to go up and his response was "Why would you ruin a good thing?"  Naturally, I responded by saying "Because 50 cents for cans and 75 cents for candy is a bad thing for business."  His wife was also selling a few specialty candy for 75 cents.  I found those candy bars at Sam's Club for about 90 cents each.  Some sellers think they are making far more money than they really are.. and they might be making some, but the reason why they want to sell out is because they know they aren't making enough to make it worth their time, and they don't want to have to fool around with relocation by raising prices.  The seller's price need to be somewhere close to what I put down and it really depends on the cost of living in your area.

 

4) Distance:  If the machines are very far apart from each other, or if they are really far away from you, then you have to consider the time and fuel cost.  If the machines are within 10 minutes of each other (on average) then that's pretty good.  If it takes you about 30 minutes between stops though.. then that can be very inconvenient and costly on fuel.

 

5) Location:  Is it easy to access the locations?  Can you access this with a larger vehicle?  Is parking convenient?  You certainly don't want to have to deal with parking tickets or being unable to park in general.  Just use your best judgement on this one.

 

6) Condition of equipment:  Does the equipment LOOK to be in good shape?  Seeing machines with working bulbs is usually a good sign that the seller takes care of his machines.  An AP 7600 without a working bulb doesn't even look like it's on.  On the flip side... if the machines don't have bulbs, installing bulbs may increase sales a little bit.

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