What are these accounts worth? (practice exercise)

[RJT]

Since people are always asking what accounts are worth paying for I thought it would be good to do a practice exercise to see how people would price an account. We are going to look at an example to see what people think these accounts would be worth paying for.  

 

You are looking at buying two accounts. Both have three year agreements but that is no guarantee of keeping the accounts since the agreement is not transferable.

 

Account # 1 warehouse/trucking Co.

 

1 USI 5 wide less than 1 year old,bought new

1 USI Cold/Frozen less than 1 year old, bought new

4 beverage machines all bottler owned on full service

 

This account does +/- $200 per week in snack and cold food 

Prices are where they need to be with no commission paid

 

Account #2 Manufacturing account

1USI 5 wide new with CC reader

1 USI 4 wide new with CC reader

1USI 3 wide (around 4 years old with LED light kit)

1 USI cold/frozen new with CC reader

6 beverage machines all bottler owned on full service

 

This account does +/- $275 per week in snack and cold food 

Prices are where they need to be with 10% commission paid

This account is a new company around 6 months old and has the potential to have a total of around 200 employees and are currently at around 140 employees. The reason they have this much equipment is because of the way the plant is broken down into three separate buildings and no real way to consolidate. You have the option to add your own drink machines and remove the bottlers. 

 

 

Both accounts are worked once a week and are within 15 miles apart. 

 

Drink commission paid from the bottlers is around $525 per month

Total gross revenue in snack and cold food for both accounts is around $475.00 a week 

Both accounts take around 1.5 hours to work per week. 

 

Combined what are these two accounts worth to purchase? 

 

If you need more info just ask.....

 

I give this example because it has a few different things to take into consideration. This type exercise will help people understand what to look at when looking at buying existing accounts. After people have chimed in I will give you my take on it and what and how to consider what to pay. 

 

 

[RJT]

Keep in mind you need to take into account all the factors including what the assets are worth along with the type of accounts, revenue, etc. 

[orsd]

First one- 8 k

Second one- 12-15 k

[RJT]

First one- 8 k

Second one- 12-15 k

 

You couldn't buy the equipment for that price.

[rmorris1953]

Both are worth 50 cents to 75 cents on the dollar.

 

First, one $5,000 to $7500. I don't trust bottlers to keep equipment filled or service in a timely matter. Would fill them myself or replace with my own vendors for more choices. Example core brands

 

Second one same thing. Low $7,000 to $11,000 high

[rmorris1953]

Equipment is only worth 1/2 its value when sitting in storage. Both accounts would be good to have. The problem now days is micro markets both of these would be prime suspects for the big guy to snap up. Contracts are worthless. Machine sales are not very good at this time so plan on losing these accounts in a short time. I had (had is the word) who spent $35,000 for 2 similar accounts and a year later lost both to micro markets.   Couldn't sell the equipment  Sold snacks, beverage centers, and frozen foods for $500 a piece. All USI

[RJT]

Ok so let me ask this. Lets just assume you could get these accounts on your own by knocking on doors. The requirement to get the accounts is the exact same equipment which means new equipment. Would you do it and what would you have total in it with equipment cost, product cost, labor cost to install, etc? 

 

Just FYI, if you are loosing accounts to micro markets then you do not know how to sell against them and save accounts. I have saved my own and helped others save theirs from being taken by micro markets. 

[AngryChris]

For that much equipment, I don't see a reasonable way to invest in new equipment while getting a good return to pay for the equipment.  I don't go after accounts that are much larger than this but I would pass on it no matter how big I was.  That's a LOT of equipment, a LOT of labor, and a LOT of hours to spend walking around from vending bank to vending bank trying to fill and rotate product.  To me, these are worth $0 as I would pass.

[RJT]

For that much equipment, I don't see a reasonable way to invest in new equipment while getting a good return to pay for the equipment.  I don't go after accounts that are much larger than this but I would pass on it no matter how big I was.  That's a LOT of equipment, a LOT of labor, and a LOT of hours to spend walking around from vending bank to vending bank trying to fill and rotate product.  To me, these are worth $0 as I would pass.

 

You are only investing in 6 pieces of equipment over two accounts and take around 1.5 hours per week to work. 

[rmorris1953]

All my clients are except for one small vendors 100 machines or less. None use dex. Some use C/C but most are retired except for  a couple. I always recommend they find their own accounts and never buy an account unless the equipment is a plus. Stay away from bottler assets  so you don't meet quotas. I could sell good equipment with a warranty to them for a fraction of the cost of new. I would tell them to walk if a potential customer demanded new equipment. $24,000 is a lot to invest on 2 accounts. For the same $24,000 I can set a vendor up with reliable vendors. Delivered with warranty. Snack and pop for 10 accounts doing $100 a week. That is $52,000 gross. 

[AngryChris]

You are only investing in 6 pieces of equipment over two accounts and take around 1.5 hours per week to work.

1.5 hours is sprinting for those accounts. If was already stated that the 2nd account is broken down into three buildings and snack machines take time.

The great RJT himself would criticize an account "only" doing an average of $68.5 per machine per week, so why would anyone dare to invest around $14,000 on the 2nd account? You probably won't make a profit on food and having any sales from it means the snacks alone are doing less than $275/week between the three. The CC fees and commission make it virtually unprofitable in the long run as the ROI would be stretched out so far.

The first account is okay, but I still wouldn't fool around with a food and a snack that do a combined $200. I'm either losing money from expired food or my snack sales really aren't that great. Even when netting 50% profit, it's a $5,000/year account. It would take two years to break even. In reality, between CC fees labor, and various other costs, it would probably take closer to three years. That's too long for me.

[RJT]

Here we go with the condescending attitude.

 

You have to factor in the drink revenue that you do nothing for other than collect a check. No product to buy, no machines to buy, no machines to fill, no machines to repair, just collect a check.  

[putrevus]

Here we go with the condescending attitude.

 

You have to factor in the drink revenue that you do nothing for other than collect a check. No product to buy, no machines to buy, no machines to fill, no machines to repair, just collect a check.  

What are these worth in your view?

[rmorris1953]

As a service technician, I hear of very few complaints  from customers but when I did it was out of product haven't seen a route person and it's always empty. Why is there 4 rows of Pepsi or Coke? One last one have not gotten a commission check in months. In a perfect world, it would be great to sit back and do nothing and collect a check. Pepsi and Coke can not provide the service the little guy needs. IMO