Existing Route Advice

[gelaro]

I am looking at buying an existing route. There are fourteen locations which gross about $30K year (18 month track record/$600 week avg.). There are 12 snack machines (mostly AP 4 and 5 wide, a National, USI, and Crane; all older machines) and 12 drink machines (all but one bottler owned; a couple of glass fronts; one owned machine). The asking price is about $12K (including business and machines). 

 

Good deal?

 

 

[CapitalCityVendingLLC]

Seems somewhat reasonable.

How far apart are the accounts? With a 30k yearly revenue stream, you'd break even within a year's time which is a good ROI. Do you already use those types of machines? My company mainly deals with older USI machines so I'd personally shy away from it because I'm not familiar/don't like other machines. Also, you could potentially work them for a while, find out which accounts are worth keeping and pull a machine or two out of the slower accounts to relocate.

Try and see if they'll come down from that 12k number. Let us know how it goes

[Poplady1]

It sounds very good.  Be sure you ride with him several times so you can get a feel for the income.  Never wise just taking someone's word.  You might check on existing contracts.  The bottler owning all of the drink machines is worth checking out a litte more.  

 

Be sure they will sign you up as a 3rd party vendor.  Are they Coke, Pepsi or 7-UP.  Sometimes the bottlers will not deliver unless you have a dock.  Try to meet with them and get it all clear.

The numbers look good compared to the income.  Most of the vendors we deal with want one year gross or 2 net (which is the same thing).  So that asking price looks good.  He must be selling based on the value of the equipment (12 snack 1 drink).  Most snack machines go for $1000 average and the bottle ($800). 

 

Let us know what you decide to do and best of luck to you.

 

B

 

[Chkoolaid1]

It seems like a fair/good deal, which always makes me suspicious. In most businesses people ask high and expect to be negotiated down. If everything is on the up and up I'd go for it. Confirm these numbers with his tax records. Good find!

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[Magiccity726]

I've been told routes can sell for as much as 3 times the yearly gross plus equipment value. Anyone ever hear of this?

[Chkoolaid1]

I've been told routes can sell for as much as 3 times the yearly gross plus equipment value. Anyone ever hear of this?

When I got into this business I purchased a small route and only paid the equipment value. They had no concrete records to support their claims. In any industry the sale price is w/e the seller and buyer can agree on. Some want 2 years net plus cost of assets others want 1 year gross. There's no real rule. The seller usually comes up with a price they want, and that's where the negotiations start. In my experience it all comes down to what the seller and buyer can agree on. Price and value are completely different. As always, YMMV.

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[AngryChris]

I've been told routes can sell for as much as 3 times the yearly gross plus equipment value. Anyone ever hear of this?

 

 

That sounds awful to me.  3 times annual gross should realistically take well over 8 years to break even.  That's not what you want.  I'm sure a good salesman would say that though.

The rule I use is simple... I want to buy the location for 75% of the annual sales OR LESS.  If it breaks 75%, then it's not worth it.  If someone has a route that grosses 30,000 and want $90,000 for the route, I won't even talk to them.  

 

Look at it this way, taking a simple account here.  An account grosses $10,000/year from a snack and can machine.  The snack and can machine are worth $2,000 combined.  Would you pay $32,000 for an account that grosses $10,000?  The MOST you ever get from the account is about $5,000/year in profits.  It will take you over 6 years to break even.  On the other hand, you can spend $2,000 on your own used equipment and go knocking on doors and try to land a location yourself.

[Anacapa Vending]

10 months gross sales if the equipment is newer or upgraded. IMO

[Magiccity726]

I would never sell my route for 75% of the yearly gross sales. Or 10 months gross sales. That is giving it away imo. At a bare minimum, I may consider one year gross sales. I am thinking in the mind of a seller. Of course, if I were buying a route, I would want to find something for the numbers that you are suggesting.

[Bvending]

In my experience the only way you are going to get one year gross sales for a route is if you have newer equipment. With older equipment, as in the original post, it's not worth a years gross. As AngryChris said, it will take you way too long to start making money and you run a larger risk with that older equipment.

As for the original post, I would personally aim for around 10k, based on the fact that the machines are older and most others are bottler assets. And the averages are pretty low

[EdsVending]

12k seams fair if the sales are 30k. I always try to buy at 40% of gross. I will pay more if there is newer high quality equipment. You could also say I'll give 6k down and 500 per month for a year. That way you can use the earnings to pay off the route.

[Southeast Treats]

I've been told routes can sell for as much as 3 times the yearly gross plus equipment value. Anyone ever hear of this?

Business brokers will try to get 3 to 5 times earnings (net profit, EBIDTA, or owner benefit) for a vending business in my experience.  Since that figure should be around 15%, the 75% of sales is about the same thing, just expressed in a different way.