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vender4321

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Opinions please guys.......

NY area route.  Appox 110 machines -  

Machines in locations:

28 snack machines owned by company (Automated Products machine 4-5 years old, in very good condition),  3 ice cream machines and 29 bulk machines.    Additionally,  50 coke machines (owned by coke) placed.     So 60 machines owed (including bulk) and  50 owned by coke  ... figure the conservative value of the OWNED machine (including bulk) is 38k.   machines not on contract but owner has maintained a excellent relationship over the years and my expectation is that nearly all machines will stay placed and running.   

gross average over past serveral years 185k 

avg commision 16%, so 155k after commission

locations relatively closes to my current route .  my labor will be ~$500/weeks for this route not including gas

how much would you guys value at?    In my area routes don't go for 50% gross. 

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Firstly, when you say "labor," do you mean you will be paying someone?  It's important to know that 185k/year is $3,550/week.  A good driver should be able to do a minimum of $800/day in 8 hours.  That's minimum.  Figure $100/hour then $3,550 is about 36 hours.  I'm not saying $500 in "labor" is bad or anything, I just find it interesting because you include it as a cost.... and while wages and salaries are definitely a cost, paying yourself is not a cost -- it is the result of profit.  Moving on...

I don't know when Crane took over Automated Products, but I feel as though it was more than 4-5 years ago.  Having said that, I think it's important to look at your numbers in the first sentence because putting a blanket number of 60 machines (including bulk and full-line) isn't fair.  If those vending machines really are 4-5 years old, then I expect them to be worth at least $1,500/each.  Having 28 machines at $1,500 each puts us at $42,000 in full-line.  I don't see gumball machines being worth more than $50/piece but I don't do bulk vending... so let's just say $1,500 for the gumball machines.  That puts us at $43,500.  The ice cream machines could be worth anything depending on their age, but let's just add $6,500 for the ice cream machines and round it all up to $50,000 in equipment.

Now, since the sales are combined between all machines, and there is no revenue breakdown provided for the bulk vending, I am going to just assume $350/head each year for an estimate of $10,000.  Subtracting that from the full-line, we are at $175,000 in gross annual sales for everything else.  Now we are left with 28 snacks, 3 ice cream, and 50 coke machines... for a total of 81 machines.

Now if we take $175,000 and divide it by 81 machines, we get $2,160 per machine annually.  That's not great... but it isn't bad either.  These accounts are generating enough money to warrant the sales if they are all equal, but they will not be.  Some accounts will have coke vendors that gross $500/year and some accounts will have a snack and a coke machine doing $10,000/year.  It's the nature of the business.  Having said that, there are too many unknown variables in this.

The next concern is 16% commission.  That's just not right.  If I saw such a route for sale with those numbers and the vendor was paying 16% commission, I wouldn't even look it over.  The most I have EVER paid for commission was 10% and that was to a vending management company.  Those accounts, on average, are NOT worth practically any commission.  Furthermore, I have to wonder if the pricing isn't great.  Is the pricing high enough to cover commission?  Or are the prices low and commissions high so the owner could get locations easily?  If that's the case, you'll have to risk losing accounts to either take away (or lower) their commission and/or raise prices.  A lot of people will give you the "just take them out" reaction.

Let's just throw some general numbers at this to see if it's profitable, even though there is very little information given on prices.  Let's assume that COGS are 50% and commission is 16%, so 66% with nothing else added.  You say you live in NY, so I have to assume that you will be paying sales tax on this.  So, let's add 8% because I have no idea how sales taxes are in NY.  Now we are at 74%.  So, take your 175,000 (no bulk) and multiply it by 26% (remaining) and we get $45,500 in annual profit.  It actually looks pretty good, but that's if all of the numbers given are accurate.  If the owner exaggerated sales or if you'll be losing any coke assets or anything else changes to the route (not including if the prices are too low), then your $45,500 can quickly fall to almost nothing.

The next logical step is to find out what the prices are and CONFIRM the prices... you'll also need to see copies of his tax returns.  For a purchase that big, if he has no proof of his sales, then you should pass because you might be being lied to.  Also, at $185,000, if that's his entire route, he shouldn't have any time to do anything else (unless he pays someone).  While it is very possible to work 2 jobs and collect $185,000 in revenue from vending, it's difficult to get all of that done given the fact that businesses often close after business hours.  So it's important to note if this is all he's been doing and he has tax returns to prove his income.  It is simply insufficient to say he has grossed an average of $xxxx over several years.  You need to see where he paid taxes on his route.. not to make it legal on his end, but because he could be lying to you about how much the route really does just to get more money for the sale.  If he has NOTHING on his tax return for vending, and he has a full-time job elsewhere with no driver running the route, then you have to assume that he rarely services the accounts because they don't make much money and he simply wants out because it's not profitable with low prices, commissions, etc...

Trust me, this could be a good route to add to yours, but it's a pretty big chunk to add if you're just one person, and the last thing you need to do is spend your existing profits paying for someone else's machines that don't generate money.  I will add though, that the value of the equipment alone was at $50,000 when I did the math, but that's if the snack machines really are relatively new.  You COULD move those machines around to better locations and use the coke assets to make it way more affordable with you get new locations (buy a snack machine and use an existing coke asset), but if the sales on the coke assets aren't that great then they provide very little value to you other than the fact that you won't have to purchase soda machines when you need them.  It is also important to know the way coke does 3rd party vending in New York.  Every region is different an they might be really lax about 3rd party vending and transferring leases, or they might say "no" and threaten to pick every coke asset up.  

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Chis-- thank you for your long and detailed response.   you clearly have a grasp on this and it's appreciated.  I have done additional analysis other then what I included.   Let me attempt to answer some questions/points...

 

Firstly, when you say "labor," do you mean you will be paying someone?  It's important to know that 185k/year is $3,550/week.  A good driver should be able to do a minimum of $800/day in 8 hours.  That's minimum.  Figure $100/hour then $3,550 is about 36 hours.  I'm not saying $500 in "labor" is bad or anything, I just find it interesting because you include it as a cost.... and while wages and salaries are definitely a cost, paying yourself is not a cost -- it is the result of profit.  Moving on...

$500/ week is my estimated labor costs for my help.   That is additional money on top of my current route that my help will get.  I am also involved as labor, and do not "pay" myself.    My estimate for hours / week it will take to service these machine was about 30 -35 hours.  Many like the bulk machines and under performing machines do not get serviced frequently and the machines are clustered fairly well.   

 

I don't know when Crane took over Automated Products, but I feel as though it was more than 4-5 years ago.  Having said that, I think it's important to look at your numbers in the first sentence because putting a blanket number of 60 machines (including bulk and full-line) isn't fair.  If those vending machines really are 4-5 years old, then I expect them to be worth at least $1,500/each.  Having 28 machines at $1,500 each puts us at $42,000 in full-line.  I don't see gumball machines being worth more than $50/piece but I don't do bulk vending... so let's just say $1,500 for the gumball machines.  That puts us at $43,500.  The ice cream machines could be worth anything depending on their age, but let's just add $6,500 for the ice cream machines and round it all up to $50,000 in equipment.

 

Moat of the machines were made by AP both before and after Crane took over.   they average 4-6 years old, I have to verify .  I will say they were up-kept well.   Some have golden eye, other don't.  My values were conservative purposely.  I think $1500 may be fair but used $1000 each to be conservative.  Bulk has little value.   For argument sake, lets say the total value of machines is 45k (between our values) 

Now, since the sales are combined between all machines, and there is no revenue breakdown provided for the bulk vending, I am going to just assume $350/head each year for an estimate of $10,000.  Subtracting that from the full-line, we are at $175,000 in gross annual sales for everything else.  Now we are left with 28 snacks, 3 ice cream, and 50 coke machines... for a total of 81 machines.   

 

You are very close on the bulk -- Its appox 12k......

Now if we take $175,000 and divide it by 81 machines, we get $2,160 per machine annually.  That's not great... but it isn't bad either.  These accounts are generating enough money to warrant the sales if they are all equal, but they will not be.  Some accounts will have coke vendors that gross $500/year and some accounts will have a snack and a coke machine doing $10,000/year.  It's the nature of the business.  Having said that, there are too many unknown variables in this.

 

Yes, agree.  I do not have that breakout yet but will be asking for it if we get close to agreeing on route price.  But at the end of the day, we have to deal with averages.   I will naturally work to do any route optimization 

 

The next concern is 16% commission.  That's just not right.  If I saw such a route for sale with those numbers and the vendor was paying 16% commission, I wouldn't even look it over.  The most I have EVER paid for commission was 10% and that was to a vending management company.  Those accounts, on average, are NOT worth practically any commission.  Furthermore, I have to wonder if the pricing isn't great.  Is the pricing high enough to cover commission?  Or are the prices low and commissions high so the owner could get locations easily?  If that's the case, you'll have to risk losing accounts to either take away (or lower) their commission and/or raise prices.  A lot of people will give you the "just take them out" reaction.

 

Yes, average commission is 16%, so on 185k sales -- 30k commission.  It is high but is what it is.  I need to dig into more on the prices.   I think it might be a case of offering high $ to get locations.  But thd route gross takes that into account. 

Let's just throw some general numbers at this to see if it's profitable, even though there is very little information given on prices.  Let's assume that COGS are 50% and commission is 16%, so 66% with nothing else added.  You say you live in NY, so I have to assume that you will be paying sales tax on this.  So, let's add 8% because I have no idea how sales taxes are in NY.  Now we are at 74%.  So, take your 175,000 (no bulk) and multiply it by 26% (remaining) and we get $45,500 in annual profit.  It actually looks pretty good, but that's if all of the numbers given are accurate.  If the owner exaggerated sales or if you'll be losing any coke assets or anything else changes to the route (not including if the prices are too low), then your $45,500 can quickly fall to almost nothing.

 

I worked out the numbers and I think NET, I take home ~45-50k (including bulk).  We are not too far off.    For the purpose of valuation, we need to assume the numbers/machine count are accurate.  I will be doing verification as well and need guarantees on the coke side.

The next logical step is to find out what the prices are and CONFIRM the prices... you'll also need to see copies of his tax returns.  For a purchase that big, if he has no proof of his sales, then you should pass because you might be being lied to.  Also, at $185,000, if that's his entire route, he shouldn't have any time to do anything else (unless he pays someone).  While it is very possible to work 2 jobs and collect $185,000 in revenue from vending, it's difficult to get all of that done given the fact that businesses often close after business hours.  So it's important to note if this is all he's been doing and he has tax returns to prove his income.  It is simply insufficient to say he has grossed an average of $xxxx over several years.  You need to see where he paid taxes on his route.. not to make it legal on his end, but because he could be lying to you about how much the route really does just to get more money for the sale.  If he has NOTHING on his tax return for vending, and he has a full-time job elsewhere with no driver running the route, then you have to assume that he rarely services the accounts because they don't make much money and he simply wants out because it's not profitable with low prices, commissions, etc...

 

They serviced the route themselves as a full time job, so that ties out.  They estimated 40 hrs / week.   Again for valuation purpose, lets assume all info is correct.  I will adjust for unforeseen risks

Trust me, this could be a good route to add to yours, but it's a pretty big chunk to add if you're just one person, and the last thing you need to do is spend your existing profits paying for someone else's machines that don't generate money.  I will add though, that the value of the equipment alone was at $50,000 when I did the math, but that's if the snack machines really are relatively new.  You COULD move those machines around to better locations and use the coke assets to make it way more affordable with you get new locations (buy a snack machine and use an existing coke asset), but if the sales on the coke assets aren't that great then they provide very little value to you other than the fact that you won't have to purchase soda machines when you need them.  It is also important to know the way coke does 3rd party vending in New York.  Every region is different an they might be really lax about 3rd party vending and transferring leases, or they might say "no" and threaten to pick every coke asset up.  

 

The coke situation will be clarified legally. 

 

With these questions answered/info available -- what dollar value would you put on the route?? 

Thanks again!!

 

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A rough estimate, all things considered and assumed accurate, I'd put this at roughly 100k. It's more than I would pay here because the 3rd party deal would be a no-go but there is value in the route and 100k is about what the route would generate in profit in 2 years.  It could be worth more or less. I wouldn't go above 120k and I don't think the owner would take less than 90k but that's the best I can give as far as an estimate goes.

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where in NY is this route? Long Island by any chance?

I may know the person and can verify your numbers if needed

16% of total sales? or 16% after expenses?

in NYC its impossible to give 16%, they will eat you alive! i usually give 30% after expenses, and i still make a profit on the soda and snack machines.

on the bulk its totally different, i can give as much as 70% and still walk away with plenty cash, but i don't, the most i do is 30%, but its 30% of the total, i don't count the gumballs! all i know is my $20 becomes $212.50!

how can i get coke or Pepsi to give me new machines?

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