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Purchasing 2 Routes - Advice

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I am looking into purchasing 2 vending routes, I do not have any experience in the vending industry and do work a job that requires 60+ hour work weeks so I do not intend to service the machines myself however this has not dissuaded me from this venture.  1 of the routes has an employee who is currently servicing the machines, my embarking on this venture is contingent on that employee staying on. 

 

I would appreciate any advice and input on valuations.

*I will update the model numbers of each machine once the current owners respond as I realize how relevant that is to the valuation

 

Route 1

  • 17 machines in 16 locations  + 2 machines and 5 side units in storage
    • Asking $60,000
    • 17 of the machines are Naturals 2 Go, 1 is Dixie Narco (don't know model), the last machine is unknown for time being
    • Pays employee $500 per week to service all machines (currently 2 days per week)
    • 9 AIRVEND 10 USATECH
    • Revenue $53,000, Gross Profit $28,000, Net Profit $4,000
    • Plan to offer $45,000

Route 2

  • 9 machines in 7 locations
    • Asking $49,000
    • USA TECH
    • Fresh Healthy Vending machines (my understanding they are out of business)
    • Revenue $42,000, Gross Profit $25,000, Net Profit $17,500
    • Plan to offer $35,000

My plan is to use the employee from route 1 (being paid $500 per week which is too high for current workload) to service both routes without changing pay.  Route 1 is claiming a gross profit margin of 50% while Route 2 is claiming 60%, either Route 1 is not sourcing their product effectively or Route 2 is fudging the numbers (maybe both).

 

1. Are my current offers to high? *I know this depends on the machines but assuming they are decent machines

2. Is it too much to pay a driver $500 per week to service 26 machines in 23 locations?

3. Parlevel vs Vendsoft vs please provide recommendations for route and machine management

4. USATECH vs AirVend vs Nayax vs please provide recommendations

5. Please provide any additional input you would like.

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20 minutes ago, Anacapa Vending said:

Oh Jesus. You saved yourself a lot of money coming here first. I dont have time right now to address all the issues here.  Quick recap of issues.  Business based on combo machines is a joke, 17 machines is 1 day of work not 1 week, 45,000 investment to net $4,000 a year (lol), healthy vending scam, you cant transfer credit card readers if the old company never finished financing the devices ( I learned that the hard way)

 

That would be $80,000 down the drain. Giving the vending industry another black eye. Keep looking if you do buy a business you better be there to run it yourself or you WILL fail. 

If you want passive income your money would be better served dollar cost averaging into the equity markets over the next couple years.

Please let me clarify that the reason route 1 is only betting $4,000 is because the employee is making $24,000 per year. If servicing all 26 machines is only 1.5 day of work I would need to negotiate that down to <$250 per week or replace him. 

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Unless YOU are going to run your business, this is a BAD idea.  What are you going to do when your employee calls in sick, or worse yet, quits.  Are you going to leave your current job to run your vending routes until you can hire another route driver?  And there is extensive training involved too.  You can't just hand someone the keys and say "Have at it."  What about repair calls?  Is the driver doing all the service repairs?  You are gambling HUGE on just ONE employee running your show.  Are you going to take time off from work to help this employee move equipment  when you lose an account?  And on top of it all, you want to pay this person less than $250/week?  It would have to be a part time  position.  If you expect full time work out of this employee, you'll need to pay them more than minimum wage.  This is a bad idea...bad, bad, BAD.  Just my two cents.  :)

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13 minutes ago, lacanteen said:

You are setting yourself up to fail. Vending is not a passive owner model. It's very hands on. Product rotations, customer contact, coin and bill jams, counting money, paying sales taxes and commissions, maintenance on the delivery vehicle, general liability insurance, product liability insurance. And that's a good week. What will you do if the route person has a fender bender in a parking lot? Who will train the new driver when the old one quits or gets fired for skimming?

Do yourself a favor, and donate $100 to this forum and that's the most you'll lose in your very short dip into the vending business. Search this forum about combo machines. A vending route is not full time until sales pass $400K per year and 1 full route is only profitable when the owner is on it. Computer scheduled routes easily do $12K per week. 

See how many of my constituents agree with this post. I'll wait.

h-eatpopcorn.gif

 

Perhaps you are correct.  I know that a number of the locations can be serviced on the weekends, I will find out how many and if it is the majority of them then I can service them myself.

 

I was hoping the software I mentioned would assist me with product rotations, managing cash flow, etc.

I intended to do the purchasing and build the pre-kits for the driver to pick up from me.

SaleTax and commissions I would handle.

The employee would need to supply their own vehicle

I would have commercial liability insurance

I was hoping to expand the routes and hiring more drivers in the inevitable scenario that someone quits or is fired

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What everyone stated this would be a guaranteed fail. #1 prices are too high as those machines suck. #2 u will never run it right if you arent involved. You need to be the salesman, accountant, manager, warehouse manager, repairman, mover, stocker, etc. Your employee may quit or may need to get fired, the business must be serviced with or without them. 250 for 2 days of work is ridiculous. Then you have a van, repairs, etc to add to it. So you wanna offer 80k to net 25k a year? You do know that means for 3+ years you would have to stay fully consistent not losing accounts or machines messing up to brake even? 

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5 hours ago, Anacapa Vending said:

Oh Jesus. You saved yourself a lot of money coming here first. I dont have time right now to address all the issues here.  Quick recap of issues.  Business based on combo machines is a joke, 17 machines is 1 day of work not 1 week, 45,000 investment to net $4,000 a year (lol), healthy vending scam, you cant transfer credit card readers if the old company never finished financing the devices ( I learned that the hard way)

 

That would be $80,000 down the drain. Giving the vending industry another black eye. Keep looking if you do buy a business you better be there to run it yourself or you WILL fail. 

If you want passive income your money would be better served dollar cost averaging into the equity markets over the next couple years.

Please let me clarify that the reason route 1 is only betting $4,000 is because the employee is making $24,000 per year. If servicing all 26 machines is only 1.5 day of work I would need to negotiate that down to <$250 per week or replace him. 

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Alright maybe atm vending might be a better idea for me. I want something tangible 

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First, props for working 60+ and wanting to start a business to get ahead.  But with vending, all of the advise you have been given above is pretty on point.  And with any business, if you are not able to be deeply involved in the operation you are setting up for failure.   A couple books I would recommend, both by Dave Ramsey - Entreleadership, and The Total Money Makeover.  Save as much as you can and find a business you can build on your own in the time that you reasonably have available.  As it grows you can shift into it.  It may be vending, but don't buy a healthy vending bizopp whatever you do!  If you can find a good location for a can drink machine and pick up a used DixieNarco 501 or Royal 660, and start with one location you can service yourself, and a machine that will only need service every week or two.  Learn and grow at the same time.  These sellers are stuck in bad deals and want to pass the damage onto you, don't fall for it!!!

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Welcome to the forum and I know you would love to get some positive feedback about your proposed plans but I also vote to PASS on this deal.  It's great to get your feet wet in vending, it really is, and obviously you would like some passive cash flow from a business which totally IS possible but that's really only possible in vending if you have a VERY efficient route, meaning you are bringing in (I would say) at least $200,000/year in gross sales with no more than 1 employee who stocks everything and does minor repair.  As other people said though, when something happens, how will you find the time to fix it?  As Southeast Treats said, good for you for working 60+ hours.  Obviously you have the dedication to run a business but you DON'T have the time.  I want to assume that the reason you are working 60 hours/week AND why you can try to afford to buy 2 routes at once is because you have a very demanding career that pays pretty well.  If I am correct on this, then it would save you much stress and grief (and possibly your well-being) by just avoiding vending altogether.  If you want to do it as a hobby or just for experience, that's one thing.  If you want to do it because you want some extra income, then your whole setup is a mistake.  My route does more than both of those routes combined and I could probably get down to 24 hours (or even less) if I did everything I need to do for that.  With GOOD locations and telemetry, a route driver should be able to restock anywhere from $1500-$3000/day in GROSS receipts, meaning anywhere from about $375,000/year up to about $750,000.  That's only with GOOD accounts though.  With mediocre locations (such as the bulk of the ones for sale in those rates, if not all of them), then anywhere from $1,200 to $1,500 depending on route density and many other variables.  Since most of the machines are combos, you have to restock more often.  Doing about $1,000/week in sales could easily be done in 1 day, even from 19 machines as long as everything is pre-kitted and nothing is way out in the middle of nowhere.

Your offer for these routes should be $0 because you shouldn't even bother with them.  If you currently make anything over $100k/year, which I hope you do if you are working 60+ hours and considering purchasing both routes, then I suggest you look into real estate IF you REALLY want to get something potentially passive.  Use your money to put a down payment on a home that is move-in ready, hire a good property maintenance company, and soon you'll be collecting a little off the top with very little effort from you.  It'll cost a lot upfront, but you'll get mostly passive cash flow.  I plan on investing in real estate in the future but I can tell you that vending requires management and if the driver is taking 2 days to service 19 machines when they are ALL should have telemetry available, then the employee is NOT being managed and the route isn't big enough to pay him anyway.

On a side note, I was tired and decided only to service 2 accounts yesterday.  I collected about $400 (between cash and card sales) in about 2 hours, and I was VERY lazy about it and that all includes about 45 minutes of drive time.

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Bought some accounts 6 months ago, I pretty much handle everything except moving machines (added locations) and major maintenance (nothing yet, knock on wood). I'm a little over half way there of collecting what I've put into these accounts. I'm a government accountant full time so it helps a lot when I put all the #'s together. 

I actually bought an SUV to help me do this with the intention of using it for a baby on the way. Plan is to sell the accounts within two years or if I get a good offer.

Wish I could get into real estate, but prices are sky high in Los Angeles

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