calculate a fair price for an existing route

[amc-vending]

here is the skinny.

This person I contacted thru CL had several triples on location and wanted to sell them off.

I purchased 1 location already that is doing about 50.00 a month, meeting next week to purchase another location that is doing around the same. 

He has 12 more locations - they do fair to not so great as he says - around 15 - 25 a month.

instead of me purchasing each location every couple of weeks - we are going to sit down and figure out a price for the entire route and he is going to finance it to me.

how does a person calculate a fair price for an existing route.

The machines a used XYZ triples in really good shape.  He has about 2 dozen in storage that I will buy separate from this deal.

NOTE: I had verified the amount taken from 1st location

thanks

Allen

[Clifford84420]

I am not familar with the machine in question, but unless they have a contract secured with the owners of the property to have the machine on location I myself would not pay more than 2 months income per machine and then what ever a average price for the machine.

So for example:

Machine fair resell value of "$50"

Machine averages "$30 a month"

I would not pay more than $110 for the machine and the rights to the location.

If there is a contract, which would guarantee I keep the location for a minimum of the next 6 months, or year or what have you, I would pay average monthly income on the machine for no more than 50% of the remaining contracted time frame.

So for example:

If the machine fair resell value is "$50"

Machine averages "$30 a month"

And there is a contract that says I am guaranteed to keep the unit there for the next 12 months

I would be willing to pay up to: $230..... $50 for the machine and half the remaining contract, 6 Months income at $30 a month ($180).

This is just how I do it.

[sherlock]

I'm sure others with PLENTY of experience will chime in to elaborate.

However, I wanted to start out by stating something that experienced vendors here have posted.

I believe it to be VERY sound reasoning:

When buying a route, your MAXIMUM should be for machines and location only.

Meaning, do not pay for product and do not pay for "hot" locations.

The product could be bad and the locations could drop you right after you purchase.

Calculate what you could buy the used machines for by themselves (craigslist/ebay).

Add to that the cost to pay a good locator to locate them for you.

The total you come up with should be your CEILING price (not your first offer).

Reason is, why would you pay more for the route than what it would cost you to do it yourself...when doing it yourself you could get gauranteed earnings or location-replacement promise if going through a respectable locator?

Again, I don't want to pretend I've done this.

I have just read this advice throughought this forum in response to questions like yours.

Do a search...you'll find great threads on route valuations.

[sherlock]

If there is a contract, which would guarantee I keep the location for a minimum of the next 6 months, or year or what have you, I would pay average monthly income on the machine for no more than 50% of the remaining contracted time frame.

I'd shy away from putting any additional value for a location based on a contract itself.

The contract isn't going to gaurantee you income, it will just gaurantee you can keep your machine at the location.

An owner or manager at the location could put your machine in a dark corner or (worse) a storage room.

Contractually, your machine is still ok, but you aren't making a dime from that "gauranteed location".

In fact, all that contract is doing is tying up a machine you could be using at a better location.

But hey, what do I know....at least Clifford has DONE IT...I'm an armchair quarterback at this point. 

[Clifford84420]

I have only used contracts that state I will be the sole vender per this particular location, it does not bind me to keep a machine on the location, it only states that my machine will be in a maximum exposure area of the business as long as it is kept in good repair and clean and does not interfer with day to day operations of the location. Basically, no one else come on my "turf" so to speak and that me and the owner agree that I CAN keep my machine on this location for a minimum of the stated time frame.

[amc-vending]

i appreciate all the input

i am looking forward to servicing the route.  Plus placing the others that he has in storage.

my goal is to be up to 100 machines by this time next year (hopfully all doing 50+ per month )

[The Mage]

I found a route on Craigslist with 75 Vendstars averaging $15 each service.  (4-6 weeks between services.)  He is asking 15K for the route with financing.

It sounds like he bought into the Vendstar BizOp, and thinks what he paid is normal, and what he is asking is a deal.

I have decided I am going to make an offer on this route.  But I am going to wait until the ad is about to expire, simply because it gives him time to realize nobody is interested.  (Then again somebody may snag it, and overpay.)

But I would be willing to go as high as $40 to 50 for a Vendstar.  (I know, many of you wouldn't)  And another $25 for the locations.  (Half of what I would pay a company to locate.)  The reason is that I do not know whether or not locations will kick me out, and how many I will have to relocate.  I assume at least 40% of the locations will need to be relocated.  

This gives me a range of $4875 to $5625.

Next I look at the return.  I will assume they are all charity locations paying $1 a month, and 30% COG giving me a $9.50 per month.  But I cut out 50¢ per location simply because I don't know how honest he is, and what other factors are involved that may cut the income, and that brings me to $9 per location.  (Maybe I should actually be more conservative.)

$675 a month net.  Or $8,100 a year net.  Now (because I am cheap,) I want the route to pay for itself in 9 months.  That brings a total of $6075.

Now I have 2 numbers to work with, and I will go with the lower numbers.  If the income was lower, I would go with that number.  My belief is that I can build at least as good a route for the value method, but if the income was the lower number, then it did not justify the inclusion of of the locator cost, and I would go with that value.

Now the range I simply average the range, which gives me a value of $5250.

I could offer $5,250, with a $250 down payment, and a 3 year loan at 9%.  The payment would equal $159.  (Even)

This is my thought process.  Does this seem acceptable?

Anyway I really doubt he will accept an offer that is $9,750 below his asking price.  And I don't think I would be willing to negotiate.

[cavity]

Remember it's a 4-6 week service too.  And in reality it may be even longer....Just a thought.

[The Mage]

Remember it's a 4-6 week service too.  And in reality it may be even longer....Just a thought.

Yes, I was thinking of that too.

[Quarter Master]

Just another thing to put into all these "formulas", is whether it is a charity or commission locations/route.

[Clifford84420]

Just another thing to put into all these "formulas", is whether it is a charity or commission locations/route.

Wow cant believe I forgot to mention that... Good catch!

Things get worked out so much better when we all put our heads together

[dperry]

I'm sure others with PLENTY of experience will chime in to elaborate.

However, I wanted to start out by stating something that experienced vendors here have posted.

I believe it to be VERY sound reasoning:

When buying a route, your MAXIMUM should be for machines and location only.

Meaning, do not pay for product and do not pay for "hot" locations.

The product could be bad and the locations could drop you right after you purchase.

Shirlock said it all before I could chime in, except I would add one more thing.  I personally would increase the amount I would pay if the seller were willing to self-finance.  Either that I would amortize and pay the interest.

[JPVendCo.]

Mage-

he is asking TWICE what I would be willing to pay max. NO more then 7500. that is 50 for a machine and 50 for the location...assuming he can give you some sort of documentation on the route.

seller financing is a bargaining tool. if he isnt willing to carry at least some of it, you can bet the route isnt as good as he says it is....

is this route in your target area?

[The Mage]

Seriously it is about finding out more information first.  Everything I said was based on assumptions, and would have to be adjusted because I don't have the actual information.  

J.P. Vend.  Yes it is where my current location is, and would leave me with the maximum number I would want in this city.  (Although I would probably need to move at least 30 of the machines.)  I think I will try for it, but only if I can get a deal.  If not another one will pop up, or I will simply build it myself.

[JPVendCo.]

it would be better if you could find them in your city instead of driving. theres gotta be something going on there as well..

[Jax Snacks]

Sounds like this guy got biz-oped and is simply looking to recover his money.  Do not pay for his mistake!  Your numbers are sooo far apart (and deservedly so), there is no way he will accept it - at least for now.  But give him 6 to 12 months and I bet he runs another ad with a much lower price.  Some people can not accept the reality of their situation and quite frankly want to find someone as naive as they were.  I would walk away from this one, much like a quarter back throws a pass away.  There will be more games to play tomorrow.

Jax

[The Mage]

So far haven't seen one route sold in my city.  (Haven't tried looking for dirty equipment, or old product, and calling anyone yet.)

I have no problem driving to Omaha, just not daily.  It is about a 60 mile drive, and I can handle that a couple times a month, which is my plan.  The financing is the only thing I like about this deal right now, but decided I would simply make it the deal I would accept, and simply see if he is willing to accept it.  If not, my thought is, "Oh well."  and move on.

Too many people think there are no deals, or are rare.  Yet I can look at this bad deal, and see a good deal hidden inside.  Yes it may take 6 - 12 months, and yes it may never appear, because he found some other sucker.  But if one sucker buys from another sucker, it is only a matter of time before he posts his ad.

Get the deal out of this I want, great.  If not, then I just continue on with my current plan, which should give me some in my town.  (Hopefully tomorrow.)

[JPVendCo.]

that is exactly how you should look at it....make an offer, dont be afraid to walk away.