A fair asking price for our route.

[gogo]

This is  a great thread.

I started in vending 9 months ago by buying a route that was doing 20k/year. The seller was a CPA who did vending on the side. He had impeccable records and was a great guy to deal with. I have since grown my business to 100k/year by buying individual locations and small routes. I have also secured locations by my own sales efforts.

I have made some good deals, and I have also gotten ripped off by some sellers.

For me at this point, the two most important factors are:

1) income verification

2) return on investment

The seller has to prove to me that the route earns what they claim. This is mainly  accomplished by going on the route with seller, or rarely you come across a guy with great records you know weren't fudged. Many of the small-time operators don't even know what they are actually making on locations. They aren't dishonest, they are just bad business operators. They tell you they are making $100/week, but when you really look at it, they are making $50. This is the first step ... knowing what you are actually buying.

More relevant to this thread is pricing ... what is it worth? This is a variable factor. I have met vendors trying to sell their route for 3 times perceived net ... what a joke! These are usually people who buy machines from a biz-op company and realize they have been ripped off and then try to play the same game with me. They sit on it for months with no buyers until they come to their senses. I have never bought a route/location for more than 65% of verifiable gross ... and that is if they have new machines. More typically, we end up at 50%-55% gross for a sales price.

When I come to the point that I decide to sell my business, I would love to get 3 years profit form the sale, but you just have to be realistic ... that's just not how it goes in vending right now ... at least not in my area.

I agree with the point made earlier in the thread about a machine's value being based on what it earns. I have sellers tell me all the time "This is a $3000 machine!" Well, if it only earns $50/month, I beg to differ about its value.  Vending is all about location. I have a machine I bought for $200 making $250/month.  What is the real value of that machine? What I paid for it, or what it earns?

If I  can reasonably expect to make my money back in 9 months or less without having to making any equipment upgrades, then I'll try to make the deal work.

Just my 2 cents.

[spdydre]

$30k gross seems awfully high for the amount of equipment that comes with this deal.  I would thoroughly verify this number.  Also, why does he have 4 wides in locations that would easily justify 5 wides?  He has to be doing nearly $200/week in each location in order to get to the gross you reported.  My best location with just one soda and one snack do $150 in a really good week and I am thrilled when they do.  I started with a 4 wide in this location and quickly replaced it with a 5 wide and moved the 4 wide to a slower  location as soon as I could.  Not saying $200/week is not possible, just very unusual in my limited experience. 

I assume you mean the 'loaned' machines are 3rd party from coke.  You can call the number on the machines to confirm who owns them if you give them the number on the side of all the Coke machines.   As long as the mahines are 3rd party and coke will give you a 3rd party account, I would not worry too much about this.  I would confirm with coke what the minimum purchase requirements are, but they rarely take back machines, just wont give you anymore if you dont buy enough product. 

Regardless, this seller is in the ballpark of what you want if the income is verifiable.  Is he willing to guarantee the income is going to be equal to 30k for the year?  Ask if he will drop the price accordingly if the sales are 5% or lower than he projected.  For instance the sales come in at $27k for the year.  If so, then he missed the gurantee by 10% and the overall price needs to drop by 10% which can be adjusted out of the second years payments to complete the sale. 

Current interest rates are 5% and I am paying no interest n the deal I am currently doing for 80+ machines.    I would ask him to drop the interest request, perhaps pay him a little more upfront if you can to avoid the interest. 

Also see if you can see tax returns or other information confirming the gross that the seller claims.

Since he is starting at 60% of gross, I think he wil be willing to come down to at least 50% so if everything checks out, offer him 50% or less to try and get him to bite.

Good luck.

Thank you I will take this into account.  He does have income tax returns and records from day one of operations. I will see if he will take no interest or at least drop the interest  to a lower rate. 

[spdydre]

Also what is the easiest way to do a transaction such as owner finance etc regarding paperwork,payments, term agreements etc?

[WillisNYC]

The beauty of that is that it is all negotiable!  The KISS principal works well here.  Keep it simple  and easy to understand with little or no attorney involvement..  In my own deal, the owner is self financing a little less than 50% of the route and I will pay off the seller in 2 years.  However he is willing to gurantee that if my gross collections fall below 95% of what  he experienced in 2009, then we knock the same percentage off the entire price.  Thus after one year, if the gross was 90% of what he experienced last year, we will lower the price by 10% and adjust the remaining payments to reflect the new price.  Now it is more usual to just guarantee the first week or months gross in this type of deal, but I was willing to go with a year since he was financing a signifigant amount of money.  I also bought the route itself for just over 50% of one years gross.  The seller retains title to the machines for the life of the deal and if we miss a payment, then he can demand that all remaining monies be paid or he can 'take back' the route and its assets.  After the route is paid off, we get a bill of sale for the machines themselves. 

[mission vending]

The beauty of that is that it is all negotiable!   The KISS principal works well here.  Keep it simple  and easy to understand with little or no attorney involvement..  In my own deal, the owner is self financing a little less than 50% of the route and I will pay off the seller in 2 years.  However he is willing to gurantee that if my gross collections fall below 95% of what  he experienced in 2009, then we knock the same percentage off the entire price.  Thus after one year, if the gross was 90% of what he experienced last year, we will lower the price by 10% and adjust the remaining payments to reflect the new price.  Now it is more usual to just guarantee the first week or months gross in this type of deal, but I was willing to go with a year since he was financing a signifigant amount of money.  I also bought the route itself for just over 50% of one years gross.   The seller retains title to the machines for the life of the deal and if we miss a payment, then he can demand that all remaining monies be paid or he can 'take back' the route and its assets.  After the route is paid off, we get a bill of sale for the machines themselves. 

The deal I did last year was very similar. Seller retains title until paid for, I represent myself as employee until paid for, he delivers commission checks. He keeps minimal involvement and has an ear to the ground so to speak that I'm performing, I get the benefit of using, in some cases, years of goodwill until they get to know me which will make the final transition seamless. This only would work in a situation where you are friendly and are willing to work together for a period of time for each others mutual benefit. The term on my deal was 18 months with an option to extend to 24 if I choose.