Location valuation -- am I calculating this right?

[brendamca]

I saw a couple of locations on CL that looked interesting. Trying to run the numbers... am I doing this right?

Location 1:

1 machine (type unknown) in a major shopping mall. Seller claims $1200-$2000/mo. Commission unknown, but I expect something substantial, given the location. Asking $10K.

I figure $1200/mo = $300/wk x 52 wks = $15,600 OR $1200/mo x 12 mo = $14,400.

Location 2:

1 AP Snack

1 BevMax glass-front

1 Coffee machine

Location has ~200 employees and seller claims 2009 brought in $14,830. Also claims that the company is hiring more employees and expects to bring in $15,500 easily in 2010. No commission. Long-standing account. Seller is asking $8900.

I figure $14,830  /  3 machines = $4943/machine annually  /  52 wks = $95.06/machine weekly gross.

I think either of these might be worth a second look. Thoughts, anyone?

Thanks for your help.

[mission vending]

I`m doing this on my phone so I will be short.

Location 1 concerns me for several reasons.

Loction 2 is worth taking a closer look. The price. if it includes inventory and mech money would not be out of line. A little high  but not out of line.

[brendamca]

Location 2 does include inventory + coin mech.

I also had concerns about Location 1. Would be interested to hear yours.

[mission vending]

For location 1 my concerns in no particular order

1. The price, that is a lot of money, the machine at best is worth 2-3K and that's if it pretty new with all the bells and whistles. So 7-8K for the location?

2. High commission, I don't like high commission locations, there is little loyalty, they will toss you out in a minute if someone offers them a nickel more unless you have a contract to beat them over the head with

3. Why only one machine? Is it a snack machine in the mall employees breakroom? If its out in the public area, why is there only one? The drinks in the public area are likely under a bottler agreement so if its a drink machine it could only be in the employee breakroom (I've had a location in a mall for the mall employees) If so, what will happen when/if the bottler finds out and demands that you get kicked out?

That's a few, maybe some more info, if you can get it, will alleviate some concerns, but again on this one I would tread very lightly.

[brendamca]

I was also concerned about commission. And one machine... why would they be unloading one that was making good money? I know some places drop locations that are poor performers/out of the area, but it was still a question in my mind.

Granted, I'd love to be pulling in that much off one machine, given my time constraints.

So, if I could get all of my concerns answered to my satisfaction (which I doubt), how much would be reasonable for this kind of location? $7K?

[mission vending]

I was also concerned about commission. And one machine... why would they be unloading one that was making good money? I know some places drop locations that are poor performers/out of the area, but it was still a question in my mind.

Granted, I'd love to be pulling in that much off one machine, given my time constraints.

So, if I could get all of my concerns answered to my satisfaction (which I doubt), how much would be reasonable for this kind of location? $7K?

First you need to get VERIFIABLE sales info, commission stmts, canceled checks, copy of contract w/ commission structure  etc.

As for price, now we are diving into a very subjective area. During my first few years in this business I probably would not have thought twice about paying that kind of money, now I know better. If everything hit just right, new machine, long term contract, good history, within existing route I would think about 2-3K above the value of the machine as an acceptable location fee. So in this case, best case scenario for me would probablybe around 6K

[brendamca]

Thanks for your reply.

I had a small route I was considering last spring, but the guy's sales info consisted of some bank statements where he went back and highlighted deposits from "memory." The amounts and dates were all over the map. There was no real winter slowdown that I could discern, and it seemed like he was there a lot more often than what he'd quoted me. Given that he admitted working under the table, I wasn't too surprised.

[coinvestor]

Thanks for your reply.

I had a small route I was considering last spring, but the guy's sales info consisted of some bank statements where he went back and highlighted deposits from "memory." The amounts and dates were all over the map. There was no real winter slowdown that I could discern, and it seemed like he was there a lot more often than what he'd quoted me. Given that he admitted working under the table, I wasn't too surprised.

Unfortunately, this is the norm. I have yet to buy a route or stop that had ANY records! I even had a call today from a guy that I have been taking to for a couple of months. He is trying to sell me all of his stops in one city that he is pulling out of. He is Incorporated, but can't provide any collection info even verbally. Of course he wants top dollar for the locations and every time I suggest a gross sales amount for a location he says "I would say its more than that".  What he doesn't know is I have already been asked to replace him at one of his stops, but I didn't because its too small of a location. Every time we talk he says he is going to check his records and get back with me with the gross sales numbers, a month or so goes by and he will call back, but still doesn't have a number.

JD

[brendamca]

It boggles the mind that so many of these operators don't get it -- keep good records, and I'll offer you something realistic for your route. But I guess they'd rather find a sucker. I'm determined not to be one.

[mission vending]

It boggles the mind that so many of these operators don't get it -- keep good records, and I'll offer you something realistic for your route. But I guess they'd rather find a sucker. I'm determined not to be one.

That sentiment is true to a degree but it is also that these guys are doing their routes with cash and no records in order to evade, not avoid, paying taxes on that income. They think they can have their cake and eat it buy evading taxes AND getting top dollar for their route when they decide to sell.

It either that or they are just plain to stupid to know better.

[tedk]

I friend once said to me about guys who work under the table."If a guy is willing to try and rip-off the IRS with what they can do to him, why would you think he wouldn't be trying to rip you off?"

[mission vending]

I friend once said to me about guys who work under the table."If a guy is willing to try and rip-off the IRS with what they can do to him, why would you think he wouldn't be trying to rip you off?"

Could not have said it better.

[brendamca]

Yes, this is what I was getting at and didn't express very well.

I wonder if they're truly surprised when they have to keep putting up their ad on CL time after time.

"The route is worth thiiiiiissss much."

"How do I know that? Can you prove it?"

"Well, um, uh..."

[NinnJinn]

I friend once said to me about guys who work under the table."If a guy is willing to try and rip-off the IRS with what they can do to him, why would you think he wouldn't be trying to rip you off?"

Could not have said it better.

I second that!

[lurtsman]

--I'm headed to bed and have not read the replies. (Sorry!)

Mall accounts do not allow the transfer of a lease between parties. If you buy his machine, the mall lease does NOT come with it. Even if it did, they have a right to kick you at any point during the lease without reimbursing you for the costs they generate for you. So.... be wary of including valuation on that account without having the mall manager say they would permit you to take over the location.

PS. To the OP, I seem to recall you saying in another thread you were new to vending and doing something else full time. The mall will have ZERO tolerance for any lack of knowledge or professionalism. When I see a big account where a new or uneducated vendor has made a mistake, I waste little time in speaking to management considering other people when they need to depend on someone to produce revenue for them.

[NinnJinn]

--I'm headed to bed and have not read the replies. (Sorry!)

Mall accounts do not allow the transfer of a lease between parties. If you buy his machine, the mall lease does NOT come with it. Even if it did, they have a right to kick you at any point during the lease without reimbursing you for the costs they generate for you. So.... be wary of including valuation on that account without having the mall manager say they would permit you to take over the location.

PS. To the OP, I seem to recall you saying in another thread you were new to vending and doing something else full time. The mall will have ZERO tolerance for any lack of knowledge or professionalism. When I see a big account where a new or uneducated vendor has made a mistake, I waste little time in speaking to management considering other people when they need to depend on someone to produce revenue for them.

Very good advice there Lurts

[brendamca]

Thanks for the advice. I didn't know that about mall leases.

I appreciate everyone chiming in. I'm planning to get my ducks in a row and then begin approaching potential locations after the first of the year. I don't want to fall flat on my face the first time out.

[NinnJinn]

FYI,  If you put drink machines in malls, or place them outside for public use,  try to remember that May through September are your gold mine months, and October through April will be your bankrupt months depending how cold it gets.

I started vending in June, was reaping in the rewards, now the colder it gets, the more I wonder if I will survive!

My sales have dropped to almost 50% now that summer is over! 

[brendamca]

Yeah, I saw a thread where someone was asking about the winter drop-off, and one poster responded that you have to look at it as the summer increase, LOL.

I'm not sure this mall location is the place to start, but it did look intriguing at first.