Snack and Soda Vending Valuation

[goldenguy18]

Hello everyone,

I have been doing some research into the vending business. Specifically, I would be interested in buying an already established and profitable route.

Talking to a couple of guys who are asking for between 2.5 and 3 times net profit for them.

Does that seem reasonable?

I'm thinking its quite high, would not expect to pay more than 1.5x unless I can be 100% certain they are stable and profitable.

Let me know what you think. Any comments would be greatly appreciated.

Kind regards.

[dogcow]

Hello everyone,

I have been doing some research into the vending business. Specifically, I would be interested in buying an already established and profitable route.

Talking to a couple of guys who are asking for between 2.5 and 3 times net profit for them.

Does that seem reasonable?

I'm thinking its quite high, would not expect to pay more than 1.5x unless I can be 100% certain they are stable and profitable.

Let me know what you think. Any comments would be greatly appreciated.

Kind regards.

i would not trust any gross revenue figures they give you unless they have tax returns and receipts backing that up

even then its not really worth it. the mistake i made was not realizing that you can start in the vending business for little

more than the cost of some business cards, flyers and a solid business plan. you are buying equipment on location in many cases its not worth anything more

than simply the value of the equipment you are buying. for example say u buy a location that does 5k gross per year, and has a DN bubble front

and an older snack machine there. Say you pay 60% of gross sales ( ithink this is a fairly common figure in vending)..well a week later they announce the facility is closing. then you've paid 3 grand and you end up with basically $1,000 or less worth of equipment.

[mission vending]

Hello everyone,

I have been doing some research into the vending business. Specifically, I would be interested in buying an already established and profitable route.

Talking to a couple of guys who are asking for between 2.5 and 3 times net profit for them.

Does that seem reasonable?

I'm thinking its quite high, would not expect to pay more than 1.5x unless I can be 100% certain they are stable and profitable.

Let me know what you think. Any comments would be greatly appreciated.

Kind regards.

We typically value vending businesses as a percentage of gross revenue. The "rule of thumb" is 50% of gross plus value of inventory and other assets (vehicle, machines not on location etc) As Dogcow mentions, a fair price would probably fall between 50-60% of gross receipts.

Using the net profit method is not very common and would also depend on what they are calling net profit. Are they saying net profit is determined after COGS subtracted or is net profit determined using GAAP methodology? (Generally Accepted Accounting Principles, what your CPA uses to complete tax return)

Any number given as a base to determine value MUST BE VERIFIABLE. Tax return, bank statements, canceled checks showing commission payments would be best. A copy of a spreadsheet that cannot be cross referenced with bank statements or tax returns is not acceptable.

Once you get to this point look at the accounts, age and condition of equipment, are there contracts with the location, any lease equipment from the bottlers etc.

Hope this help you get started, if you need more help just ask.

[nrpick44]

I've kept an eye on the CL postings in my area pretty much since last June when I started and it seems like most posting are asking for 100% yearly gross. Are there ever situations where the 50% " rule of thumb " can be closer to let's say 75%?

I'm beginning to wonder that if I sit and wait for the " perfect " opportunity I may pass up on accounts that I could use just because I'm too cheap.

Or is being patience key here?

[mission vending]

I've kept an eye on the CL postings in my area pretty much since last June when I started and it seems like most posting are asking for 100% yearly gross. Are there ever situations where the 50% " rule of thumb " can be closer to let's say 75%?

I'm beginning to wonder that if I sit and wait for the " perfect " opportunity I may pass up on accounts that I could use just because I'm too cheap.

Or is being patience key here?

Patience is the key. I bought a route in Nov of 09, one of the things we did to reach agreement on pricing was to contact someone that did professional business appraisal. One of the things we got in the report was a comp listing of reported vending company sales 100K to 250K gross revenue. The report listed 28 transactions over the previous 2 years in all parts of the country. The price paid reported ranged from 29% to 126% of gross revenue with the median being 74%. In this revenue range 50% of gross plus assets, (vehicles, counter, idle equipment, inventory, money in mechs etc) will get you close to the 74% number.

In my experience, smaller routes will typically sell for a little less due to there being fewer assets to include in the sale, hence my agreement with dogcow on the 50-60% number.

That being said, it is not the be all end method to determine value. You can determine the value anyway you want and if you are comfortable paying a higher price to get things going for you then by all means do so. The result of doing so only impacts you. It does so by creating a longer time period to get a return on your investment and if for some reason you are forced to sell (health, divorce etc.) then you will likely be disappointed when you compare the sale vs purchase price.

Regarding those CL ads, did you contact them and make them any kind of offer? Many of those postings will disappear and reappear over time if you watch long enough and if you contact the seller everytime he posts with the same offer you will probably eventually get it.

[dogcow]

Regarding those CL ads, did you contact them and make them any kind of offer? Many of those postings will disappear and reappear over time if you watch long enough and if you contact the seller everytime he posts with the same offer you will probably eventually get it.

i agree with this. also remember a lot of people who answer craigslist ads are just dreamers, if you have cash make sure you clearly state

that you have access to cash and are a serious buyer.

people i have talked to selling stuff on craigslist said they deal with all kind of dreamers and people who waste their time because they dont have

any money. one person i talked to said they had negotiated a whole deal for the purchase of a route, run the route with the guy to verify collections, agreed on a

price and then the guy said "ok now i have to try to get a loan from the bank" of course at that point he knew it wasnt going anywhere.

[nrpick44]

Regarding those CL ads, did you contact them and make them any kind of offer? Many of those postings will disappear and reappear over time if you watch long enough and if you contact the seller everytime he posts with the same offer you will probably eventually get it.

Its been alot of asking questions and sad to say practice at just talking to different vendors and trying to get little nugget of info here and there. I only vend part-time and luckly the income I generate only stays in my vending business so I can afford to wait til the "perfect" opportunity comes along. The few times that I actually made an offer I was always considered low and they either sold to someone else or just kept their locations ( usually been 1 or maybe 2 location type deals ).

That being said owning my own business has been a blast and I find myself hooked. Just thankful that I have the time to learn and I would rather move slowly than do anything quickly that I may regret.

[goldenguy18]

We typically value vending businesses as a percentage of gross revenue. The "rule of thumb" is 50% of gross plus value of inventory and other assets (vehicle, machines not on location etc) As Dogcow mentions, a fair price would probably fall between 50-60% of gross receipts.

Using the net profit method is not very common and would also depend on what they are calling net profit. Are they saying net profit is determined after COGS subtracted or is net profit determined using GAAP methodology? (Generally Accepted Accounting Principles, what your CPA uses to complete tax return)

Any number given as a base to determine value MUST BE VERIFIABLE. Tax return, bank statements, canceled checks showing commission payments would be best. A copy of a spreadsheet that cannot be cross referenced with bank statements or tax returns is not acceptable.

Once you get to this point look at the accounts, age and condition of equipment, are there contracts with the location, any lease equipment from the bottlers etc.

Hope this help you get started, if you need more help just ask.

Yes, 50 - 60% of gross and 1.5x net profit should be about the same thing. We're on the same page here, I just need to start using industry jargon.

I'll be meeting with the seller tomorrow, will see what kind of information he has backing up his revenue and profit claims. I'll also try to get a list of his inventory and the age/model of the machines. I agree with the other posts as well, should not pay much more than the value of inventory.

I believe that you make money going into the transaction, not going out.

So my offer will be somewhere between the value of his inventory (machines etc) and 60% of Gross.

Thank you very much.