7 replies to this topic

[soco]

I'm considering the purchase of a route with 4 snack, 1 combo & 4 soda. Route was created by the seller and they bought used and re-furbished machines, which are described as in good shape with routine maintenance. Prelim numbers look reasonable and so is the attitude of the Seller. Of course prior to full payment I'll be reviewing the books & machines, working the route for awhile with the seller, etc. I understand the purchase price isn't about the locations, but how would you value something like this? I read somewhere that 40% of gross was a reasonable value, but the Seller feels that they put a certain amount of money into machines and they want that + goodwill back. Any thoughts?

[mikepn]

Here's my formula for valuing machines on location:

Compute value 1 to be what you think the machine might be worth as just a machine on Craigslist or eBay. Subtract a certain amount for the hassle of removing it from location. (Say, $20 for a small mechanical machine, up to a couple hundred dollars for full size soda machines.) This is the value of the actual equipment to you.

Compute value 2 to be 40 times WEEKLY profit. So, if the prices are set wrong and it's not making any profit, then value 2 would be close to nothing. So, if the machine is making $50/week in sales, and they follow the general rules right and it's making $25/week in profit, then the location is worth $1000.

The maximum of value 1 and value 2 is what you should offer. If the values are too far apart, it may mean that the machine is not right for the location. If value 1 is much larger than value 2, it means the location stinks and you're wasting a good machine on a bad location, and you'll have to move the machine off to a better location and move a new machine on. Factor in the hassle when making an offer. Similarly, if value 2 is much larger than value 1, you're probably losing revenue by having an under-sized machine on the location. Again, you'll have to go to the trouble of getting a new machine and putting it on the location.

Remember that Planet Antares *machines* really aren't worth anywhere near what people ask for them online. Since people who bought Planet Antares machines overpaid, they think they can charge too much too. My perception is that you shouldn't touch a Planet Antares machine unless you are getting a *bargain*. (Planet Antares is a business-in-a-box biz-op that got a lot of non-vending-type-people into the vending business.)


Also, it doesn't matter one bit how much money the seller put into the machines. If the seller got ripped off, that does not mean you need to get ripped off. In fact, if the seller is putting in a lot into maintenance, then you'll want to pay less because the machines are going to be nothing but trouble.


Do you know what kind of machines you are looking at?

Hope that helps a bit,
-Michael

[soco]

Here's my formula for valuing machines on location:

Compute value 1 to be what you think the machine might be worth as just a machine on Craigslist or eBay. Subtract a certain amount for the hassle of removing it from location. (Say, $20 for a small mechanical machine, up to a couple hundred dollars for full size soda machines.) This is the value of the actual equipment to you.

Compute value 2 to be 40 times WEEKLY profit. So, if the prices are set wrong and it's not making any profit, then value 2 would be close to nothing. So, if the machine is making $50/week in sales, and they follow the general rules right and it's making $25/week in profit, then the location is worth $1000.

The maximum of value 1 and value 2 is what you should offer. If the values are too far apart, it may mean that the machine is not right for the location. If value 1 is much larger than value 2, it means the location stinks and you're wasting a good machine on a bad location, and you'll have to move the machine off to a better location and move a new machine on. Factor in the hassle when making an offer. Similarly, if value 2 is much larger than value 1, you're probably losing revenue by having an under-sized machine on the location. Again, you'll have to go to the trouble of getting a new machine and putting it on the location.

Remember that Planet Antares *machines* really aren't worth anywhere near what people ask for them online. Since people who bought Planet Antares machines overpaid, they think they can charge too much too. My perception is that you shouldn't touch a Planet Antares machine unless you are getting a *bargain*. (Planet Antares is a business-in-a-box biz-op that got a lot of non-vending-type-people into the vending business.)


Also, it doesn't matter one bit how much money the seller put into the machines. If the seller got ripped off, that does not mean you need to get ripped off. In fact, if the seller is putting in a lot into maintenance, then you'll want to pay less because the machines are going to be nothing but trouble.


Do you know what kind of machines you are looking at?

Hope that helps a bit,
-Michael

Thanks very much Michael... it helps a lot. I'm actually giving the seller a small refundable deposit so I can go on the route with him and list the machine names/condition etc. for myself... no, he didn't have this info on file. He has two other jobs and this is a "hobby" that he didn't put much effort into besides making sure the machines run well and the selections are what the client(s) want. I liked your formula because it also helps with how I view the route up if I purchase it. I'll let you know how it goes, Trina

[cwdist]

Value depends on many different things.

Is the seller desperate to sell? moving, new job, no time
Is the buyer needing to buy? take over a market, become fulltime

soco, you said "I understand the purchase price isn't about the locations", but it is about the locations.

If you have the same equipment at 2 different locations and location 1 has $200/week in sales and location 2 has $100/week in sales, then location 1 is worth twice as much as location 2. Equipment value is only used if the location is poor and the equipment needs to be moved.

I personally think mikepn is undervaluing the locations.

When you find new locations you want them to pay of in less than 1 year, but it is an unknown factor. You may do good but you may do bad.

When buying a known sales amount you may have to pay more.

A seller will probably be asking 1 year sales, as a buyer you should be offering 1 year profit and then you meet somewhere in the middle depending on who is more motivated.

I personally am trying to sell my small part time route right now and I wouldn't even consider 1 week profit times 40. But of my three locations 1 stinks and I'm pretty much throwing it in free, 1 is a full size snack machine that does about $120-$150 per week, and the best one has a snack ($200/wk), Pepsi ($200/wk), and a Coke ($150/wk). Total sales last year were over $31k and it only takes half a day per week to run.

To me this type of route would have more value than one with 10 machines doing $500/week total that takes a full day or more to run.

Just my point of view.

[wannavend]

what is the normal/average profit per snack, can of soda, etc?
Thanks,
Mary

Value depends on many different things.

Is the seller desperate to sell? moving, new job, no time
Is the buyer needing to buy? take over a market, become fulltime

soco, you said "I understand the purchase price isn't about the locations", but it is about the locations.

If you have the same equipment at 2 different locations and location 1 has $200/week in sales and location 2 has $100/week in sales, then location 1 is worth twice as much as location 2. Equipment value is only used if the location is poor and the equipment needs to be moved.

I personally think mikepn is undervaluing the locations.

When you find new locations you want them to pay of in less than 1 year, but it is an unknown factor. You may do good but you may do bad.

When buying a known sales amount you may have to pay more.

A seller will probably be asking 1 year sales, as a buyer you should be offering 1 year profit and then you meet somewhere in the middle depending on who is more motivated.

I personally am trying to sell my small part time route right now and I wouldn't even consider 1 week profit times 40. But of my three locations 1 stinks and I'm pretty much throwing it in free, 1 is a full size snack machine that does about $120-$150 per week, and the best one has a snack ($200/wk), Pepsi ($200/wk), and a Coke ($150/wk). Total sales last year were over $31k and it only takes half a day per week to run.

To me this type of route would have more value than one with 10 machines doing $500/week total that takes a full day or more to run.

Just my point of view.

[soco]

Value depends on many different things.

Is the seller desperate to sell? moving, new job, no time
Is the buyer needing to buy? take over a market, become fulltime

soco, you said "I understand the purchase price isn't about the locations", but it is about the locations.

If you have the same equipment at 2 different locations and location 1 has $200/week in sales and location 2 has $100/week in sales, then location 1 is worth twice as much as location 2. Equipment value is only used if the location is poor and the equipment needs to be moved.

I personally think mikepn is undervaluing the locations.

When you find new locations you want them to pay of in less than 1 year, but it is an unknown factor. You may do good but you may do bad.

When buying a known sales amount you may have to pay more.

A seller will probably be asking 1 year sales, as a buyer you should be offering 1 year profit and then you meet somewhere in the middle depending on who is more motivated.

I personally am trying to sell my small part time route right now and I wouldn't even consider 1 week profit times 40. But of my three locations 1 stinks and I'm pretty much throwing it in free, 1 is a full size snack machine that does about $120-$150 per week, and the best one has a snack ($200/wk), Pepsi ($200/wk), and a Coke ($150/wk). Total sales last year were over $31k and it only takes half a day per week to run.

To me this type of route would have more value than one with 10 machines doing $500/week total that takes a full day or more to run.

Just my point of view.

I understand your point too, but several sources mention that you can't "buy" the location. Seems to me there is a "range" of value that both suggestions above can help create, mixed with intuition and a few other specific factors to get to a final sales number. BTW, since I didn't have the specific machine brands prior to making the offer, I calculated the average machine value, multiplied it by the number of machines and then considered that against the values of 30% and 40% of the gross profit for a year. I factored in inventory on hand, change in the machine and "goodwill" to come up with my offer. We negotiated a bit and settled on a final price that was $1000 more then I offered and $1000 less then he wanted. Best of luck with the sale of your route!

[cwdist]

what is the normal/average profit per snack, can of soda, etc?
Thanks,
Mary

It can vary greatly, but on average you should sell for double the cost.

Here are some examples of my pricing:

item cost sell
Can drinks: .35 .75
Bottle Pepsi: .70 1.25
Bottle Coke: .95 1.25

Chips: .25 .60
Candy bars .60 1.00
Pastries: .45 1.00
Cracker: .30 .75
Cookies: .35 1.00


Your drink prices are usually set by whatever Coke and Pepsi set their machines at.
Snacks are usually slightly less than convenient stores on most items.

[wannavend]

thank you so much for that.
Mary Coppin

It can vary greatly, but on average you should sell for double the cost.

Here are some examples of my pricing:

item cost sell
Can drinks: .35 .75
Bottle Pepsi: .70 1.25
Bottle Coke: .95 1.25

Chips: .25 .60
Candy bars .60 1.00
Pastries: .45 1.00
Cracker: .30 .75
Cookies: .35 1.00


Your drink prices are usually set by whatever Coke and Pepsi set their machines at.
Snacks are usually slightly less than convenient stores on most items.