Hi,
Looking for a little veteran advise. I am looking to buy a route in the SF Bay Area. I have one picked out and it looks good. Revenues are down but so is the economy. They supply the bulk vending machines (toy cranes, stickers and capsule toys) and split with the client 40% product, 30% client, 30% them.
While doing research I was told by a machine vendor that this is an outdated business model. Most vendors at moving to a model where the client buys the machine (at cost or close to it) and signs a service contract.
What is your take on this? Is this mostly for large operations (I am and will be a one man show)? Do many vendors retain the profit split model used by this route? I am very interested as I plan to keep this business 5-7 years, sell it and retire when my kids complete school. An operation that loses value due to industry changes now occuring is not desirable to me.
Also, how would you value a route? This guy is asking over 3 times his annual cash flow which seems high to me.
Lastly, how about the Bulk Vending Industry Outlook in general? Those of you who have been in this field for a while and know it, are you glad you got into it and glad you are still here?
Any idea how I can research that more effectively? I got a report from the Bulk Vending Association but it was more of a historical review of the last couple years. Seems to me that every industry has a "Bible" publication that the industry follows. What is that publication/magazine for Bulk Vending? Thanks.
Business Model/outlook
Started by CalifGuy, Sep 13 2010 09:52 AM
3 replies to this topic
#2
vendgrl
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Posted 18 September 2010 - 10:58 AM
Hi,
Looking for a little veteran advise. I am looking to buy a route in the SF Bay Area. I have one picked out and it looks good. Revenues are down but so is the economy. They supply the bulk vending machines (toy cranes, stickers and capsule toys) and split with the client 40% product, 30% client, 30% them.
While doing research I was told by a machine vendor that this is an outdated business model. Most vendors at moving to a model where the client buys the machine (at cost or close to it) and signs a service contract.
What is your take on this? Is this mostly for large operations (I am and will be a one man show)? Do many vendors retain the profit split model used by this route? I am very interested as I plan to keep this business 5-7 years, sell it and retire when my kids complete school. An operation that loses value due to industry changes now occuring is not desirable to me.
Also, how would you value a route? This guy is asking over 3 times his annual cash flow which seems high to me.
Lastly, how about the Bulk Vending Industry Outlook in general? Those of you who have been in this field for a while and know it, are you glad you got into it and glad you are still here?
Any idea how I can research that more effectively? I got a report from the Bulk Vending Association but it was more of a historical review of the last couple years. Seems to me that every industry has a "Bible" publication that the industry follows. What is that publication/magazine for Bulk Vending? Thanks.
#3
vendgrl
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Posted 18 September 2010 - 11:12 AM
I wouldn't consider myself a veteran by any means, but I do own and operate several machines.
The best advice I can give you would be to read a couple of books on the topic. Before I got started, I read these three:
Vending Machine Fundamentals
Start Your Own Vending Business
Vending Success Secrets
The first two were very helpful, the last one was dull and boring. They are all available on Amazon.com. From my experience the business model I currently us is based on a charity model. IE- the owners allow me to place machines at their locations so long as I donate monthly to a specific charitable organization. I donate to a local charity, but one of the common ones is Child Search:
http://www.childsearch.org/vendors.php
Personally, I am a little skeptical. I wouldn't go by what the guy says he is making on the machines. He can make up any numbers he wants. I would go based on a valuation model. Price out the machines that he's selling (Ebay is a great place to start), figure out how much it would cost for you to place them with a placement company, and factor in any extras (product currently in machines, product that he is willing to give you ect.) Because you are buying a pre-existing route, he has done a lot of the work for you, and he should be compensated for that work. Finding locations and physically placing machines is a LOT more work than one would initially imagine.
Three times his annual cash flow seems absurd to me, but that's just my opinion.
Hope this helps!
Good luck!
The best advice I can give you would be to read a couple of books on the topic. Before I got started, I read these three:
Vending Machine Fundamentals
Start Your Own Vending Business
Vending Success Secrets
The first two were very helpful, the last one was dull and boring. They are all available on Amazon.com. From my experience the business model I currently us is based on a charity model. IE- the owners allow me to place machines at their locations so long as I donate monthly to a specific charitable organization. I donate to a local charity, but one of the common ones is Child Search:
http://www.childsearch.org/vendors.php
Personally, I am a little skeptical. I wouldn't go by what the guy says he is making on the machines. He can make up any numbers he wants. I would go based on a valuation model. Price out the machines that he's selling (Ebay is a great place to start), figure out how much it would cost for you to place them with a placement company, and factor in any extras (product currently in machines, product that he is willing to give you ect.) Because you are buying a pre-existing route, he has done a lot of the work for you, and he should be compensated for that work. Finding locations and physically placing machines is a LOT more work than one would initially imagine.
Three times his annual cash flow seems absurd to me, but that's just my opinion.
Hope this helps!
Good luck!
#4
dperry324
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Posted 12 October 2010 - 11:34 AM
Hi,
Looking for a little veteran advise. I am looking to buy a route in the SF Bay Area. I have one picked out and it looks good. Revenues are down but so is the economy. They supply the bulk vending machines (toy cranes, stickers and capsule toys) and split with the client 40% product, 30% client, 30% them.
While doing research I was told by a machine vendor that this is an outdated business model. Most vendors at moving to a model where the client buys the machine (at cost or close to it) and signs a service contract.
What is your take on this? Is this mostly for large operations (I am and will be a one man show)? Do many vendors retain the profit split model used by this route? I am very interested as I plan to keep this business 5-7 years, sell it and retire when my kids complete school. An operation that loses value due to industry changes now occuring is not desirable to me.
Also, how would you value a route? This guy is asking over 3 times his annual cash flow which seems high to me.
Lastly, how about the Bulk Vending Industry Outlook in general? Those of you who have been in this field for a while and know it, are you glad you got into it and glad you are still here?
Any idea how I can research that more effectively? I got a report from the Bulk Vending Association but it was more of a historical review of the last couple years. Seems to me that every industry has a "Bible" publication that the industry follows. What is that publication/magazine for Bulk Vending? Thanks.
Personally, I would pay the market rate for used equipment. You should know the replacement cost for all the equipment, then base the price on that, and adjust for used equipment. For instance, a northwestern super60 is about $75 plus tax and/or shipping. I like to pay no more than 1/2 the price of new when buying used machines. The price of stands don't usually change much when buying used, unless they are in really bad shape. You can get a charity location for as little as $25 and as much as $50, depending on the locator that you use. So you should be able to determine how much it would cost to build the entire route yourself
Admittedly, I have only been doing this a few years, but have never heard of this new model of making the location owner buy the equipment. I am associated with a number of venders around the country, and I have not heard of any body suggest such a model. The 30% commission you cited sounds like a pretty standard amount, although I try not to go that high myself. I try to keep it around 20%.
