I've been speaking with someone about purchasing a route. I'll copy and paste the email below and hopefully someone can give me some advice on it. He's asking $125,000 for everything including the locations and truck. I haven't gotten the types of machines from him yet (I just responded to this email). Any input would be appreciated.
Hi Justin,Thanks for your interest in our business. I'll list some numbers below for consideration:
Estimated revenue per week: $2,500.00 per week
Minus: 750.00-1,000.00 week product cost (drinks/snacks)
Minus: 75.00 week (gas)
Minus: 500.00 week (business payment, owner financed at 5% interest) for 4 years
Estimated profit each week ($750.00 to 1,000 per week)
Included: 20-25 accounts, each with drink/snack machines, some with coffee machines (need to be visited roughly once per week). During that visit would replenish drinks/snacks and collect $$. You own your drink/snack machines, and can move them at strategic times if want a different location, find a more lucrative location, etc. Customized truck with state of art vending shelving system, nice hand truck, truck opens on three sides for easy stocking and unloading of truck. Training included. Can purchase products at Sam's or Costco (also have ability to purchase products at larger local vending services company at attractive pricing). Have support of larger vending company if need assistance with repairs or moving of equipment.
Positives: Would gross around $2,000 month during first 4 years of business (while paying for business). After 4 years, and you own business free and clear, it would double and would be clearing around $4,000 per month.
Recommended Terms: $20,000 down, Balance financed at 5% interest for 4 years (would pay $500.00 per week towards balance)
(Only other cost, would be purchasing of existing product in machines at time of purchase of business (inventory).
3 replies to this topic
#2
RJT
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Posted 13 December 2010 - 08:59 PM
What type of machines are they? Make and model of each one?
Until I see an accurate equipment list it is hard to give you a good answer.
However even without the equipment list you are looking at (from what I read) all the machines average $100 per week gross revenue which is not bad. He is asking (by my math) a little under one time gross for purchase price. His price is a little high but if he is willing to owner finance you have to take that into consideration. I have seen vending companies sell for less but this was because they were desperate to sell and needed out.
A few questions I do have for you.
How long is he willing to train you? How long is he willing to stay on board showing you the ropes? I dont mean a phone call away but I mean actual 8 hours a day with you showing you the business and transitioning you with the customers.
Have you ever owned or ran a business?
Have you ever been in customer service related position?
Is the down payment your entire nest egg?
If you buy the business and loose a portion of the accounts do you have enough sales experience to place the machines in new locations? Do you have a backup plan if you loose accounts during the transition? When people buy vending companies you run a risk of loosing some of the accounts. You have to account for it and have a plan.
Why not start your vending business from scratch?
Overall from what I see it looks like a pretty decent deal. Is it a steal? No, but it is not awful, I have seen much worse.You have to factor in the owner financing because it is very hard to get money right now from banks. That is why it is a decent deal from what I can tell based on what you have told.
Until I see an accurate equipment list it is hard to give you a good answer.
However even without the equipment list you are looking at (from what I read) all the machines average $100 per week gross revenue which is not bad. He is asking (by my math) a little under one time gross for purchase price. His price is a little high but if he is willing to owner finance you have to take that into consideration. I have seen vending companies sell for less but this was because they were desperate to sell and needed out.
A few questions I do have for you.
How long is he willing to train you? How long is he willing to stay on board showing you the ropes? I dont mean a phone call away but I mean actual 8 hours a day with you showing you the business and transitioning you with the customers.
Have you ever owned or ran a business?
Have you ever been in customer service related position?
Is the down payment your entire nest egg?
If you buy the business and loose a portion of the accounts do you have enough sales experience to place the machines in new locations? Do you have a backup plan if you loose accounts during the transition? When people buy vending companies you run a risk of loosing some of the accounts. You have to account for it and have a plan.
Why not start your vending business from scratch?
Overall from what I see it looks like a pretty decent deal. Is it a steal? No, but it is not awful, I have seen much worse.You have to factor in the owner financing because it is very hard to get money right now from banks. That is why it is a decent deal from what I can tell based on what you have told.
#3
ambitionoverkill
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Posted 13 December 2010 - 09:31 PM
I have a lot of customer service experience. I've managed at a hotel and restaurants. I also have about a year of sales experience with a software company and I've also ran a small business on the side(skills don't apply to this though).
I know it's a vague description but I haven't talked to him on the phone or in person yet, it's just his first response to my initial email. The $20k down payment isn't going to happen. Those terms I will negotiate with him. I'm thinking more of around $10k and keep the $125k at the same price. The owner financing is a very important part of it with me being young(23) and fresh out of college. I'll put out a response with more information as I get it. I was just wondering if it was an absolute "no-go" or if there is potential here.
I'm pretty optimistic in my ability to run the route, I'm outgoing and smart about handling business. I'm just concerned with the machine types, his training(I'm not putting up any money until I train with him for atleast two weeks and then he agrees to stay on for a while), if the accounts have contracts attached, and also the size of the route.
I would start one from the scratch but I found this one and just thought I'd see what it's all about.
I know it's a vague description but I haven't talked to him on the phone or in person yet, it's just his first response to my initial email. The $20k down payment isn't going to happen. Those terms I will negotiate with him. I'm thinking more of around $10k and keep the $125k at the same price. The owner financing is a very important part of it with me being young(23) and fresh out of college. I'll put out a response with more information as I get it. I was just wondering if it was an absolute "no-go" or if there is potential here.
I'm pretty optimistic in my ability to run the route, I'm outgoing and smart about handling business. I'm just concerned with the machine types, his training(I'm not putting up any money until I train with him for atleast two weeks and then he agrees to stay on for a while), if the accounts have contracts attached, and also the size of the route.
I would start one from the scratch but I found this one and just thought I'd see what it's all about.
#4
RJT
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Posted 13 December 2010 - 11:45 PM
Their is nothing wrong with buying existing routes to get started. My biggest issue is you can risk a lot by doing so. I will give you this example that is a true story. The largest vending company in the world bought a piece of a route from a company selling out. They bought 9 total accounts in a certain geographical area because the main buyer did not service that area. Within 3 months of buying those 9 accounts they lost 7 of them. I personally took some along with other vending companies. The nine accounts did around 500k a year.
If this can happen to the largest vending company in the world with deep pockets and resources it can happen to you (or me) for the matter. You have to have a plan of action and a safety net to account for this.
Unless the person you are buying from is willing to spend a minimum of 3 to 6 months working beside you during the transition it is a pretty high risk. If the person is willing to dedicate that amount of time then you have a much greater chance of making it work.
I like to recommend this plan of action. The seller stays on for 6 months. The first two months is training only with the account not being aware of you buying. The seller introduces you to the accounts as working for him and you get to know the customers and get them to know and like you. The seller is showing you all aspects of the business and how it works.
The third month the seller is not around as much and you are interacting with the accounts on your own.
The fourth month you start to inform the accounts you are buying.
The 5 and 6th month the seller can help you either save potential lost customers or help you find new customers to replace the ones you are loosing (if any).
Some sellers may not be willing to do this process but it is the safer way to buy an existing route. Could it be done in a shorter amount of time? Yes, but the longer the transition the better.
The more conservative approach is to start from scratch and learn as you go., this way you risk much less. While it will take longer to produce your goal income it is the safest way.
If this can happen to the largest vending company in the world with deep pockets and resources it can happen to you (or me) for the matter. You have to have a plan of action and a safety net to account for this.
Unless the person you are buying from is willing to spend a minimum of 3 to 6 months working beside you during the transition it is a pretty high risk. If the person is willing to dedicate that amount of time then you have a much greater chance of making it work.
I like to recommend this plan of action. The seller stays on for 6 months. The first two months is training only with the account not being aware of you buying. The seller introduces you to the accounts as working for him and you get to know the customers and get them to know and like you. The seller is showing you all aspects of the business and how it works.
The third month the seller is not around as much and you are interacting with the accounts on your own.
The fourth month you start to inform the accounts you are buying.
The 5 and 6th month the seller can help you either save potential lost customers or help you find new customers to replace the ones you are loosing (if any).
Some sellers may not be willing to do this process but it is the safer way to buy an existing route. Could it be done in a shorter amount of time? Yes, but the longer the transition the better.
The more conservative approach is to start from scratch and learn as you go., this way you risk much less. While it will take longer to produce your goal income it is the safest way.
