Vending Route For Sale - Deal Teardown
12 machines, 6 locations in Northern Utah
Two months ago I came across this deal.
I immediately text the buyer as if I was about to miss out on the trade of a lifetime.
We talked through some of his locations but he didn’t seem to know the gross revenue numbers off the top of his head…
Seemed a bit odd to me.
He suggested I give him some time to get the numbers together and he’d get back to me.
Nearly 60 days went by and he text me out of the blue.
“Hey Blake, I just emailed you those revenue numbers, let me know if you want to get a deal done today or tomorrow”…
hmm… ok I guess.
The Deal
Asking Price: $40,000
Gross Revenue: $31,000
Machines: 13
Locations: 7
Asking Price & Gross Revenue
1.9x gross revenue
At 50% net margin (pretty standard in vending) $15,500 net (2.58x multiple)
It’s not a crazy number. Regardless, there’s a lot more to factor in here.
Location Breakdown (by Revenue)
Location 1: $10,000/year, 2 machines (32% overall revenue)
Location 2: $7,200/year, 2 machines (23% of overall revenue)
Location 3: $6,500/year, 2 machines (21% of overall revenue)
We’re now at 76% of the revenue between 3 locations & 6 machines… you see where this is going…
Location 4: $5,000/year, 4 machines (16% of overall revenue)
Location 5: $1,600/year, 1 machines (5% of overall revenue)
Location 6: ??, 1 machine. cash only
What’s Good here?
Locations 1-2 are close. 12 minute drive between both.
Location 3 is a 20 minute drive south.
$10,000 gross revenue per year for a location is good. Not Great. But on the higher end of average.
This breaks down to $833/month, $415/machine/month.
If you built a portfolio of only these type of locations, you’d be in a great spot. But that’s the trick with vending… Most locations don’t break $500/month in gross revenue.
You have to sort through a lot of bad locations to find the good locations.
What’s Bad here?
The remaining locations are a 50 minute drive south of location 1-2. Outside of the top 3 locations, you’d end up with $7,300 of annual revenue and 6 machines.
What a headache.
This means:
You’d net ~$300/month from all these machines.
Additionally, at least 4 of the machines listed are old with don’t have card readers.
Additional Costs Nobody tells you
Old machines are not compatible with card readers. You’d need to upgrade the boards on these machines. $300 each.
Then, you’ll need to buy a card reader for them. Another $300 each.
When you activate the devices & transfer the others from the previous owner, it’s a $10/month fee per device, plus ~$150 one time transfer fee.
So, these additional costs that nobody tells you about add up to:
Upgraded boards: $300 x 4 (could be more machines)
Vending Mechanic: $500
Transfer devices: $150
New Card Readers: $300 x 4
Monthly Subscription: $10/month x 12 machines
= $3,050 additional up front costs plus $120/month.
All in, this deal would cost you ~$45,000 to get up and running.
If you’re brand new to vending…
Stocking up on inventory is a process.
It’ll cost you ~3 months net revenue to go from zero to ‘inventory on the shelves’.
In this case, this burns down all your net for the first 3 months.
You’d need to factor this in.
What I considered doing and why I passed on this deal
I almost bought this deal for the first 3 locations. That’s it. I would have sold off the remaining locations.
But, those first 3 were too far north for me and the headache of getting the rest of the locations in a better spot to sell wasn’t worth the time invested.
Additionally, I always look for locations that have natural expansion opportunities. Basically, I look to buy the relationship that could turn into more machines or a micro market for that location. This allows for easy organic growth.
Considering Vending?
If you’re new to the game though, I’d convince the seller to let you only buy the first 3 locations (if you’re near downtown SLC). It’d be a great way to cut your teeth.
If I was going to do this, here’s what I’d be willing to pay:
$25,000 price
$23,700 gross revenue
6 machines
You’ll net ~$9,000 your first year after all expenses ($750/month).
You’d have to fill these at least 1x every 2 weeks. But you could knock these out in 2-3 hours tops.
~$100/hour? Not bad.
>30% cash on cash return.
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With the way employers can cut people loose without any notice (or severance… I talked to 2 people this week let go without severance), it’s critical to have other sources of income.
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How can I get in touch with the seller?