How to Determine Fair Value for a Route Business
Over the last several years we have sold a variety of route businesses. The types of routes sold include vending routes, landscaping routes, bread routes, snack routes, wholesale supply routes, pool routes and several others. One of the most common questions we receive from our sellers is how to determine a fair asking price for their route business.
We have listed some guidelines for pricing a variety of businesses below. There are a number of variables that can impact a business’ price. Each business is unique and may not fit into the “typical” pricing structure. The outline below should be treated as a rough guide or estimate.
Vending routes are often priced and sold based strictly on their gross annual sales volume. Most vending routes operate with a 40-50% profit margin. If the business sells for one times its annual gross sales, that typically allows the buyer to earn back their investment in about two years. Of course other factors such as the number of accounts, flexibility of schedule, quality of machines, etc. can play a large role in the value as well.
Bread routes are typically sold based on their average weekly sales volume and a local, market based multiplier. For example, a Pepperidge Farm route doing $10,000 in weekly sales might sell at a multiplier of 15 times if it is located in Omaha, NE. That same route, with the same $10,000 weekly sales volume, might sell for a 25 times multiplier if it is located in New York City, NY.
Each company and market will use different multipliers based on historical sales of similar routes in the area. Larger routes typically sell for a slightly higher multiplier since they generate more income. Routes that are more attractive…possibly with a more flexible schedule, lower number of accounts, better company financing…will typically have higher multipliers as well.
Snack, cookie or pastry routes are generally priced the same way as bread routes
Landscaping routes are very unique since they often include a more significant amount of equipment. A number of other factors come into play that may not be considered for bread, snack, vending or other routes. For example, are the accounts under contract? If so, what services are under contract and what amount of revenue is “guaranteed” with service agreements. Small local routes will typically have an earn back period of less than one year. Larger routes, those with 3+ employees and significant equipment included, may have earn back periods closer to 2-3 years.
If you have any questions about how to price your route or the best way to find a serious buyer, please contact us today. You can always find our full list of routes for sale at this page as well. Thank you!