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Electrical engineering technology capstone project ideas do my capstone logistics rocklin ca noiseblocker blacksilent xk2 review of literature hey guys it's a david barnett here from David C Barnett comm and this week I've got a question from an anonymous YouTube viewer who wants to know what I think about roots like bread roots chip roots milk roots etc let's think about this hey there guys it's a David Barnett from David C Barnett calm the blog site YouTube channel and now iTunes podcast where I talk about buying and selling businesses local investing managing your small business anything really that people want to send me questions about as it relates to small business entrepreneurship this week I've got a question about roots like a bread route so for those of you who don't know many companies out there who used to do their own direct distribution so think about the bread truck that comes to a little corner convenience store and the guy comes in and takes care of all the merchandising he he brings the bread in the store he loads the shelves rotates the product does everything for the store owner so the store owner doesn't actually have to have staff setting up and making the bread display look nice okay so those companies at one time maybe used to do that work themselves and and then there was a period of time in the 80s and 90s when it became very popular to basically outsource all of that by making their employees contractors right so what a lot of these companies would do is they would actually sell the trucks to the driver and give him a fee either per loaf of bread or a percentage of sales that his route did or what have you and in essence what they wanted to do is they wanted to simplify their distribution operations and they wanted to remove cost from their own company because think about this if you're a delivery driver and you're paid by the hour let's say and you're driving a truck that's not your truck right you know do you make extra efforts to make sure you don't hit a pothole do you make sure that the oil is changed on time do you do all those things that the owners of things do to make sure that their things last because represents you know an asset of theirs right so by making the drivers the owners of the truck and basically turning them into contractors a lot of these companies number one simplified administration because now all they had to do is track how much bread for example a driver was distributing and then pay them according to whatever formula they were using and number two they could get rid of the guy who managed the fleet right because now they don't have to worry what all changes and tires all that kind of stuff because the drivers are going to look after that themselves so the question was what do I think about this because of course as this business model has become more popular some of these bread routes you know make money and people when they go to retire since they believe that they have their own business they are you know putting them up for sale and people are buying them so let's look exactly at what this scenario is okay number one you've got a business where basically you work really hard and there are probably very few bread route owners who are able to hire other employees and get them to do the work for them okay so it's usually an owner/operator type of scenario number two do you really own the customers or are they the bakery's customers right who do the customers paid they pay the driver or do they pay the bakery right and so if they're not your customers does that mean if you have a dispute with the bakery that you can simply take all the business to a competing bakery likely not because the competing bakery is probably already delivering to those stores you know when I go into a store they usually have several brands of bread for example right so you've got a problem of not owning your own customers and you probably only have one supplier the bakery right so any business that I can think of where you have one sole source of supply and you don't have control over your customers these things would weigh downward on the value of that business right the second thing is that um these bakeries the reason why they out sore and other companies to like you know pop companies and candy companies and potato chip companies there's a lot of companies have done the other thing that they're getting you to do is not only are you a driver and in charge of delivering and merchandising but now you're managing the truck you're making the investment in the truck you're replacing the truck when the time comes due so you're probably doing those kinds of things after hours right and in my book 21 stupid things that people do when trying to buy a business one of the one of the chief things that I point out to people is that they underestimate often the value of their labor so they basically took drivers and they made them into contractors and then they got those contractors to do the regular work during the day and then in the evenings go and get the tire changed or change the oil or go and talk to the salesman about buying a new truck or leasing or what-have-you so they outsource tons of burden and expense on to their former employees while still retaining a great degree of control over these people because you know if it doesn't work out between you in the bakery basically you're out of business right so what do I think about them here's what I think I think that it's not really a business I think it's a job and it may offer certain flexibility and tax benefits in that you kind of have your own business set up and there are things that you may be able to write off but I think at the end of the day if you truly recognize the fact that you're investing time and money into this small business and if you record it all the time that was being spent managing this business and taking care of the truck etc and you looked at the cash you put into a down payment on the vehicle and you looked for a real fair market rate of return it as far as investing the small business goes into your down payment on the vehicle etc what you would find is that you're probably earning about as much as someone who had a job probably doing something similar like driving a truck for another company so well there may be some rare instances out there of a bread route that performs really well the problem would be the risk involved in being in a business that basically has one supplier and so it's something that I would certainly help someone look at and something that might be right for someone out there if they had little employment opportunities if you knew that you could basically secure a level of income that you were going to need to support your family and more importantly if the deal could be structured in such a way to protect the buyer from risk in the event that there were some kind of problem or disruption in the operation of the bakery in the case of a bread route anyway if you want to learn more about buying a business and how to look at it critically and how to you know work the numbers and figure out what it's worth etc you should be taking my online course which is that business buyer advantage comm hundreds of people have taken it no one's ever asked for a refund and there's a 30-day money-back guarantee you take the course I show people how to find value analyze make offers for do the paperwork on negotiate finance etc the small business that's right for them and if you go to David C Barnett comm you should sign up for my email list because people on the list get the videos three days before everyone else as well as any other special offers for example this summer I'm coming to st. John's Newfoundland I'm going to Orlando Toronto in New York City I'd love to see you or any of those places go to David C Barnett comm to learn more thanks and we'll see you next time capstone games china for money SUNY Empire State College (The Harry Van Arsdale Jr. Center for Labor Studies).