"Costs and Performance"

Here are two secrets that are not talked about vary much. Part of the reason for this may be due to the fact that most vending companies approach the subject of cost and performance differently. In some cases a decision to place equipment at a location may be pure guess work. Whenever possible you should try to make the most educated decision possible. There are two important pieces of information you will need. You will need both cost and performance estimates. Use these estimates to make an informed decision about location equipment placement. If your projected performance numbers are low, then the cost of the proposed equipment will have to be adjusted downward. The two work in relationship with each other. The money used to finance a location needs to be paid back over time. The cost of financing should come from the profits of the location.

The formula for the basic monthly equipment payment is; (equipment cost) divided by (number of months financed) = (basic payment amount) x (interest rate) = (the basic cost of the equipment). Example ($ 8000 / 36 = $222 x 10% = $244
In this example the monthly equipment cost would be $244 or ($2928 per year).

The question of economic performance must be answered. This is the estimate of what the location will do revenue wise? The formula for this is (number of people) divided by (2) x (the number of days open per year) = (Annual Revenues). Example (100 / 2 = 50 x 365 = $18,250) per year if the location is 24 /7/365.

If the location is closed weekend and only runs one shift the $18,250 should be divided by 3.2 and your projection for the location would now be $5703 dollars of annual revenue. In this example if the location only has sales potential of 40 hours a week with projected revenues of $5703 minus $2928, leaving approximately $2775 dollars for all other expenses associated with this location. This now sets up a situation where the estimated profit from the location is projected to be 35% or $1996. This could cause a flat line or negative cash flow associated with servicing this location. In order to justify setting equipment, in this situation you will have to adjust the cost of the equipment downward.

Obviously when the potential sales hours are less you may want to have a good reason for placing equipment at a location. You could service this one shift location. However, equipment cost would have to be lowered. In most cases in order to make the numbers work, you would try lowering equipment costs. The 24/7/365 locations usually are going to be the best. Cost of equipment and economic performance are the basis for setting up locations. These two formulas are basic secrets you can employ for the success of your vending business.