"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.

Commissions Expressed

Paying commissions expressed at 30% or 40%

Just about all the large vending companies use this kind of terminology when they are speaking to the location about paying out commissions on revenues collected from the machine or machines that have commissions due. A high volume, an average or a below average machine will all pay out varied commission amounts. If you would like more specific information about how to double check your commission amounts paid; PLEASE email me for a Special Report on this subject: (ken@ chiservicegroup.com) and ask for Special Report and the Commissions Calculator. I will return your email with attachments of the REPORT & CALCULATOR. The variable in all of this is the cost of goods. The Commissions Calculator displayed above is used to calculate commissions.

"Not just the same old, same old"

If you are thinking about getting into the vending business that is great! It is a good all cash business. Be sure to read some of the other articles on this blog that discuss topics about service, set up costs and equipment.

Research and write a business plan before you spend any money.

When starting out in the vending business DO NOT assume that to place vending equipment you have to find businesses that have no vending machines. If you do, you will most likely find locations too small to be profitable. That is the reason some locations do not have any vending machines. Experienced vendors have already passed these locations by, because they know that these locations will not be profitable.

The best way to find a good location is to go to a high traffic business that already has vending machines. Then ask them if they are happy with the vending service they have now? Listen for common complaints and make sure your service can fix the problems various locations share with you. You may have to contact 20 or more businesses to find one that will let you become their new vending service. In many cases your work in contacting all those companies could be well worth the effort. Some break rooms may do 1k to 3k a week. If your costs and sell prices are right, your profit margins should be at least 35%. You can easily calculate what kind of cash your business can produce. Establish ten good locations and you could have 300k to 500k first year gross income. Can you make a lot of money in the vending business? Yes! You can.

You might ask; is it easy to find good locations? YES; if you are willing to go out and find them. You do not have to sell. It is not that you have to convince locations to switch. It is more about finding locations that are already unhappy with the vendor that is there now. Their complaints will generally be about poor service, machine problems or lack of menu choices. Your job is to not be the same, but different. http://www.youtube.com/watch?v=xBIVlM435Zg Be remarkable, not just the same old, same old. Their complaints, the machines are old, they are always empty, the company takes weeks to return a simple phone call etc. These before mentioned problems are the ones you are going to fix and maintain a much higher level of service. If you can do this, you will be successful.

Do not be scared of big vending companies. Big vending companies are the easiest to take accounts away from. This is because they have gotten too big. Their route drivers may not care about good customer service. They may not care about the appearance of the equipment or the satisfaction level of the customers using the equipment. You must not let it become just a job. If you do you will become the target of the new guy. Keep good customer service as your goal and you will be OK.

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