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Sunday, March 20, 2005

Buying Vending Machines Part I - "Why Buy Used?"

When I an on my route or once someone finds out that I own a vending route I am often asked by people, "What is the best type of venidng machine to buy." I am able to quickly reply, "Used." Yes, I realize this isn;t exactly what they were asking; but it was the answer they needed ;-)

You see, the most critical part to being successful in the vedning business isn't what type of vending you are in but how much you initially pay for the machine(s). The most important number you need to know in vending (or any business) is your ROI (Return on Investment). That is a fancy way of saying, "How much are you making based on how much you spent?" Obviously then the two numbers that affect your ROI will be #1 Cost of your machines and #2 Revenue per machine. Now the second item, we have very little control over. Unless you keep very dirty looking machines your machine will vend about as much as any other machine in that location. The first part of the equation is another matter. How much you pay is completely controllable by you.

Let's look at a simple example of Lazy Larry and Hardworking Harry:

Lazy Larry buys a Vendstar 3000 brand new from the company. Why? Because it was easier to deal with the Biz-Opp salesman's "package deal" than to go looking for a deal on his own (his time is too valuable he tells himnself). He paid at least $350 per machine and was forced to buy about 30 machines to get the "package deal" - his total investment is about $10,000.

Hardworking Harry knows a scam when he sees one and loves looking for a deal. He ignores the Biz-Opp salesman and starts calling ads in the paper. Finding mostly other Biz-Opp salesman he decides to check eBay (a great place to buy machines) and finds (and buys) a Vendstar 3000 for $125 (including S&H).

Now assuming they both get similar locations and profit $15 per month what is Larry's ROI and what is Harry's ROI?

Larry - $15/$350 = 4% (don't forget he also had to spend $10,000 just to get started)
Harry - $15/$125 = 12%

Now who is in a better position to expand his route? How long will it take each of them to "pay off" their machine cost? Who is more likely to have financial problems if the business doesn;t work out?

Now take the following example and assume that Larry bought a $6000 Snack and/or Soda machine and Harry bought that sames machines used for only $1500. Like I said eariler. It doesn't matter what type of vending machine you buy - it's how much you paid for it.

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