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.

Do you know what you're making?

Do you really know how much money you're making on your vending route? I'm not just talking about the spread between the cost of goods and their selling price. I'm asking if you've taken the time to calculate exactly how much you're making per hour (after ALL your expenses).

If you are tracking your business via accouting software (like QuickBooks or Quicken) then the answer is easy. If you track it using some other electronic method (or even manually) then the answer may take a couple extra minutes - but still worth your time. Take the "Profit" number from one of your P/L statement - I recommend you use at least a quarterly or semi-annual reporting period. Once you have this number divide the amount of time you spent in your business by it. The answer you get may surprise you - hopefully for the better.

Do you even track your business? If not, then my first question is, "Why not?" How can you be expected to make intelligent decisions if you do not even know "where you stand"? So this week's assignment is for you to review exactly how much you are making. If you have no way of knowing then first you need to start tracking your business.

Don't touch the candy !

OK, here i am getting gas at the local "cheapie" station (with gas prices these days the vendor's life is getting hard). Anyway, I have a van so it usually takes about 5 minutes to fill-up. I was bored so I was looking at the Office Strip Mall across the street. You know the type, they are setup like a regular strip mall but they only have offices, no food (OK one Pizza Shop). I always like to look around because it occured to me that I shuld get machines in those offices (not sure why Inever thought about it before). Almost as if my mind summoned him out of the RE Office walks a vendor with a Vendstar (too expensive at $350 each bbut OK for less than $150 on eBay) in his hands. He was servicing his route! I rarely get a chance to watch my competitors so I took the opportunity now - since I was just sitting there anyway.

So I sat there watching him. He did all the right things. Wiped down the machine, filled with product, emptied the coins, and lastly he tested the vends. To my utter horror he was catching the candy in his hand (yes he even tasted some) and then dumped the rest back into the machine. This was done in plain sight of everyone. Worse yet, this guy didn't give off the "nice and clean" look - he actually scratched himself (I won't say where) during the whole process too. I am not making this stuff up. I wish I had a video camera handy to use the footage in future training videos.

Folks, when you stocking your bulk candy/gumball machines, please do not touch the product. And if you have to, DO NOT put it back in the machine. Throw it away. You'll only make the rest of us look bad.

Stay on your toes - or you'll lose your shirt.

The main reason I started this blog was so that I could vent my own frustrations and hopefully everyone reading this would learn from it. So let me give you guys a good one - no matter how well you think you're doing - don't get lazy!

Look I am no different than any of you out there reading this blog. I get complacent and lazy and sometimes it takes a while to snap out of it (often I need a good kick in the butt). It only takes a day like I had on Friday to make me realize that sometimes you have to stop working harder and start working smarter. It all started with a nice simple route of about 10 locations. As time went by I picked up a couple smaller acccounts since I was driving by anyway ( so far so good ). Over the last 18 months something has happened. I lost two accounts because the chain store went out of business and two other accounts started out-sourcing so the sales were cut in half. Last week we got a call and we lost another location (that was my kick in the butt I needed). It took a while to happen but suddenly the once good route is "piss poor". I spend more time driving than I do pulling money (the locations I lost were in the center of the route - of course).

I haven't been working to get new locations for this route (I didn't feel like doing more than 10) so now I have to get 3 new locations (5 if you count the two accounts I need to dump) just to stay even with last year. Not a great position to have allowed myself to get into. Did it happen overnight? No. Could I have acted proactively to prevent this? Easily, but I got lazy.

Two lessons here: #1 Don't let success make you lazy. #2 You're going to lose accounts so make sure you have a strategy to get new ones on an ongoing basis.

Vending Thieves - Your Silent Partener

Do you have silent parteners in your vending business? I know I have had silent parteners from time to time. Fortunately I figured it out pretty quickly and was able to stop them. How did I do this? I simply changed the locks on my machines.

Did you know (I sure didn't) that most vending manufacturing companies use a very small set of keys for the machines they sell. Of course they deny it - but then we all know that they are lying. While this is more of a problem with the gumball and bulk candy vending machines it is certainly not exclusive ti these machien either. Most companies have 4 - 8 keys and they "try" not sell other vendors in your area the same key. I say try because if they have more than 5 people buy machiens in your area you can be sure they aren't getting an entire new keyset created. Add to this the fact that so many people are buying and selling machines on eBay you can be sure that your "unique" key is anything but unique. Unfortunately, if you bought machines from: Vendstar (aka Multivend), North American Vending, Silent Sales Force Antares (aka Orion Corp or Natural Choice), Ultravend, and any number of other companies the key on your machine is NOT unique.

The first thing to understand is that your machine IS NOT as secure as you may think. Don't worry though the solution is simple. For about $10 a lock you can replace the lock/key for you current vending machines. If you have lots of vending machines this may be expensive but I can guarantee it is cheaping then having a "silent partener" stealing from you every month. Change you locks today and fire you silent partener.