the vending equation

A reader on my blog Jason Burkert wrote this on the forum. It really sums up vending.

RISK

Low risk. Startup costs are low, and if you want to get out, you can always sell your machines.
The biggest risk is to your ego when you are placing machines. But look at it as an opportunity to learn to sell and to handle rejection. You also get the chance to know other business owners!

RETURN ON INVESTMENT (ROI)

Why would anyone do this?

Gum balls can purchased in bulk for $0.02 each. They are sold for $0.25 each.
Other candy, can be purchased in bulk for less than $0.10 per vend. They are also sold for $0.25 per vend.
Do the math.

OPPORTUNITY

When you go searching for locations, you're looking for an opportunity.
A location with lots of quarters (laundromat, arcade), or lots of waiting (restaurant, auto repair), or lots of kids (restaurant), or a captive audience (office lunch rooms) is an opportunity.
An empty lobby at a privately-owned store/shop/restaurant is a terrific opportunity.
Even if there is a machine there already, if the location is unhappy with their current vendor, or has plenty of space for your machine too, that's an opportunity. Call the phone numbers on other people's machines and ask to buy the machine or route to expand quickly!

NEGOTIATION

In general private businesses are easier to locate with. There are multiple ways to persuade a decision-maker to allow you to place a machine:

• you're offering a free service to their employees and customers, it costs the location nothing but unused floor space
• a commission paid to the location (10% - 30%)
• a charitable donation to a local charity, police, or fire department (10% - 30%)
• a one time gift certificate to a local restaurant ($20 - $40)

Large corporations may have policies against vending machines, so negotiation can be out of the question.
But it may be up to the discretion of the manager. It doesn't hurt to ask.

VALUE

When purchasing existing routes, solving other people's problems makes you money. Experience will give you an eye for things that are wrong with the existing business. I've read accounts where a route buyer was appalled at the state of a seller's "business" because of problems such as these:

• Located machines are empty
• Located machines are dirty and unattractive
• The vend size is too large / too small
• Several machines are not located, not making money, collecting dust in a storage locker
• Locations have low profit and don't have enough foot traffic
• The business owner has no records, and doesn't know the locations of his machines, or when they were last serviced
• Candy selection is inappropriate for the location

Fixing these problems can make you money.

OPTIMIZATION

Like any other business, as you become more experienced, you'll find ways to make various improvements and optimizations.

• Look for better deals on candy. Buy in bulk. Break it down to cost per ounce for easier comparison and greater accuracy. Include shipping costs.
• Adjust the size of bulk vends to an appropriate size.
• A one-time gift certificate is cheaper than a commission, or monthly charitable donation.
• Relocate low-profit machines to higher-profit locations.
• Map out your locations and service them in an efficient manner. If some locations are faster/slower service them on a different interval.
• Have everything you need with you to service your machines. Be in and out quickly.
• Buy already placed machines and existing routes.