What’s a good location? This question is relative, based on your company’s size and objectives. A national vending concern considers a good account to have gross sales over $240,000 per year ($20,000 per month), whereas a small vendor working out of his garage may consider an account with sales of $6,000 per year ($500 per month) to be a good account.
Begin with your goals. What kind of vending machine business do you want? How much capital do you have? What are your operational plans? Is this a full time venture for you or a part time income?
For instance, a vending machine account that generates $20,000 per month probably will have at least 6 vending machines (3 sets, snack/soda). These vending machines would need to be late model or new, an investment of at least $15,000 in equipment.
To service an account of this nature, a vending machine operator would require –
o $2,000 in parts for immediate repair – Customers like this expect service calls to be completed within 4 hours of the initial call.
o A running daily inventory of $5,000 in vending machine product
o Service 2-3 times a day
o Fully insured – liability, workers compensation, etc.
o Compensating a commission
o Driving a late model vending truck ($40,000)
o Extremely specialist demeanor
o $62,000 in initial capital investment, plus ongoing expenses (telephone, office expense etc.), before the very first dollar is generated
As you can imagine, this type of account is very rare, could require even more equipment than we discussed here, and is highly desirable.
A vending machine account that generates $500 per month can have as little as a single vending machine, which may be older and may even have been free.
Servicing this account is much simpler, requiring 2 route stops per month, service calls handled in a reasonable amount of time (within 5 days), could be run out of a automobile or pickup truck, wouldn’t be a commission account (unless you are crazy), and would’ve little ongoing expense.
These accounts are much more plentiful and, thus, less desirable.
Each kind of account appeals to different levels of corporation expertise, and the rules of economies of scale do apply. Large organizations lose money in smaller accounts because of bigger overhead costs.
Smaller corporations could make money in smaller accounts by keeping overhead low. Where do you want to be? What’s your skill level? How much capital do you have?
Now it’s time for the market analysis. Once you have determined your goals, study the marketplace. Look for accounts that can generate the amount of money you desire within the framework of your investment – both time and money.
Find out which operators service those types of accounts and study their operations. Analyze what you perceive to be their profitability. Are they making money in these types of accounts?
Remember that just having a vending machine account doesn’t mean they’re profitable. Be conservative with your estimates and include all costs.
Don’t forget to include wages – your time isn’t free. When you cannot make more than your current hourly wage, do not enter the business.
So there it is, XYZ account, and your analysis decides that you can be profitable in the account. How do you get the XYZ account?
ABC Vending has the account now and you’ve studied ABC’s operations. You have advantages over ABC and you know you are able to get the account. What do you do now? Go selling.
Thousands of good books have been written about successful selling, and I’ll not get too specific, but I’ll give some pointers that were successful for my vending machine operations.
o Timing is critical for two reasons –
1. Most sales occur after the 5th sales call. Be consistent and do not give up. When you have never called on XYZ, there is a certain amount of time required for the decision-maker to determine when you’re “real.”
How often do you personally purchase from an anonymous company? Do you have a tendency to purchase the very first time? Of course not.
Nearly all individuals are afraid of making a bad decision and want to “get to know” the operator.
2. The nature of the vending machine business is that vending machines will break down, service can get sloppy, vending machines get old, management changes, and a host of other situations.
When you’re consistent, you’ve to wait for one or more of these factors to open the door of opportunity for you.
Each vending machine operator has lost an account due to a malfunction in his/her vending machine that was followed by a well-timed sales call from another business.
I have personally acquired accounts while the decision-maker was in the process of reporting the loss to his current vendor.
o Under-promise and over-deliver. When you make a commitment, you have to keep it, so do not over-commit.
Ever purchased anything where the salesperson says they can do this, that and the other thing, but the product only delivers “this”? What do you think of the salesperson and their company?
On the other hand, have you ever purchased something where the salesperson says they are able to deliver this and that, then they deliver this and that – and include the other thing at no additional cost? How do you feel about that salesperson and his corporation.
Under-promising and over-delivering will get referral business for you. It also strengthens your position with the decision-makers, building a win win situation for everyone.
So you have seen an advertisement that advertises a vending machine business for sale. When it comes to vending machines, are you better off purchasing an existing corporation or starting your own? Let’s Consider these two approaches.
Once you have decided to enter the vending machine business, one of the many options that you’ll have to make is whether to buy a vending route from another operator or to begin your own from scratch.
Price
If you are purchasing an established corporation that runs well, makes money and has good relationships in place then you’ll pay for this privilege.
The cost of buying the corporation will be considerable but if you can manage to keep the corporation on its successful course then you will recoup your investment over time.
On the other hand you can begin up your own vending operation on an extremelylow budget but it’ll take time to get your corporation profitable.
It’s all about deciding which approach will give you the best return on the time and money that you’re investing.
Follow your Own Path or Somebody Else’s
When you begin your own vending machine corporation you can begin it off the way that you like and create something unique that you can be proud of.
By purchasing that vending machine company that you’ve seen advertised for sale, you’ll be inheriting the creation of someone else and all the good and bad things that go along with it.
Think about your own plans and goals and decide when you are able to use someone else’s corporation as a car to achieve them.
Your Personality
Starting up a vending machine corporation from scratch will take time and determination. You will have to learn through your own research and trial and error. This process may be lengthy before you begin to see success.
If you feel that you are the kind of individuals who’ll become disheartened easily and have trouble seeing a project through to the end then you could be better to start off with an existing corporation that works well right away.
Company Relationships
If you purchase a vending route then you ought to find that it is easy to carry on the relationships that the former owner worked hard to establish. Make certain that you have the seller introduce you to all the key providers and location managers before you purchase.
If you are beginning from scratch then you’ll have to put a excellent deal of time and effort into locating vending machine suppliers, product suppliers and locations for your vending machines.
Beginning from scratch isn’t as hard as it sounds though and you’ll find numerous vending information resources available.
You may even be able to find a successful vending machine company operator (who isn’t in direct competition with you) to mentor you for a small fee.
You could also consider beginning out working for a big vending machine company to get a feel for the company before jumping into your own venture
Risk
No matter which path you decide to follow there are risks involved. The vending industry is rife with con artists who prey on newcomers to the industry.
If you are beginning off independently you really have to do your due diligence so that you do not get ripped off by machinery dealers, expert locators or those selling phony or overpriced startup packages.
Look into subscribing to industry publications like the Vending Times and contact the industry association NAMA before making any major buys.
Do a search web-based and check with the Better Business Bureau (BBB) to find out if a business that you want to deal with has had any complaints filed against it.
On the contrary there are also risks involved with buying an existing vending machine business.
Vendors selling their companies can clearly inflate figures and ordinarily make their company sound like a much better opportunity than it really is to justify a higher sale price.
Do your due diligence here and look for proof that the corporation is in truth performing at the level that is promised. Get your accountant and lawyer involved and consider getting the corporation valued by an professional.
Try to find out when the owner has a genuine reason for selling and insist on an arrangement whereby the previous owner stays on for several months to teach you the ropes. Insist on compensating the sale price in installments.
Provide yourself a way out of the deal if you begin to observe the returns from the vending machines over several months and find out that they aren’t as high as the owner claimed they were.
Start off Slow or Fast?
With your own vending machine business you’ll be able to start off slowly, purchasing several vending machines here and there. You may even keep your day job for the very first year while your business slowly grows.
Buying an existing corporation though will mean jumping in at the deep end so you ought to be prepared and know something about managing a corporation when you are to keep it performing well.
By beginning off small with your own business you will not be committing yourself fully. You can give yourself a trial period to see if it works out without spending a fortune on a business that might be challenging to exit if you find that it is not what you want to do.
Selecting whether to buy a vending machine company that’s for sale or to start your own is not an easy decision. Your decision will be influenced by your access to funding, your experience in business and your personality in addition to the level of risk that you are prepared to take on.
Both alternatives offer you an excellent way to get into what’s still one of the best company opportunities around.