How Does the Vending Machine Business Work

vendor-in-manhattanHow Does the Vending Machine Business  Work   This business isn’t very complex. You solicit different businesses with sites on which to put your vending machines.

How Does the Vending Business Work  The best locations that bring in the most money are hospitals, truck terminals, manufacturing plants, schools, and any place where large numbers of people pass through. Blue collar locations are better because these folks work hard, make good money and don’t normally have time to go out to lunch. A general rule of thumb is that you’ll secure one location for every 100 locations you solicit. It isn’t as hard as it seems because the larger vending companies – the ones you think would gobble up all the business – often lose sites simply because they are so large, and aren’t able to provide the level of service many businesses want.

How Does the Vending Business Work  If I were starting a vending business from scratch today, I would decide – and promise – to give prompt, personalized service; in many instances, that’s all a business owner needs to hear. Your job, of course, is then to follow-through on your pledge.

Once you secure a location, you then buy and install the machines into the new account. Never buy machines before you secure a location, and always buy the least number of machines that you can get by with. You can always add machines if needed. Just remember your goal is the highest possible return on your investment (the vending machines) that you can get. The more profit that you make, the faster you can pay off your machines.

Next, fill the machines. I always put a note on the front of the machines that says, “Please tell me what you want placed in the machines” on installation day, with room for people to write comments. During the first week, go by the machines every day to make sure all machines are working well and are stocked. After the first week you will be able to work out a schedule in order to restock the machines, based on the volume of product sold from the vending machines. When restocking the vending machines, listen for (or even ask about) things like “We’re working overtime this week.” Of course, then it’s your job to be sure you step up the schedule to keep pace with what folks are buying.

Some locations will want commissions from their machines. Commissions are a percentage of sales that you give to higher volume locations – usually between 5-20% of gross sales. Personally, I would not pay a commission to any location with fewer than 40 employees. Set up a commission that you can live with or raise the prices of the items in the machine to cover your costs.

If the account does not bring in the amount of money that you feel satisfied with, move the machines to a new account. Every account has to pay for itself. Having friends in an account that’s not making money isn’t a good business reason for keeping the account there; your friends don’t help you pay the bills.

The key to a successful vending business is working hard, and providing prompt, courteous customer service. If you don’t mind working, a lot of people make a fine living in this business. It’s up to you to find the motivation to seek out locations for your machines, to follow-up with your customers and restock machines regularly, and to respond professionally when problems arise.It is not rocket science in knowing How Does the Vending Machine Business Work just mostly common sense.  More videos from the Vending Business Show  How to Start a Snack Machine Business

Don’t Purchase Vending Machines from Unscrupulous Suppliers

Davy-JonesDon’t purchase Vending Machines from Unscrupulous Suppliers  How to handle payment for vending equipment is a personal choice, but there are some guidelines. Most supply companies in the vending industry are legitimate, respectable entities, but the vending industry (like any other) has a contingent of unscrupulous suppliers.

A supplier of vending equipment wants to be paid. His business is not a finance company and, like all businesses, lives on cash flow. He’s in business to develop successful vending operators who will buy more vending equipment from the company in the future, and he should be a source of knowledge. A successful vending machine supply company sees hundreds of vending operators, knows their systems and how they work. That vending supplier knows what works and what doesn’t, and has probably seen every scheme that’s out there.

At the time he sells that vending machine to you, he has expenses associated with that piece of vending equipment. He has to have paid either the manufacturer (new) or the secondary party (used) for the piece. He has to have a place to refurbish that vending equipment, as well as storage space for it – both of which are line items in his budget.

You can purchase used vending equipment in several ways. If you buy in “as is” condition, what you see is what you get, and the machine might – or might not – work. This type of purchase is not for most vendors. “As is, working” condition means a vending machine might look old, or even unsightly, but functions properly. It has been refurbished, usually to specifications that make the vending machine look and function like new, and will often come with a limited warranty.

Of course, the cost of the vending equipment varies with the level of refurbishment. Both snack and soda vending machines are highly complex pieces of equipment that can cost hundreds of dollars to repair, requiring specific knowledge and specialized tools to make a piece location-ready. Learn about vending equipment – read and study, go to successful competitors’ locations and see what vending equipment they place.

A word of caution: Proper placement of equipment is critical to success. Vending equipment can be costly and the impulse to purchase new equipment for every location can lead to business failure. Be sure to evaluate your potential vending account carefully; estimate the number of people who will be in front of the machine daily, estimate sales, calculate your gross profit, and relate it to the cost of the vending equipment.

Let’s do a quick analysis. Your barber/beauty shop wants a soda machine and, through conversation, they know you are in the vending industry. They tell you there are hundreds of people who walk in every day, and that you would make a fortune if you placed a soda machine in the shop. (Of course, this is what every prospect says.) The shop has 3 employees working 7 days a week, and, when you are there, the shop is full and has a waiting list.  You are excited about the business you just generated, and commit to the location.

You purchase a new soda machine for $3500 because you don’t want any maintenance or problems. You finance the machine with a finance company specializing in vending equipment, then fill the machine with $250 worth of soda. One week later, you arrive to service the soda machine; you pull the money, and find your sales are less than $20. The shop owner tells you that his customers are starting to get used to the soda machine being there and that your sales are surely going to go up. You come back the next week and find less than $10. Oh, they had a slow week. Each week you hear another excuse.

Your first payment slip arrives for the soda machine from the finance company, for $100.  In the four weeks the machine has been placed, you have not generated $100 in sales, let alone profit (since you still have to pay for your product). While this might sound far-fetched, I can assure you I receive calls every day from people in this very predicament.

The vending industry is a proven business, with proven techniques, formulas and systems. Don’t make the mistake of thinking that all of the rules apply to everyone else, but not to you – at least not in this case. Don’t believe that you can’t lose.

With this lesson about equipment placement in mind, let’s return to the initial question: Should you pay for equipment with a wire transfer? In today’s world, identity theft is becoming the largest white collar crime. How well do you know this supplier? Have you checked them out with other vending machine operators? Have you looked online for any negative reports? If you turned up some evidence of dissatisfaction, how many complaints do they have, and how serious are they? (Keep in mind that not all customers are easily satisfied). Explore, look for the fatal flaw.  Is this their first venture into selling vending equipment? Do they have a facility? Are they real?  Do not act on impulse.

I would suggest not using wire transfer. Most legitimate suppliers or, for that matter, vending machine operators, can accept money in a variety of ways: credit card, Pay Pal, check, money order. Use a source of funding that has recourse if the terms of the transaction are not met. Use a source that does not allow for further attacks against your finances. Drafting, by wire, requires that you divulge personal information that can lead to abuse. Protect yourself and your business. Don’t Purchase Vending Machines from Unscrupulous Suppliers.More information  Take Over A Vending Route Or Start Your Own?

Caution when Hiring Locators

Account_PlacementCaution When Hiring Locators    Bad  idea. . . or not?

Caution When hiring Locators  Before we can effectively discuss compensation for account placement, we need to discuss the qualities of the account market. Have you determined the type of company you will be selling to? What type of people are the decision-makers in these accounts, what are their purchasing habits, when do they buy? Create a sales strategy and implement that strategy in a sales program that targets the decision-maker’s habits.

Remember the law of cause and effect. For example, if your desired decision-makers are concerned only about price, your concern should be profitability. If you can obtain placement by lowering the prices of your products – but your company cannot make a profit – there is no reason to place the account, because no profits means no cash flow, which means the business isn’t sustainable. You can grow your business by lowering prices. If your goal is to sell 1 million units and you achieve this goal by lowering prices – but you lose $1 per unit – you are now $1 million in debt. Not a great business model to follow.

Find a business mentor
The vending machine industry is an established industry. An operator that has been in business for 5 or more years has seen what does – and doesn’t – work. Don’t fool yourself into believing that you are innovative and that your new system is going to take the market by storm. Very few ideas are new and somewhere (probably closer than you think) someone has tried to implement it that same idea. Keep thinking, but find an experienced operator with whom to discuss the ideas. You might be surprised by the answers you receive.

I personally did just this with an idea that I felt would give me a huge advantage in the vending machine business. I discussed it with my equipment supplier, who informed me that the concept had been tried by 3 other companies that he knew of – and that all 3 failed for the same reason (a possibility that hadn’t even occurred to me). He saved me thousands of dollars and hundreds of man hours for 20 minutes of conversation; it was one of the best returns on investment I have ever made.

Caution When Hiring Locators  But what about paying for placement?
Paying to place machines is a type of sales program and is a subset of your marketing effort. What are you trying to achieve with this type of sales program? What are the implications of your actions, and why are you doing this action? What are your sales and marketing alternatives? What will this program cost? Will it be profitable? What type of vending accounts will it generate? How do successful operators become successful?

Experience has taught me several lessons about this type of program. There are particular industries and companies where this is a common practice. Shortly after a sales discussion is started, the decision-maker asks what’s in it for him. I have found that these particular locations change vending suppliers frequently, and some companies have no ability to have vending services unless they find new operators.

The law of cause and effect works here, too. If you replace a qualified vending machine operator because you offer the decision-maker a cash bonus for changing, you set a precedent allowing that decision-maker to change again when a better offer comes along. Unless you have a signed contract, you will not recoup your initial investment.

Caution When Hiring Locators  I know one vending machine operator who lost $1000 and never placed the equipment. The decision-maker took the $1000 (cash), told the vending machine operator that he was getting the account, and retired the next day without telling his successor that the company was changing vending operators. The vending machine operator was truly in a no-win situation: The unscrupulous decision-maker had stolen his money and he had no recourse.

Caution When Hiring Locators While this is an extreme scenario, offering cash incentives to replace vending machine operators gives the industry, as a whole, a bad name. It also creates a level of expectation in customers that implies it is normal.

Concentrate, instead, on good service, quality products, and an enjoyable experience. Those are the best ways I know to ensure low account turnover, higher profitability higher and stable cash flow.

Vending How Reliable a Business Venture

Vending How Reliable a Business Venture HoIt’s time to turn our attention to whether vending is a viable business to enter, as well as the average cost for a very important part of the business: the vending machine.

Vending How Reliable a Business Venture?
The first recorded vending machines date back to the first century B.C., but came to prominence in the late 1880s. These were primarily postcard and gumball machines with simple mechanisms, a single selection and accepted one coin.

The snack and soda machines we recognize today – multi-selection, accepting multiple coin types, dispensing change – originated in the 1940s. In the ‘40s, of course, vending machines accepted coins only, did not dispense change, and limited selections about 20 items. These were fully mechanical vend mechanisms and required no power to operate the vend cycle.

Early soda machines required power to refrigerate the product. The modern vending machine design with spiral dispense, full change capacity, dollar bill acceptance (usually by dollar bill coin changer), 30-40 snack selections, and up to 10 soda options, came to being in the late 1960s and was refined in the 1970s.

Improvements in vending machine technology since have been based on electronics and computer innovation, with standardization of protocols and improvements in currency acceptance. Ultra-modern vending machines can accept a variety of payment types – credit cards, large denomination bills (up to $100), cell phone charges (charging a product to your cell phone bill) – can be monitored remotely by Internet, can produce sales figures to individual unit numbers (sold 13 Snickers and 8 Doritos out of this machine last week), log machine entry times, and can even provide surveillance with camera technology. Yes, we’ve come a long way, baby.

So how is this history lesson relevant? Vending machine technology is responding to market need. The successful vending operators have driven this technology with their purchasing habits. Like all businesses, if technology affords a profitable advantage, that product has a market. The fact that the vending machine manufacturers have continued to produce better and better vending machines means that the vending business is a reliable venture when run properly.

Vending How Reliable a Business Venture? Like all businesses, proper operations is the key to success. Learning about your account market, the kind of locations and businesses you serve, learning about marketing, the product you are you going to sell, and the type/s of vending equipment you’ll use, all these factor into the success of your vending machine business.

Vending How Reliable a Business Venture?  There are thousands of successful vending machine companies in the United States, and if you think the vending business is for you, offer to work for a company in another city for free. For free, are you kidding?! Instead of taking that week’s vacation on a cruise, work for a vending machine company: learn all you can about every aspect of the business – load trucks, fix machines, look at the accounting, install machines. Pay attention to the products sold, the order in which they go into the vending machine, find out what sells best, ask questions. The real-world education you will receive will be invaluable. One week’s worth of effort can literally save you hundreds of thousands of dollars. (And an operator in a different city than yours won’t feel threatened by your business plans.)

The vending machine business is an established industry, so don’t try to reinvent the wheel. . .at least not at first. Work a proven system until you achieve profitability, then implement new systems to improve your economies of scale. Don’t fall into the trap of believing that the rules of the business do not apply to you.

So what do vending machines cost?
The first criteria in determining cost depends upon the location for which the vending machines are destined.

Most successful vending operators have a formula to determine the value of the equipment to be placed into a given account. In our surveys of hundreds of companies, we have found that most operators want to pay off the equipment with 9 months’ profit from the vending machine account. This equates to about half of the gross sales for a 9-month period. If they project an account to do $10,000 in sales in 9 months, then the equipment cost should be $5,000 or less. Less effectively produces more profit from your vending machine investment.

Now that you have a budget (based on your agreement with the customer), it’s time to find the vending machine equipment. You have two basic choices:

  1. Used vending machine equipment
  2. New vending machine equipment

New vending machine equipment is straightforward: find the brand and model you feel comfortable with. New equipment ranges from $2,000 to $10,000 per vending machine and depends on the type of machine, as well as its options. Types include snack machines, soda machines, refrigerated machines, frozen food machines, change machines, and more. Options include payment methods, size of vending machine, number of selections, electronics packages, and so forth.

Used vending machine equipment has many options on pricing, from free to several thousand dollars. With all used machines, make sure you have a clear title. Be extremely careful in buying a branded machine (Coke, Pepsi, M&M, etc.), because many of these machines are owned by the brand company, which retains ownership rights. If you purchase one of these machines, you could find yourself either losing the machine without compensation, or heading to jail for possession of stolen property.

Most free vending machines have been abandoned when an operator went out of business. You can also find operators selling their vending equipment through the want ads. Both of these venues generally require a tremendous amount of work to get the vending machine location-ready. While the initial cost might be low, the time and repair costs can be excessive, making other alternatives actually less expensive in the long run.

Reputable used vending machine equipment suppliers sell equipment at several levels: as-is, as-is working, refurbished (several levels), and like new. As-is and as-is working are similar to free machines or those found through want ads. I don’t suggest these options unless you are a highly skilled mechanic with access to a large parts inventory.

Instead, I suggest you concentrate on refurbished vending machines. Select the refurbishment level that the customer needs, and stick to your pre-determined budget. Expect to pay at least $1,000 per machine. And don’t forget shipping, which can be  considerable and is a part of the cost of vending machine equipment.  Check out the Vending Business Show  Vending Machine License: Is It Something You Need?

How much money can I make from a vending machine

How much money can I make from a vending machine   Millions! Successful vending machine operators can have gross sales into the hundreds of millions of dollars, but so can successful car wash operators, multi-level marketing operators or, for that matter, employees. Your level of success depends upon your business skill, your ability to generate customers and manage people, your skill at accounting, planning and marketing, as well as other important abilities. You are limited only by yourself.

How much money can I make from a vending machine  The vending machine industry is one of the few businesses left in which an operator can start with a modest investment, create positive cash flow, expand the business, manage his money and become wealthy. The vending machine business holds great opportunity, but that opportunity comes dressed in work clothes.

If you think all you are going to do is fill vending machines, count money and become wealthy, you are wrong. I always ask potential vending machine operators if they like to work, if they get up early and work late, and work on weekends. Their response dictates my suggestions. Many times I’ve invited a potential vending machine operator to come work with me for a day, starting a typical day at 5 a.m., finishing at 7 or 8 p.m., 5 days a week, with a half day on Saturday (until about 3) and Sunday off.

Successful vending machine operators start out with detailed goals. Before they act, they decide what they want. Successful vending machine operators set these goals in minute detail, for example: This year I will place four new vending accounts, in industrial facilities with 75 or more employees working three shifts and seven days. The new accounts will have at least a 50% Hispanic male population under the age of 35. I will place snack and soda vending machines, with options on office coffee service and a coffee vending machine. I will use vending machine equipment that has the “guaranteed vend option” on the snack and soda machines, they will be late model. I will use refurbished coffee machines if necessary. I will price products at $X for chips, $Y for candy and pastry, and $Z for bottled drinks and $Z-.25 for canned drinks; coffee pricing will be determined when necessary. I will service this vending machine account three times a week and expect to spend 2 hours at the location per visit, and expect to have revenue in the $ABC range.

This type of goal-setting is radically different from most people’s goals, which look more like: I wish I had a lot of money. Proper goal-setting is the basis for planning. The example looks like a plan, but is not; it is a goal, and this operator now sets about a sales and marketing plan to achieve this goal.

He takes his vending machine account parameters and starts identifying potential accounts that meet these standards. He doesn’t just place an ad in the newspaper and hope he gets the business. He calls the target businesses, explores the possibilities of obtaining the vending machine account, visits personally, sends direct mail and e-mail, talks to employees of the account, gathers information and keeps it in a file. And all this before he even generates one dollar.

After his sales and marketing plan is in place, the operator then plans for the placement of his vending machines. He checks the schedules of the contractors that do his installations so that, when he gets an account, he can place his vending machines quickly and efficiently – within the customer’s expectations.

The vending machine operator also has an operations plan. He knows what days he will service the account, how to handle service calls and refunds, he has a re-contact schedule, product acquisition plan (how he will obtain the product that goes into the machines), a vehicle maintenance plan, a money handling plan (how to count money and get it to the bank), an equipment replacement plan (vending machines, automotive, changer, validator, office equipment, software, etc.), a loss of vending machine account plan, and so on.

Successful vending machine operators also have expansion plans, which include specific plans for hiring vending machine route people, acquiring equipment, and managing financial, legal, licenses and taxes. As the vending machine operator’s business becomes larger, his focus will shift to newer plans that have more priority. What was irrelevant in the past becomes critical now. All growing businesses go through growth cycles, when the challenges change.

Put simply, if you want to be a successful vending machine operator, you have to set specific goals – goals that you absolutely believe you can achieve. The $8 billion vending machine industry offers the opportunity for you to achieve your financial goals. . . if you will study, plan, work hard and work smart. How much money can I make from a vending machine the sky is the limit.  More Vending Business videos Starting a Vending Machine Route

Right Product selection means vending machine profits

product selectionRight Product selection means vending machine profits this can mean  the difference between success and failure. Ultimately, your gross sales depend on a customer deciding to purchase a snack, soda or food item. Proper product selection can increase your sales by 20% or more, and improper selection can reduce sales to nothing. So Right Product selection means vending machine profits  how do you determine what products to put into your machines?

Right Product selection means vending machine profits  All vending machine product selection starts with an account analysis. After you place vending machines in a new account, you could fill them with what you have on the truck, the product you got at the local warehouse club on special last week. You got a good deal on the product and your new customers will eat and drink it because they don’t have a choice.

This attitude is the beginning of failure in the vending machine route business. Your customers do have choices when it comes to using your vending machines. Customers can:
· Bring snacks and drinks from home
· Go off-site to a convenience store, or
· Decide not to use your vending machines at all.

Several factors determine the type of product to place in your vending machines.

1. Analysis begins with a basic demographic profile of the account. Who are your customers: Are they male, female, young, old, white, black, Hispanic, Asian? Are they blue collar, white collar or both? What kinds of cars are in the parking lot? Are your customers southern, northern, locals, transplants? Find out as much as you can about your customer base – at each location. Different people have different tastes; some products will sell well to one group, while that same product can be given away for free to another and will not be eaten. Blue collar, young Hispanic men have radically different vending machine purchasing habits than white collar, older Caucasian women.

A quick note on product selection and profitability: The vending business depends on product turn, which is the amount of time it takes to sell your inventory. Faster is better.

But here’s a rule of thumb that seems counter-intuitive: Low cost in vending product selection is not always the prudent and profitable choice. For example, you offer 2 brands of honey buns in a machine. Brand A is 5 cents cheaper than Brand B. You have studied your competitors’ machines in the area and learn that most use Brand B.

Here’s why: Brand A costs 30 cents and Brand B costs 35 cents. When put in the vending machines, Brand A sells 3 units in a week at 75 cents, for total sales of $2.25. Subtracting your cost from sales, $2.25 (sales) – $.90 (cost) = $1.35 profit.

Brand B sells 12 units per week at 75 cents for total sales of $9.00. Subtract your cost: $9.00 (sales) – $4.20 (cost) = $4.80 profit.

Multiply this times the number of columns in your vending machines to see the difference in gross sales. Let’s say you have 50 machines, so the math looks like this:

Brand A: 40 selections x $1.35 = $54.00 x 50 vending machines = $2,700

Brand B: 40 selections x $4.80 = $192.00 x 50 vending machines = $9,600

Brand B is 3 times (300%) more profitable than Brand A, even though it is more expensive to purchase. This is vending machine product turn – selling product faster, generating more cash flow and more profit – absolutely critical to vending machine business success. By the way, while these numbers are slightly exaggerated for effect (because you won’t achieve these results from every item in every machine), individual sales can vary by as much as the numbers listed. I have personally run honey buns side by side and seen these results.

2. After you have summed up your account, ask your contact if any products sell particularly well. They will usually tell you what they like, and a list of what the other people don’t like, because they hear all the complaints. Ask as many people as you can, being request-oriented. The people in your vending machine account know what they will buy. Listen for trends, because one person asking for dried pomegranate seeds while everyone else asks for Snickers does not mean you place the seeds in your machine. (Unless the person asking is the “big boss,” when it’s usually best handled by giving the boss his seeds for free).

Read the trade magazines; vending machine products are rated by sales every year. Find out what sells best from the manufacturers. Learn and remember, build rough profiles of what certain types of people like, so that the next time you place your vending machines in a similar location, you have an idea of what might sell.

Another factor in product selection is that variety is critical. Change your product selection regularly. Do not let a product that does not sell sit in a machine until it goes out of date. If you visit the account once a week, and the expiration date is 4 weeks away, you will see that product 4 times for perhaps 1 hour each time. The customers see that product every day for 8 hours. If it doesn’t sell, change it. Variety sells, and sales mean profit. Profit means success. Sell what the customer purchases.

3. What about healthy food for vending machines?
“Healthy” is a matter of perspective and marketing. Vending machine products are marketed differently: some satisfy (Snickers) and some are sold with the health-conscious person in mind (Nature Valley granola bars). But if you read the packages, you’ll see they contain about the same number of calories and fat content. Some products could never be considered healthy (pork skins) but, in reality, have very few calories and little fat (hard to believe, but true). Even our public school systems will call a bag of potato chips “junk food” if sold from the vending machine, but a healthy potato snack if sold in the cafeteria.

My point is that “healthy” is often determined by factors you don’t control. Ask your customers what they consider to be healthy and will they buy it if you place it in the vending machines. If they don’t (or won’t) buy it, don’t place it.  Right Product selection means vending machine profits. More blogs at the Vending Business Show  Take Over A Vending Route Or Start Your Own?

Vending Business Planning Means Success

Vending Business Planning Means Success Before you undertake any venture, it is wise to do initial planning. How are you going to run your business?  Write a business plan. Think through all of the potential problems with running the business. Understand that you are fully responsible for the outcome of the business.

Remember the rule of cause and effect: If I do this, then what happens? And what does that cause? And what does that cause? Think at least 4 or 5 steps into the future, keeping a long-term perspective on you business.

Vending Business  Planning Means Sucess  Attainable, measurable goals are key
Develop business goals that are long-term, clearly defined and measurable. Divide your business into its components and create short term goals for each section. Be methodical. The time you invest in planning is far less expensive than the cost of engaging in a failed business.

Vending Business  Planning Means Success  Know your customers – and your prospects
Invest time in developing a marketing plan. Marketing is the entire process of selling product, from demographic research (who will buy), what they will buy (product selection), where they will buy (commercial location, street corner, school), to how they will they buy (cash, credit, check), and why they will buy (price, selection, color). A sale is the process of taking money and delivering product; marketing determines what you will sell.

In the vending machine business, management has to make these critical decisions. What will you sell, what kind of machines will you use, where do you set pricing, where will you sell? Our market is broken into two groups, each having different concerns. We have the account market – focusing on where to place machines – and the end user market, determining who will spend money and what will they buy. This article will discuss the account market, and the account sales process.

Vending Business  Planning Means Success  Plan for the unforeseeable
As much as we enjoy planning out sales, it’s also important to consider the impact that problems, issues and catastrophes could have on the business, things like:

  • Equipment destruction
  • Pricing decisions
  • Placement fees and bad placements

Like any business, vending machine operations can be enjoyable and profitable – provided you do your homework ahead of time.  More Vending Business Show Blogs  Vending Machine Technology

Equipment liability forklift vending machine crash

Equipment liability forklift vending machine crash   Proper handling of equipment damage incidents starts at the time of placement. Accidents, vandalism and theft will happen, so I discuss these issues during the sales process and negotiate terms for dealing with them. You need to be comfortable with the placement terms. Generally, our company carries most of the liability – unless malice is involved. We do not tolerate theft or vandalism.

Equipment liability fork lift vending machine crash  We actually have had forklifts crash into our machines on 2 occasions. One instance was a driver mistake; he bumped the machine and bent the door. It was obviously an accident, and we repaired the machine at our expense.

Equipment liability fork lift vending machine crash  What if a forklift crashes into your vending machine  The second incident was radically different: An employee lost $0.65 in the soda machine, climbed on the forklift, skewered the machine and completely destroyed the piece of equipment. This was done in plain view of the other employees. We demanded that the account replace the machine and terminate the employee. They were one step ahead of us, had already terminated the employee, garnished what wages were due him, and had contacted their attorney to sue for malice. (They won the suit and garnished his wages for the cost of the machine.)

Simple refund policy
Another much more common scenario involves an employee losing money and wanting reimbursement. We empower our route people to handle this situation themselves; they simply log the refund and add it to their paperwork. We use this policy because we found that it is better to keep the vending account management uninvolved – don’t give them reasons to replace you.

Eventually, you will have an employee who always loses a dollar, every visit, and upon interrogation, cannot really justify why he lost money. I call this “working the route driver.” When we realize an employee is working a driver, we contact the management with our concern, and set up refunds through an account management program. This does one of two things: (1) It stops the problem immediately (because the employee does not want to be caught stealing), or (2) it alerts us to an equipment problem. Nine out of ten times, the first option is what occurs. We always discuss this possibility during the sales process, precisely because it is so common.

And then there’s vandalism
Employees will bump, grind, beat and damage your vending equipment. Product hangs, or, invariably, the machine will malfunction just as that employee (who is starving to death) has deposited his last 50 cents. Take these actions in stride: they happen; it is a part of the industry. Offer a refund policy that allays the employees’ fears.

But what if an employee breaks the glass or does significant damage? I look to malice for responsibility. If an employee goes to his tool box and grabs a hammer to break the glass, the account is responsible. (Actually, the employee is responsible and we have had several companies garnish the employee’s wages to pay for the repair.) Because most companies don’t want people with this kind of behavior, I present the situation by saying, “If they are doing this to our equipment, what are they doing to your equipment or, worse yet, your customers?” Writing on machines, leaving nasty notes and other forms of vandalism are handled in a similar way; keep it professional and impersonal. Give the account solid business reasons to support your position.

Disasters and other losses
What about catastrophic loss of equipment, such as if the building burns down and destroys my equipment? We also cover possibilities like this during the sales process. Catastrophic losses are usually covered by the account’s insurance, added into their loss. Our company has had several incidents where the account location has paid for equipment due to catastrophic loss.

A word of advice: When placing an account, make sure you have some sort of agreement with the location about your liability and their liability. It is best to have this agreement in writing, prepared by a lawyer, to protect yourself and your investment. But this process often raises a red flag and can cost you an account. I usually discuss the issue during the sales process, and send them the agreed-upon terms after equipment is installed. After installation, the agreement is usually just filed in the vending file and forgotten. We rarely need to refer to the agreement after the initial sales process; when we do, we are usually losing or removing the account anyway. Equipment liability forklift vending machine crash    Preparing for incidents early, discussing the possibilities during the sales process, and coming to terms beforehand can save you a great deal of aggravation.  More Vending Business Blogs  Vending Machine License: Is It Something You Need?

Vending machine evalulation

Vending machine evaluation   The valuation of vending machine equipment is based on several factors:

  1. Storage value
  2. Collector’s value
  3. Scrap value
  4. Parts value
  5. Operational value
  6. Market value

Vending machine  evaluation  In trying to value machines, each of these valuations is significant.

1.Vending machine evaluation  Storage value: Machines in storage are generally considered liabilities, and they cost you money each month. Even if you store the machines in your garage, they’re taking space that could be used for something else (like your car), which leaves them a liability.

2.Vending machine evaluation  Collector’s value: If you have an extremely old vending machine, you might have a piece of equipment that is collectable. The most notable examples are rounded top soda machines. These machines were made in the 1950s, and are examples of the initial entry into the cold drink vending era. They were usually purchased by bottling companies and painted with a brand of soda (Coke, Pepsi, Crush, etc.). They were usually single-selection (one flavor) and operated with primitive coin acceptance. Snack machines are much the same; they were usually a mechanical vend process with primitive coin acceptance. To be valuable, they need to be working and in pristine condition. Few of these machines still exist; just because a machine is old does not mean it is valuable.

3.    Vending machine evaluation Scrap value: All old vending equipment has a scrap value, if nothing else. Scrap is the lowest value available and is calculated by weight. Because vending machines are generally made of steel, they’re heavy. The scrap value of steel fluctuates frequently, based on world demand. Scrap value is best figured by calling a local shredding facility that deals in scrap metal. Make sure to figure in the cost of transportation, as this figure can make it unprofitable to scrap machines. I personally use a local man who takes a truck and trailer load (pickup with a flatbed trailer) to the scrap yard; for his efforts, he keeps the revenue. Unless the value of steel is extremely high, we do not generate revenue from this process, but at no cost, we remove junk from our facility. We do not “junk” a machine until we have used all the available parts.

4.   Vending machine evaluation   Parts value: Old vending equipment also has salvage value in the form of parts. The cost of replacing individual parts from vending machines can often be recouped by scrapping parts from other machines. Replacement parts can be costly and requires time to obtain. If you have a compromised machine, the parts value can far exceed the machine value. Vend motors, compressors, switches, computer boards, changers, validators, spirals, coin chutes, glass, etc., are all available if you salvage the machine. Our company has purchased machines (usually one that’s been vandalized) intending to use it strictly for parts. Repair parts are immediately available at a reduced cost. For example, snack machines have 30 to 40 selections, which means 30 to 40 vend motors and spirals. New vend motors start at $10, spirals at $5 – so one machine yields $600 worth of motors and spirals. The glass is worth $50; trays are worth $15. Nuts, bolts, specialty parts have some value. Changers and validators are worth $50 each. If you have the need, the parts value can add up quickly.

5. Vending machine evaluation  Operational value: Vending machines on location develop cash flow; they produce cash for your operation. The amount of cash generated depends upon the location, but if placed properly, one can expect positive cash flow from vending machines. The operational value is the amount of single net cash flow that can be generated by the vending machine in 9 months. Single net cash flow is the total revenue minus the cost of goods sold. Let’s do the math:

Account A: $400 per month gross sales                $400.00
$50 Cost of goods sold (100% margin)                  $200.00  –
Single net cash flow                                            $200.00  X
9 Months                                                            9           =
Equipment Value                                                $1,800.00

This formula is a quick guide to equipment placement. If you can accurately forecast your sales, you can determine how much to spend on equipment. Your goal should be to violate this formula by spending less on your equipment. This will make your accounts more profitable.

6. Vending machine evaluation  Market value: Market value is the amount of money you will pay for a machine in the open market. Market value falls into two categories: new and used. New values for vending machines are determined by the manufacturer and sales organization. Like all value, the value of new vending machines depends on options, name brand, warranty, reliability, standardization, versatility, and so forth. Not all vending machines are created equal; some brands have features that are superior to others, and it is critical that the dealer stands behind that equipment and honors his warranties. Used equipment can be purchased several ways – through want ads, vending companies going out of business or updating equipment, and from dealers. Used values are determined by many of the same factors, but also include the seller’s motivation to move the equipment.

When choosing a vending machine dealer, remember that your dealer will become your unofficial partner in the vending machine business. A good dealer will have a solid business record (dealers that have run vending machine companies are preferred), should be honest, and have a list of satisfied (and dissatisfied) customers you can call. A quality dealer will carry several lines of new equipment and have a service and refurbishment department for used equipment. Most quality dealers offer several levels of refurbished used equipment to help you best meet your needs. They usually have some type of financing available, as well. Shop your rates and terms, because vending equipment is very difficult to finance; ask your accountant for your best finance solution. The dealer’s service staff should be available by telephone for quick suggestions on repair. They should have delivery services. Generally, a quality dealer has the ability to help you with all facets of your business and should be able to guide your decisions in an unbiased way. Of course this all comes with a cost: most quality dealers will be slightly more expensive than their competitors.

Keep in mind, though, that you don’t want to be “penny wise and pound foolish,” as the old saying goes. The added initial cost of your equipment will be overcome by the added service you will receive, and avoiding one simple mistake can generate thousands of dollars in added income. Use your dealer as a source of information and capitalize on that information. Vending machine evaluation  More Vending Market Blogs  FDA Requirements for Vending Machines: What You Need to Know

Finding Good Vending Machine Locations

Finding Good Vending Machine Locations  What is a good location? This question is relative, based on your company’s size and goals. 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 might consider an account with sales of $6,000 per year ($500 per month) to be a good account. Start 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?

Finding Good Vending Machine Locations  For example, 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:

  • $2,000 in parts for immediate repair – Customers like this expect service calls to be completed within 4 hours of the initial call.
  • A running daily inventory of $5,000 in vending machine product
  • Service 2-3 times a day
  • Fully insured – liability, workers compensation, etc.
  • Paying a commission
  • Driving a late model vending truck ($40,000)
  • Extremely professional demeanor
  • $62,000 in initial capital investment, plus ongoing expenses (telephone, office expense etc.), before the 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.

Finding Good Vending Machine Locations  A vending machine account that generates $500 per month can have as little as a single vending machine, which could be older and might even have been free. Servicing this account is much easier, requiring 2 route stops per month, service calls handled in a reasonable amount of time (within 5 days), could be run out of a car or pickup truck, would not be a commission account (unless you are crazy), and would have little ongoing expense. These accounts are much more plentiful and, therefore, less desirable.

Each type of account appeals to different levels of business expertise, and the rules of economies of scale do apply. Large organizations lose money in smaller accounts because of larger overhead costs. Smaller businesses can make money in smaller accounts by keeping overhead low. Where do you want to be? What is your skill level? How much capital do you have?

Now it is 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? Keep in mind that just having a vending machine account doesn’t mean they are profitable. Be conservative with your estimates and include all costs. Do not forget to include wages – your time is not free. If you can’t make more than your current hourly wage, do not enter the business.

So there it is, XYZ account, and your analysis determines that you can be profitable in the account. How do you get the XYZ account? ABC Vending has the account now and you have studied ABC’s operations. You have advantages over ABC and you know you can get the account. What do you do now? Go selling.

Thousands of good books have been written about successful selling, and I will not get too specific, but I will give some pointers that were successful for my vending machine operations.

  • Timing is critical for two reasons:
  1. Most sales occur after the 5th sales call. Be consistent and do not give up. If you have never called on XYZ, there is a certain amount of time required for the decision-maker to determine if you are “real.” How often do you personally purchase from an unknown company? Do you tend to purchase the first time? Of course not. Most people are afraid of making a bad decision and want to “get to know” the operator (or at least see that he/she has the desire to earn the account).
  2. The nature of the vending machine business is that machines will break down, service can get sloppy, machines get old, management changes, and a host of other situations. If you are consistent, you have to wait for one or more of these factors to open the door of opportunity for you. Every vending machine operator has lost an account due to a malfunction in his/her machine that was followed by a well-timed sales call from another company. I have personally obtained accounts while the decision-maker was in the process of reporting the loss to his current vendor. (He himself had just lost money, was sick and tired of hearing complaints, and replaced his vendor on the spot.)
  • Under-promise and over-deliver. If you make a commitment, you must keep it, so don’t 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 can 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 company? 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.  Finding Good Vending Machine Locations  More videos of the Vending business show  Vending Machine Technology