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?
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.
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:
- 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).
- 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.