Tom shivers: How to get started in the vending business I’m Tom Shivers with the Vending Business Show, here with Larry Towner, who has been in the vending business for many years and a few years ago sold the majority share of his vending business. Today, he mostly provides consulting. In the last show, Larry talked about how to start a vending business, and we’ll pick back up where we left off. So, Larry, thanks for being here.
Larry Towner: Oh. It’s a pleasure, Tom.
Tom shivers: Last time, you explained that sometimes people get in the vending business, but don’t realize what they’re getting themselves into, like what kind of person does well in the vending business. Then you shared some information resources to help people get off to a good start. What other tips do you have on how to get started in the vending business?
Larry Towner: Well, one thing, Tom, that I always try to stress to people is that the vending business is just that. It is a business. If you’re looking to get into a business, you need to have a sense of organization and/or planning. I tell everybody to be very careful when you get into the vending business to make sure that you write a business plan of some sort. Now, it can be as simple as sitting down with a pad of paper and just writing out some of the concerns and some of the things.
Larry Towner: We try to keep people to be aware if they go to some of these seminars that they see in the newspapers and things like that, to be very careful of those things. These guys are professionals at selling equipment and things that are not really of professional grade. So, they make it sound very exciting and very dynamic, and they give you an idea of the kinds of money that you can make, but what they don’t do is they don’t tell you the whole story. I tell people to really sit down and really think this through. Put pen to paper. Write yourself a business plan.
Larry Towner: Now, you don’t have to write a business plan that’s designed for going to the bank and getting financing. You might need to do that, but that’s a separate issue. It all depends on what your goals are, but have an idea of what you’re trying to achieve, number one. What’s your goal? Are you looking to become self-employed? Are you looking for additional income? Are you looking for a part-time business or a retirement business? What are your goals within those kinds of things? That’s where you start.
Larry Towner: Then you try to cater the vending business into those aspects of what you’re looking for. Don’t forget things like … What people are most common is what they present in a lot of these shows and things like that is they say, “Gosh. You’re buying this for a quarter, and you’re selling it of 50 cents, and you’re making 100% profit. How can you go wrong when you make that much money?”, and this, and that.
Larry Towner: Well, at the end of the day, what they don’t tell you is that you have to sell four items to make $1. You have to pay for your equipment and all your expenses out of that $1 that you make in profit, and you had to sell four items. When you think about it, on the average person’s paycheck, if you had to make your paycheck, how many items would you have to sell? People don’t even do that basic math, and when they think about it, they go, “Wow. I have to sell 4,000 items,” or, “I have to sell 10,000 items,” or whatever it is that the particular person is looking for.
Larry Towner: Out of that money too, what they always forget is that they have to have a vehicle. They have to pay for fuel. They have to pay for insurance. They have to pay for the machines. They have to pay for repairs. They have to pay for all the things that a business has to pay for just to be in business, which includes telephones. There’s hundreds and hundreds of books on writing business plans, but you need to sit down and really think about it. You can just say, “Wow. I’ll run this out of my garage, and it’ll just be clean and easy.” It can be that simple, but it can also not be that simple.
Larry Towner: So, it starts with a good understanding of the numbers, and how much profit you think you’re gonna make, and how much can you make per account and per machine, which brings up a few different issues that get into the planning. Some of the things in discussion with some people wanting to get into the business, I said, “Well, what kind of potential accounts do you think you have?” They would give me an idea of what they have, and they say, “Well, I can’t lose. I’m gonna buy a new machine and put it in there.” I’ll tell them flat out, “It’s gonna take you 10 years to pay for your equipment. Have you even thought about that?” They go, “No. I haven’t,” and they have opted out.
Larry Towner: That’s one of the biggest keys to success is to sit down and actually do a business plan of some sort. Write out what you want and how you think you’re gonna get there. Then walk backwards through all the steps and all of the things that it might take you to do to get to that number, and just give yourself some kind of a reality check. If you jump into this thing, you can obligate yourself for thousands of dollars and end up having very little income coming out of it. That’s one of my biggest things when I tell people, “If you’re gonna get into the business, it’s a business. Do a business plan.”
Tom shivers: Mm-hmm (affirmative). You’ve been in this, so what is a realistic goal for someone or maybe a couple of them?
Larry Towner: Well, again, it just kind of depends on what you’re looking for. The way I started in the business, and this has an amount of relevance, is I actually went to work for a guy in the vending business, and I worked for him in the vending business. He basically taught me the vending business. We went over it, and I got to see what it takes to be in the vending business, what accounts are, what products that sell, and things like that. So, that’s where you get into … When you get into your goals, it’s like where do you want to be?
Larry Towner: If you want to be fully self-employed, my suggestion is that you go work for somebody first, understand the business, and then back yourself into the business. If your goal is a part-time income, like say you want to work a retirement income or you’re perhaps a woman that has children at home, and you think you can run this on a part-time basis and things like that, those things are attainable. It’s just a matter of getting down to the actual numbers and your time.
Larry Towner: You have to really be able to allocate your time out to figure out when you can actually get this work done, because it is quite a bit of work. I mean, it requires you being there. You have to go and fill machines, and you have to be available for repair on call, and things like this, or you have to be able to work with your customers to make all those things work out. Again, it’s difficult. You just have to be able to do that kind of thing.
Tom shivers: Let’s just say, for instance, I’ve got four soda machines in pretty high trafficked areas not far from where I live. I want to do it on a part-time basis. Can you give me some suggestions as to how much time and resource that that would involve?
Larry Towner: Yeah. If you’re talking a good, high volume location, a drink machine can hold, depending on whether you’re doing bottles or cans, a drink machine can hold in the neighborhood of about 300 bottles or maybe 600 cans total. You’re never gonna run that machine completely out, so if you’re running say cans, and you’re running at 75 cents, and you get a big machine that holds 600 cans, you know, you want to refill it at about a 200 can point, so you’d be hitting in the neighborhood of about say 400 times 75 cents is about $400 in gross sales.
Larry Towner: Out of that, you’re gonna pay for half of … Basically, about half of your money goes to pay for product, which gives you $150. If you’re doing that once a week or twice a week, you’re in the neighborhood of you’re gonna do a single net profit of about 100 … If you do it twice a week, you’re gonna do $300 a week. That’s a pretty high volume location, to be honest. That’s a very high volume location for somebody doing just drink machines, without a snack machine associated with it or a food machine, things like that.
Larry Towner: What you’ll find too is when you get out there, that in the marketplace you might have this concept that you want to do one thing, like say just drink machines, but the reality is it’s tough to get the really high volume locations in just one avenue for it. But that would give you $300 in single net profit in a week, and then you’re expenses to do that. It would take you two days during the week to do that, and it’s gonna take you approximately … [inaudible 00:08:40] It’s gonna take you probably an hour, maybe an hour and a half to actually service those machine, to fill them up. That gives you kind of an idea of what you’re gonna have.
Larry Towner: Then you have support time, what it’s gonna take you to actually get the product and load that into your truck, get it out to the locations. You’re gonna have to have a warehouse if you’re gonna do that kind of volume and things like that, or you’re gonna spend a lot of time running to local Walmarts or Sam’s Clubs, or Costco, or BJ’s, or whatever. So, to do that you’re probably gonna have five or six hours per machine to do that, in total time.
Tom shivers: Per week. I imagine if it’s in a high volume area that the turnover rate might dictate the best times to refill the machines? Does that come into play?
Larry Towner: Yeah. The timing is always an issue, as far as when you … You know, you want to be there in what I consider to be an off time, a time when there aren’t people there wanting product all the time. If it’s in a commercial location, that’s usually not on the hours, like you’re gonna be mid-hour, and not at break time. In a commercial location, in a street vending location, you’re gonna wanna be there at night or something like that. So, all that does play. We call those account dynamics essentially.
Larry Towner: What’s the best time to service it? Is the facility open at those times? Do you have what I call extended hours? Extended hours to me are any time that’s before 7:00 in the morning or after 5:00 in the afternoon, because that really opens up a huge ability to do work at times when otherwise it’s off time. You’re guaranteed to get into most locations between 7:00 and 5:00. The question is can you get in after the hours or before the hours to get you the extra time that you need? There’s a whole concept of dynamics in an account and how you manage your accounts and all of that. That’s a whole topic for a whole show we can do in the future.
Tom shivers; Any there tips for people getting started in this business, before we-
Larry Towner: Probably one of the biggest tips that I can give also, along with a very strong business plan, is to actually go out and do a few sales calls, and go try and find an account. A lot of vendors try to get into the business backwards. I say backwards in that they go out and they buy a bunch of equipment, and then they go out and try to place it. My philosophy always has been that you actually do that in reverse. You go out and get the account and then place the equipment, because the account will dictate the equipment that you buy.
Larry Towner: If you go into a, oh, I don’t know, a very large manufacturing facility that has many hundreds of employees, you need a different set of equipment than if you go into an office situation that has 50 employees, or you’re in a street vending situation where you’re outside. That requires a different piece of equipment than something that you’re putting inside. You want to be able to go ut and make a few sales calls.
Larry Towner: The other thing that’ll help you, if you make some sales calls and you actually obtain the business, or you get an idea, if you go out and do a survey more or less, if you go out and talk to … you have a target market in mind that you worked on when you did your business plan. You say you want to service, it doesn’t matter, say commercial, industrial accounts. You go out, and you look at what your competition is doing out there. You’ll see what kind of pricing they have, what kind of equipment they have. If you talk to people, you’ll find out what kind of service level they get from them as well. A lot of it falls in under the planning stages.
Larry Towner: The other thing that you can find out too is if you go out, and you call on a certain number of accounts, and you find a common thread in what your competition is doing, and then you have to figure out a way to either get around what your competition is doing and offer more, so that they will actually change vendors, or you find a particular vendor that doesn’t do a good job, and you know all the points to hit, so you can go replace him when you run into him, and you walk into an account, and you say, “Oh. It’s X, Y, Z company.” I ask lots of questions in a sales [inaudible 00:12:55]. I say, “Hey. Are you having this problem with X, Y, Z company?” If you know that company, you’ll know that they are indeed having that problem. You say, “Wow.” You can sell them right out of the place.
Larry Towner: That’s something I say to people. You’ve got to be able to go in and sell a little bit. If you sell beforehand, really you’ll know everything that you need to know beforehand. If you come in and you go … Just for example, say you buy brand new equipment. You’ve invested $5,000 for a snack and soda machine or $6,000 for a snack and soda machine, just depending on what you buy. You need to generate X amount of dollars out of that equipment, or you’re gonna be in the hole. If you don’t do that, you’re gonna be in trouble, because you can’t place that everywhere. You can’t go out and put that into a smaller account. You’ll just have too much money invested into that equipment to actually turn and make a profit at it.
Tom shivers: Yeah. That makes a lot of sense. I know that’s kind of an entrepreneur quality that would say, “Hey. I want to sell some of this stuff before I decide I’m in the business.”
Larry Towner: Right. I tell people to do that in the vending business consistently. If they don’t, they can really get themselves into financial hot water. I get phone calls even today on a regular basis, where people say, “I’ve got a warehouse full of such and such equipment and things like that, and I can’t place it, and I can’t sell it. What would you buy it for?” Unfortunately, you end up insulting them, because you can’t really give them anything for it. That’s kind of a situation that you do run into.
Tom shivers: All right, Larry. Well, thanks for sharing. Tell us a little bit about your business, your consulting business.
Larry Towner: Well, the consulting business is basically we help new vendors and experienced vendors really optimize their companies or get a good idea of exactly what they’re doing. One of my goals with new vendors in particular, and this is gonna sound funny, but I try to talk them out of the business. It’s not in a bad way. I just want to make sure they understand what they’re getting into before they make that jump, because if we can save them some heartache I guess is what it is … I mean, I’ve actually seen marriages come apart because of the vending business and because it’s never what they expected.
Larry Towner: So, we try to just make sure people understand completely what they get into. That’s what we do. Then on an established business we can come in and we can just look at how you run your operations and make sure that you’re running it at an efficient and profitable mode. We’re always amazed we can learn things every day doing this, but that’s what we do.
Tom shivers: What’s a good way for someone to contact you?
Larry Towner: Generally over email. It’s firstname.lastname@example.org.
Tom shivers: All right. Service Group International all spelled out?
Larry Towner: All spelled out.
Tom shivers: Okay. @earthlink.net?
Larry Towner: Earthlink.net.
Tom shivers: All right. Super. Next time, we’ll be talking about the question, is vending a reliable business venture? You’ve been listening to How to get started in the vending business at the Vending Business Show, a publication of A&M Equipment Sales.
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