by Abco | Nov 4, 2011 | Vending Business Show
AN INTERVIEW WITH LARRY TOWNER, VENDING CONSULTANT.
Larry is a veteran vending operator who has had great success. Listen in as he answers a few questions:
ABOUT VENDING MACHINE PLACEMENT
Larry discusses vending machine placement with tom shivers and answers questions about the following categories:
- The history of the vending industry
- The business hasn’t changed that much since it began in the 50’s
- It is a numbers game
How would you know you’ve got a good location for a vending machine?
- Tips for identifying a good vending account
Larry can be reached at [email protected].
EPISODE TRANSCRIPT:
Tom shivers: I’m Tom Shivers with the Vending Business Show here with Larry Towner who’s been in the vending business for many years and sold the majority share of his vending business a few years ago. He mostly provides consulting now, and in the last show, Larry talked about how to start a vending business. So, thanks for being here, Larry.
Larry Towner: Thanks, Tom. It’s a pleasure.
Tom shivers: Yes, some of the things you went over last time, just briefly, were writing down a business plan, defining your goals, getting an understanding of the numbers, the profit, how much you want to make per machine so you can get to your goal, and you talked a little bit about a part-time scenario. You went over a few sales and things like doing sales calls and getting an account first. Any other tips you want to talk about?
Larry Towner: Well, that’s a good place to start. I think that most of those tips that we gave in the previous shows, really, are great places to start, and I really think we don’t have too much to add to that at this point.
Tom shivers: Another thing we were gonna talk about was is vending a reliable business venture.
Larry Towner: To answer those questions … Well, finish your question there, Tom, for me, and we’ll see where we go with it.
Tom shivers: I mean, is it something that is sustainable? Is it something that is worth the time and effort, and if it is a fit for you, how would you know? What are some things from a veteran vending business operator that would tell us that?
Larry Towner: All right, well, that’s a great place to start. Let’s just take a history lesson on the vending business, and that will give us an idea of how reliable … Basically, we’ll start off with is the market stable. To give you an idea, vending started in the 30s, really, is when it started. It was very rudimentary at that time, and it really exploded in the 50s and into the 60s. And it was in the 60s that there was tremendous growth in the vending industry, and that was when a lot of companies realized … Actually, it had to do with equipment and things like that, but the vending machine industry matured in the 60s, and then it has been growing slowly ever since then.
But to get into the market stability, there always seems to be a market for good, quality vending services out there in the world. They wax and wane a little bit with economic tide. Currently, we’re in a little bit of a downturn, and that’s just a normal economic situation. It’s not a business that’s easily replaced. If you were, oh I don’t know, a computer software engineer, and you worked in some obscure language that I don’t even know, but Basic or something, you’re job has basically been outsourced or it’s gone at this point. It’s been replaced by something that’s newer and better.
The vending industry has been pretty stable for quite a number of years. So, from market stability, there always seems to be a market for vending type services in snack or refreshment services. Some of the products have changed a little bit, but in general, we’re still selling the same basic products today that were sold in the 50s and 60s. Some products have come, and some products have gone and product dimensions have changed. Packaging has changed, but the business itself has not changed all that much. So, the business itself, the market is quite stable.
As far as reliable, it also tends to be a pretty … From a cash flow standpoint, if you go into a commercial type account, which means you’re in someone else’s business providing vending services, the cash flow is actually pretty stable and it’s pretty heavy ability to forecast it with a high degree, because it’s not gonna change all that much week to week, month to month. You’ll have your seasonal variations, meaning in the springtime or in the summertime, you’ll tend to sell more drinks than you do snacks. In the wintertime, you tend to sell more snacks than you do drinks. And then around Christmas, you don’t sell anything pretty much. December always is the worst month for most vending companies, unless you have a large amount of retail where you’re in retail operations where they have large Christmas staffs.
Besides that, the business itself is quite stable on a cash flow basis and as far as products sold. If you do a lot of street vending or vending out in the public-type places, it’s dependent upon the number of people that come in or are in and exposed to your machine. And one thing, too, about the vending industry, it is a numbers game. The more people that are in front of your machines, the more product you will sell, so your object should be to get pretty high volume type accounts if you can.
To answer that question, it is a reliable business. It’s been around for a long time, and it really hasn’t changed all that much throughout the years, and it does quite well.
Tom shivers: What are some of the numbers like you just mentioned there? How would you know that you’ve got a good vending machine placement location? Let’s say how would you know you’ve got a good location for a vending machine?
Larry Towner: Well, the basic benchmark for looking at a vending machine placement there’s some demographics that play. We always broke demographics down into white collar verus blue collar was the first demographic we always looked at. So, we’re looking at a white collar account does about a quarter of what a blue collar account does. Of course, there’s not too many blue collar accounts left in the United States anymore. We’ve outsourced most of our manufacturing off to China, but you still have a lot of blue collar accounts in the construction industry and automotive and things like that, say automotive repair shops and things like that.
That particular customer is largely male. They generally are quite a bit younger. They’re in their younger … Well, they’re under 35 in general, and those are really strong vending type accounts. On the opposite spectrum, older women are not really great vending prospects. So, when you walk into a facility, or you’re looking a facility to put a machine in, if you’re looking at a commercial account, you walk around take a look at who really works there on the commercial side. And if you’re in a street-type location, just sit where you’re thinking about putting a machine and look at the type of people that walk by you.
Children, and I say children, kids anywhere from the age of five up to about 13 or 14 are really strong vending people as long as they come with their parents. You really don’t want young people and teenagers a lot alone, because they tend to vandalize things a lot, so it’s one of things, but if they’re with their parents, that’s good.
But that’s the beginning point of how you determine what determines a good vending account. The other thing is just pure numbers. If you walk into a location and they have 20 people or they have 50 people or they have 200 people, it’s all relative to the basic numbers. So, you want more is usually better, but if you walk into, and it’s a white collar account, say it’s a, I don’t know, a sales office or something like that, and there are a large number of white collar men, you say 100. Well, a good blue collar, say automotive shop with 25 people will do just as much business as that 100 person sales organization where people are in coats and ties. And these are general numbers. It doesn’t always pan out that way, but in general, it’s been my experience and a lot of other people’s experiences as well. This is the kind of thing that you might see.
One other thing that I always took into consideration, I did a lot of vending, I would say, in the outer regions of the metro Atlanta area. So, we were far out. When I looked at accounts, sometimes really tiny, small accounts like, say 25 people or so, could actually surprise you with how much business they did, because in some of these locations, the closest restaurant or the closest convenience store could be two, three, four miles away. In that sense, they had no easy access to any other refreshment source, so they couldn’t just jump in the car and run down the street. Conversely, a place that has a convenience store or a grocery store or whatever that sits right next door, and people can walk to it on their break, that is indirect competition, and they will make that trip. You’d be absolutely shocked.
So, we were really surprised that at some of our locations, because they were out and away from other things, they did very large numbers per capita. We always marked our numbers by the number of people, and they did $4.00 a week per person or $6.00 a week per person or whatever. We always marked it per capita, and when we looked at some of our accounts, because there was nothing around them, they did very large numbers compared to a lot of the other places, because they basically had no choice.
So, those are all considerations that you take into account when you look at a vending account, and those are the things that will tell you whether it’s a good account or not. A lot of when you set a vending account, too, and this is why we say go out and get an account first, is that many of these places don’t necessarily require the latest equipment. So, you can go in with a good piece of refurbished equipment, which is gonna save you several thousand dollars. And since you’re really looking at turning profits, sometimes it depends on your location as to the type of equipment you can put in, and that plays into the operational side along with the financial side.
Sometimes, my philosophy was I tried to put the biggest machines I could into a location, and I did that so that I could reduce my service interval, meaning if I only had to go to an account once a month, it was easier from a service standpoint provided they would turn the product, meaning the sales would [inaudible 00:10:43]. We’ll talk about things like that in another show, but I always try to put the biggest pieces of equipment in there as possible and run long-date type products, and that way I had to visit it less, which really lowered my cost. Because your service cost in newer accounts is very, very high. So, a lot of these things play into looking at what a good thing an account is.
Also, one of the questions that I always ask when I go on a sales call is who is your current vendor, or try to get a sense of how many vendors have they had in the past X number of years, and it just depends. There are accounts out there that flip vending companies every year or every two years, and these are generally, they’re either on a bid-type basis or they’re highly problematic type accounts. Because if they’re looking for a new vendor all the time, why are you gonna be vastly superior to what they already have. They have a cultural mindset of swapping people out all the time, and that can be problematic. In our opinion, or in my opinion, a good vending account is one where you move equipment and it’s there for quite a while. You’re not busy moving equipment all the time. That’s a hidden expense. [inaudible 00:11:52].
That gives you a real general, I mean I can go on for hours on this stuff, but that’s just a general overview of if you’re gonna go in and look, you want to look for large numbers of people. You want to generally look for people who are a little younger, generally blue collar is gonna be better than white collar although not always, but those are the situations. Another demographic thing is is the ethnic groups can be very good. Hispanics do quite well in vending as where Asians do not. So, if you have a large Asian population, in general, vending isn’t gonna be the greatest thing in the world. If you have a large Hispanic population, it can be quite good provided you provide the right product for them, and they’ll tell you.
Tom shivers: Okay, great. Well, I think we’ll wrap that up for now, and next time we’ll talk about what do vending machines cost, and later, we’ll probably get back to the vending location issues that you started touching on there. I know there’s a lot more to finding a good vending location.
Larry Towner: Yeah, there’s whole strategies in types of locations, and also amount of windshield time between stops, and do you go in and do you saturate an area, or do you look for a certain size, and there’s all kinds of strategies for the types of vending accounts, and that actually, well, we’ll tie that up in another show.
Tom shivers: Okay, well, thanks so much, and do you want to mention your consulting business?
Larry Towner: Sure, my company’s name is Service Group International. We’ve done vending and food service consulting, basically, for about 15 years. We can take a lot of start-ups. We like to make sure people understand what they’re getting involved in if they get into the vending businesses. It’s not a business where you’re gonna make millions of millions of dollars with very little effort and things like that. We can be reached at [email protected]. It’s all one word, and we’d love to talk to you. It’s [email protected], and of course, my name’s Larry Towner.
Tom shivers: And you’ve been listening to the Vending Business Show, a publication of A&M Equipment Sales.
by Abco | Oct 21, 2011 | Vending Business Show
Vending Business Tips
An interview with, Larry towner
On This week Podcast larry gives us Vending Business Tips
EPISODE TRANSCRIPT:
Tom Shivers: I’m Tom Shivers with the Vending Business Show, here with Larry Towner, who sold the majority share of his 15-year-old vending business a few years ago. He now mostly provides consulting. Today, we’re going to talk about how to start a vending business.
Tom Shivers: Larry, thanks for being here.
Larry Towner: Thanks, Tom. It’s a pleasure.
Tom Shivers: You know, sometimes, people who are in the market for something have good questions, but don’t realize there are questions they should be asking, but aren’t. Do you find that to come up? Do you find that to be true?
Larry Towner: I do find that to be true, Tom. What we have a lot of is, in the vending vending business tips is, you have people that see a person that’s in the vending business, or works for a vending operator, and they look at the business, and they say, “Boy, that’s great,” and they look and they see all this money that they get taken out of the machines, and they just say, “Man, that’s the business for me.”
Larry Towner: Then they go, and they’re reading through the paper somewhere, the newspaper, or they see an opportunity on the internet, or they see an opportunity in a business opportunity magazine, or something saying that the vending business is one of the great businesses to be in. So they inquire in that, and they go to a hotel ballroom, and they get essentially pitched to what we call a “blue sky promotion,” that just says, “Oh, it’s great, and you can make all this money, and you’re … It’s a hundred percent margin, and you’re buy it for a quarter and sell it for 50 cents. You can’t lose,” and things like that.
Larry Towner: And one of the things that I’d like to talk to people about when they’re starting a vending business, is to do really a good business plan, or at least sit down and run a few numbers through the business, a business plan type. Figure out if you were to purchase equipment, how much product do you actually have to sell at what rate, meaning how much profit do you make, before you actually go and buy equipment, because a lot of people don’t realize that, at the end of the day, if you buy something for a quarter and you sell it for 50 cents, you still only make a quarter, and it takes four quarters to make a dollar, and if you’re making $500 a week, you have to sell four items to make a dollar, times 500, or 2000 items a week, just to make what we would call your “single net profit.” Meaning, after you pay for your goods, just to make that much.
Larry Towner: Now, that doesn’t include paying for your machines, or paying for your insurance, or paying for any of the number of things that it takes to actually run a business, and … because you’re not just gonna go out there and set these machines, and all this money’s gonna come to you, and you’re gonna end up with it all. It doesn’t really work that way. And that’s one of the big mistakes that I see people make continuously, and when I draw their attention to this, they kind of go, “Well, I never really thought about that. I never really thought about this. I never really thought about that.” And that’s one of the big questions that, or things that people have to do when they start a vending business.
Larry Towner: Also, in these “blue sky promotions,” is what we call a “blue sky promotion,” they tend to sell very small combination machines, and these machines have anywhere from nine to 12, maybe 18 selections on them, and they only run six or eight or maybe ten selections deep. And the funny thing is, is that with that piece of equipment, you can never make money, because you [inaudible 00:03:22] generate enough profit out of that machine to even justify your stop. So, and when I say stop, I mean your service stop, going to the machines to refill them. The machine would have to be completely empty before you could even approach making the stop. And again, this just goes back to planning. If you understand this beforehand, you can look at it down the road and understand that what they’re selling you is really things that are not appropriate.
Larry Towner: I still get phone calls from people wanting to sell me this equipment that they bought in a hotel ballroom, and they paid $400 a machine, and I say, “Well, they’re worth about 20 bucks.” [crosstalk 00:03:57]
Tom Shivers: Wow. Well … What, what –
Larry Towner: [crosstalk 00:03:59] first thing I see.
Tom Shivers: Uh-huh. Well, what kind of person tends to do well in the vending business?
Larry Towner: Well, that’s another great question. It’s one of the first questions that I ask about, about vending. They look at it, and they say … it seems like it’s a trend in people’s minds, “Man, that looks like easy money. That just looks so easy. All you do is fill those vending machines and take the money out.” And what they don’t realize is what’s on the back end of running a vending company.
Larry Towner: What they see is really the … about the shortest period of time that you have in the vending business, and when we address this issue, to address your question, “What kind kind of person does well?” the first thing that we like to say is, “Do you like to work?” Because if you don’t like to work, you’re really not gonna do well in the vending business.
Larry Towner: We … We’ve done a long analysis on vending companies and things like that, and the average driver starts at, you know, and if he works for a big company, starts at four or five in the morning, and he finishes on average, about five or six at night. He works about a 12 hour day. Of that 12 hour day, he spends approximately three … two to three hours loading his truck out of the warehouse. That’s where, of course, it all starts, and at four o’clock in the morning, he’s taking all of the product that he … that the warehouse manager has brought into the warehouse, he’s putting what he needs on the truck, even with a computer-generated list, it still takes a long time. He moves that … all that product up into the truck, stacks it, puts it into his route order, and things like that. That’s the first step.
Larry Towner: The second step is, he goes out and he sits in traffic for a while. He gets to the stop. He has to then unload all the things that he needs, drags it into the place, spends 15, 20, 30, maybe an hour, filling the machine. Then he picks up the money, and then he leaves and he goes to his next stop, and what he does is he does this over, and over, and over, every single day, for … usually eight to ten hours, doing those kinds of activities, and it takes a real work ethic, and you need to be fast and efficient. So, the kind of personality it takes is, it takes a person that likes to work.
Larry Towner: When I started in the vending business, the fellow that taught me the vending business was actually a Harvard Law graduate, and he was in the vending business for most of his professional career. Coming out of Harvard Law, he chose not to practice law, he [inaudible 00:06:16] as a business thing.
Larry Towner: But he always … We always started at about ten o’clock in the morning, but we worked until midnight. So, he just kind of reversed the clock. He did it for reasons, we were working in the greater Boston area, and he … He knew the traffic patterns better than the traffic patterns new it, so we were counter-traffic all the time, which was tremendously advantageous to us for doing that.
Larry Towner: But you can figure, if you’re gonna be in the vending business, if you work … If you don’t work an eight hour day, that’s a very rare day. So the first thing is, work hard. The second thing is, you need to be very focused on efficiency and being very efficient with your time. Your motions need to be choreographed. You need to be very detail-oriented, because you’re gonna need to understand what … You have to do a forecast when you go to purchase product. You need to have a forecast when you go to get in the truck that day. You just don’t jump in the truck and go to the stop. You need to say, “I’m going to this stop, that stop, this stop, that stop,” and, “What product do I actually need for this stop and that stop?” Because each location will have a different set of selections of products that they prefer, and so, in that sense, you need to be very detail-oriented.
Tom Shivers: Mm-hmm (affirmative)-
Larry Towner: The other thing that’s very helpful when you’re starting a vending business, is to have your eye on the numbers. You don’t have to have an accounting background, but at the end of the week, you need to sit down with … in some quiet time, and really put your numbers into an accounting program that work. I personally use QuickBooks. It works … It always worked well for me. But any kind of accounting software [inaudible 00:07:47] software. It really doesn’t matter.
Larry Towner: But really understand what your costs are. Understand what your expenses are. Understand how much money are you actually making, because if you don’t do that, you’ll get yourself into financial trouble very, very rapidly, and it’s extremely hard to dig out of it once you … once you get wrapped into it. So a little basis in accounting is very, very helpful in the vending business.
Larry Towner: Another thing that’s … that people overlook, too, is that those machines just don’t walk themselves into the doors out there. They, they … You have to be … have a bit of sales ability to go out and actually sell out into these accounts. So … And you don’t have to be a salesperson, per se. You just have to have some sales ability, and you need to be able to ask the right questions, and things like that, to generate business. You will be … It helps to have some sales background, but again, it’s not necessary, but you have to understand how to sell and what your competitors do and things like that. So sales ability is important.
Larry Towner: The … One other thing that’s really important is you have to have either access to somebody that can do repairs for you, or you have to be able to do repairs yourself. One or the other, because you’re gonna have problems that come up with your equipment. It is inevitable. You will have … There’s various different degrees of problems that come up in the vending business. Some of it is easily solved. Some of it is not so easily solved.
Larry Towner: But you have to have somebody that’s somewhat technical, and you have to understand how the vending business works. And one of the biggest things that happens in the repair side is, you’ll have a changer or validator, which is the parts that the money will not function properly. And you need to be able to troubleshoot those real quick, and figure out, “Is it something I can fix with it on the machine? Or do I just swap this equipment out?” And we always carried on our trucks, we always had extra validators and extra changers on the truck. If you have a problem, the worst thing you can do is leave a machine that doesn’t take money, and that’s also one of the simplest repairs, because it’s turn the machine off, just take the piece of equipment off, put a new piece of equipment on, turn it on, give it a couple of tests, and you’re ready to go. So, you have to have somebody that’s somewhat technical, that can do some repairs, either have availability to it, or have that ability yourself.
Larry Towner: And then the other thing is, is just … You have to have good business sense, and … You don’t have to have great business sense, but you just have to have good business sense. You have to understand when you’re talking to a customer, and it doesn’t matter who you’re talking to. You could be talking to the President of the company, and you’d never know it, in many cases, because they come to the vending machines, and you don’t know who they are, and I’ve seen many, many, many a route man, and many, many a business owner absolutely lose accounts because they just don’t have good manners, for lack of a better word. They’re rude to the customer, and they’re talking to the wrong person. They don’t realize who they’re talking to, and they’re out the door.
Larry Towner: So, those are some of the things that you need. You need a good, strong work ethic. You need to have a bit of sales ability. You need to have a bit of mechanical ability. You need to have good business sense, and you have to have just a little bit of accounting ability. And all of those things, you can hire out, but you really need to understand them on a kind of a base-level. You have to have a basic understanding of all of those aspects of the vending business.
Tom Shivers: Yeah. That sounds like a … a team, actually.
Larry Towner: Well, it’s a team, but all of those aspects are not impossible for one person to do. I know, in my case, I did all of that. I was … I had a background in repair, and I had a background in sales, so it was real simple for me to do the sales and the repair part. The business sense comes out of the sales for me, so treating customers properly always was real simple for me, ’cause I always figure, if you take care of your people, they’ll take care of you, and then … The accounting, it took me a while to really understand the accounting. I have to be honest. It probably took me two or three years before I fully understood what I was really looking at. That’s something you can kind of work your way into, but at the same time, you do what to have it … You want to have somebody that can help you understand it, if you accountant or whomever, can explain it to you, it’s very, very helpful, so.
Tom Shivers: Mm-hmm (affirmative)-
Tom Shivers: Yeah, it’s real good.
Tom Shivers: In addition to the Vending Business Show, right here, what are some good information resources to help people get off to a good start?
Larry Towner: Probably one of the best support places that you can go to to get good information would be your local equipment distributor, and you want to find a reputable equipment distributor. Now, we’re here … I’m here outside of Atlanta, Georgia, and I use A & M Equipment exclusively, and Joe Nichols at A & M is a wonderful guy, and he’s been involved with the vending business for … well, really, his whole life, more than 40 years, and his ability to give you the information that you need, and all of these questions that I can answer for you, he can answer just as well. He has a refurb shop, and does things like … sells machines out to people.
Larry Towner: But he sees the industry on a much broader base, and he understands what works and what doesn’t work, and he can tell you without a doubt, whether or not … even to the account sizes. If you go in and say, “I’m looking at an account that has 75 people. It’s largely a white collar account. It’s this and that.” He can give you a pretty good synopsis on what that account’s gonna do.
Larry Towner: So, that’s one source, is to have a good equipment distributor, and he … A good equipment distributor will help you in many, many, many ways. They can help you with the repair side. They can help you with the sales side, to a certain degree. They can give you an analysis ability that you will have from experience, because they see all the vendors in town. They understand.
Larry Towner: And the other people that I’ll refer to are the same way. You see … They see it at a much larger base. They look at 100 different people. They know what works. They know what doesn’t work. It’s kind of that kind of thing. So, you’ve equipment issuers.
Larry Towner: Same thing would go with a good product supplier. If you go to, not so much like a warehouse club, because they don’t really know anything about it, but you go to an actual vend distributor, somebody that distributes out to all the various different vending companies in your particular area. They know what works, and what doesn’t work.
Larry Towner: They can also give you help on doing your marketing in the account, meaning … Each machine needs to be set up in a certain way, and so you … they will tell you what products really sell and what products don’t sell. They can usually give you an idea of what products sell to what particular demographic, and when we say that, we say … If you have an office full of women, for example, that’s a totally different set of products than if you have a … concrete facility where you’ve got 25 truck drivers. It’s just that it’s night and day. What sells in that concrete plant won’t sell in that office. So, a good product distributor that can help you with some of those information is a great place to find. And these guys are all local.
Larry Towner: There’s also the national organizations, and usually, there’s a state organization. There’s the National Automatic Merchandiser’s Association, or NAMA, and they can give you the numbers and the concepts on the whole industry as a whole in the United States. They have a tremendous resource base. They can tell you what works, what doesn’t work. They give you … They actually have formulas for what a proper numbers should look like in your vending business, as far as from your accounting standpoint. They have all kinds of information on equipment, and things like that. They do tend to promote who advertises with them, so you kind of have to be somewhat careful with that, but that’s gonna be typical of all of them.
Larry Towner: In an association, there’s also like state associations. In Georgia, there’s the Georgia Automatic Merchandiser’s Association, which is a local state organization, with the same basic concepts of the National Automatic Merchandiser’s Association, but it’s a little more specific to the state. If you have any kind of legal issues within the state, and things like that, they can help you out with that. And not that there’s a lot of legal issues, but mostly it has to do with paying your taxes, and this and that, and that kind of thing. They can help you out with that.
Larry Towner: So, you’ve got national organizations, state organizations, good local distributors for both product and/or for equipment, and then the other resource is actually go find some of your competitors, and now … Don’t go for your direct competitors. Don’t pick the guy whose town you’re trying to work in, or somebody whose accounts you’re calling on, but in general, if you go out and you find …
Larry Towner: My opinion was, I looked at somebody that was across town from me, and in Atlanta, that’s about an hour away. So, an hour away, we have very little cross. It was very, very rare that we would run into each other, and I would get tremendous information on what’s selling, what’s not selling, who’s looking for accounts, this and that. They would send me leads, because they would get a call on an account that was way out of their operational area, and they knew I was in that area, and they would say, “Hey, this guy’s looking for an account. Give him a call.” And so … and then also, tips on working a particular area, even down to things like traffic.
Larry Towner: I mean, you can get all kinds of things from what we … what I call a “friendly competitor,” and you kind of have to have a code with the friendly competitor. Basically, if you’ve got somebody that’s doing a good job … My whole philosophy is, if you’ve got somebody that’s doing a really good job on a vending account, leave them along, ’cause there’s plenty of people that don’t do a good job, so you can take accounts from them. You don’t need to take accounts from good vendors that are doing a good job, and offering things out at the right price and things like that.
Larry Towner: So, that gives you a pretty good resource base to work with, just at a cursory start, and that would be, go to a good equipment distributor, a good product distributor, go to the national organizations, the state organizations, and see if you can rustle up a friendly competitor, or maybe a couple of friendly competitors. I personally have about four or five people up in strategic points all around the greater Atlanta area that I talk to on a fairly regular basis. So, that’s a place to start.
Tom Shivers: Alright, great. Well, thanks for sharing, Larry. Tell us about your business and what you do.
Larry Towner: Well, what we do is we still … We’re still have a few vending accounts out there. We work mostly on the very, very far north side of Atlanta, but what I also do is, I do spend a good portion of my time consulting with people that want to get into the business. I’m extremely reasonably priced. I really don’t even charge for an initial consultation. If somebody wants to get in and really go into a deep analysis, and really wants to make a thing, we charge very modest rates for that kind of thing, and we can also steer them the proper way on equipment and all kinds of information like that. Give them the kind of the thing that makes them a good deal.
Larry Towner: Basically, my goals are, if I don’t make someone money, then I’m not gonna charge them anything for it, anyway. So, that’s basically what we do.
Tom Shivers: Well, you’ve been listening to the Vending Business Show, a publication of A & M Equipment Sales.
by Abco | Mar 4, 2011 | Start A Vending Machine Business
Vending Business Accounts Effective Selling How do you effectively sell vending machine accounts? That’s the million dollar 
question, the solution to all of your problems, right? I hate to break it to you, but more accounts will not necessarily solve your problems. In fact, having more accounts could exacerbate your problems and even quicken your business’ demise.
So let’s define effective selling: Vending Business Accounts Effective Selling Effective selling is obtaining profitable business, developing a working relationship with the accounts so the situation benefits both you and your customers.
Anyone can obtain new accounts by offering lower prices, bigger commissions, new machines, or sandwich/frozen/cold food machines. You might find that your competitors offer all of these. But this is not effective selling. Your challenge is to focus on profit and profitability, and let your competitors create their own problems.
One of the biggest challenges in selling vending accounts is deciding what makes a good/profitable account. Let’s look at a couple of scenarios.
You obtain two leads: one is a small business (25 employees, one shift) in an industrial park you are already servicing, the other is a very large facility (350 employees, 24/7 operations) that is across town.
You learn that both companies currently have vendors in their locations now, but are considering change. You set appointments to meet with both.
What now? Your goal is to make an objective assessment of the locations, determine their expectations, and decide if you can meet their needs profitably. Information is key, and this is the best (and easiest) time to gather any information that could be valuable in your endeavors. I strive to ask questions like:
- Who is servicing the account now? What do I know about this company? Are they reputable, good people? Do they generally provide good service? Do they effectively service the area and account in question? Are they using bottler’s assets?
- Why is the account considering changing vendors? Ask the question and let them talk, find out all you can about how they are being serviced now, what they like and dislike about their current service, what they would change.
- What is their expectation for equipment and for service scheduling? What are the hours of operation and/or access to the location?
- What is the pricing and do they expect commissions? Is the account open to a different pricing/commission structure?
- What is the distance from the truck parking to the machines, first floor, second floor, elevator, stairs, and dock? How quickly can it be serviced?
- Number of expected patrons? How many people have access to using your machines? How much indirect competition do you have (fast food restaurants or convenience stores within walking distance)?
- What are the demographics of the account? Age, gender, cultural and ethnic factors all relate to sales of product. What are the environmental conditions in the account?
- How easily is equipment moved into the location? Look for narrow hallways, large steps, short doors, tile and hardwood floors – any factors that could affect the move or that might induce unexpected liability.
In our scenario, you find that the 25-person account is being run by an operator you don’t know. He has told the customer that he is a part-timer who operates “blue sky” machines out of his garage. The customer relates to you that the machines are unreliable and that, while he makes a good effort to repair them, they just don’t seem to be fixed. The customer likes the selection offered, and the machines are full most of the time (mainly because the operator is out every other day to fix the machines and he restocks while he’s there). The customer has had several conversations about the reliability issue, but has had no solution to the problem.
You notice that the machines are in a small break room, down a narrow hallway, and they dominate the break room. You also notice that the demographics of the account are largely young males working in a warehouse with no climate control. There are 20 warehouse workers and five office staff. The warehouse ships and receives freight, and you notice a couple of truck drivers waiting in the warehouse. The operating hours are from 7:30 am to 9 pm (warehouse 7:30 am to 3:30 pm and office staff till 9 pm). The dock has a drive-up garage door, as well as 8 dock facilities. The building is in the middle of an industrial park; the nearest restaurant is a little over a mile away. The customer indicates they don’t want commission, just good service with machines that work.
Your visit to the 350-person account finds an account that is run by a local independent vendor you know. They run a tight operation, provide good service, and are generally very difficult to remove from accounts. The operation runs 24/7 and you notice that the current vendor has equipment that is 2-3 years old, and are using bottler’s assets. The location is in a secured facility, with a security checkpoint at the entrance and a pass card at the door. The break room is on the second floor, accessible by elevator. The facility is a service center for a large insurance company and is staffed largely by older women. There are several restaurants within walking distance and you notice delivery brochures in the break room. The break room has ceramic tiled floors.
The customer indicates that they are looking for a new vendor because the machine never has the healthy snack items that they want, and they are not servicing the machines quickly enough when there’s a problem. You ask about the service issue, and the customer responds that the drink machine took someone’s money last fall, and the vendor, arriving 2 hours later, could not find the problem with the machine.
The vendor pays a 25% commission – pricing is in your low range – and you learn that they are tardy in paying their commission payments, which they get on the 15th of the month. The customer really thinks their pricing is too high; they go to Sam’s Club and see that their current vendor is making too much money. You discover that their current vendor is the third vendor they have had in five years.
For those of you not experienced in the vending business, these are actual cases; if you’ve worked in vending for awhile, you’ve probably just pictured several of your customers.
Which account is more profitable? You be the judge. Both have their positive and negative factors.
For the first account, I would suggest putting full-size vending machines in the warehouse area close to the dock door. Free up the space in their break room (you wouldn’t want to move or service equipment in there, anyway). I would put in refurbished older machines, properly set up and maintained with perfection. I would set their service schedule at two weeks with the understanding that they can call anytime for service within 24 hours. Pricing would be on the high side, with an explanation that “professional service” is more costly and that the need to raise prices will be far into the future.
The second account, I would be blunt. I would offer new equipment with premium pricing, offering coffee service as commission. I would stress a high degree of professionalism, and if they want the best, they will have to pay for it. I might offer a second option of leasing them equipment and letting them have an employee take care of the machines; they could keep the profit. This type of account is what I refer to as a revolving door account; they have a new vendor every year, have no loyalty, and do not value service.
My goal with this article is to get you to ask the pertinent questions, to analyze an account for all it’s worth. Don’t be fooled by numbers alone. While large numbers are generally better, there are many factors that determine profitability. Understanding the various factors involved with operating a vending route can be the difference between success and failure.
If you have not read the previous parts of this series, I suggest you do so.
Together, these articles present a comprehensive overview of the vending business, so each article shows only a small cross-section of the business. Success in any one area does not mean your business will be successful; it’s important to understand the dynamics – the relationship between the various activities – to be effective.Vending Business Accounts Effective Selling
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