Vending Efficiency Operating Procedures An interview with Larry Towner, vending consultant
In this podcast, Larry discusses: Vending Efficiency Operating Procedures
Statistically you touch an item 5 times before it sells
Create a plan for loading your truck so that you get a smooth flow of products
Loading drinks vs. loading snacks
Keeping things neat and orderly makes you more money
Dealing with products going out of date in the warehouse
Use vertical space to your advantage
\ EPISODE TRANSCRIPT: Tom: I’m Tom Shivers with the Vending Business Show here with Larry Towner who is a vending business consultant. He’s been in the vending business for a long time so thanks for being here Larry.
Larry: Thanks Tom, appreciate it.
Tom: In the last show, past couple of shows, we’ve talked about some interesting topics like marketing at the machine level and product turn. Basically, at this point, in the process, the vending operators may be selling more product. I imagine Vending Efficiency Operating Procedures is, becomes kinda important at this stage.
Larry: Yeah, it’s kinda time to start talking about Vending Efficiency Operating Procedures because now that you’ve got everybody selling product at a strong level, a couple of different problems that come up, everybody thinks oh it’s great to sell a whole lot of product, that’s great I’ll be making all this money except there’s a couple of things people don’t realize when they get out to selling a lot of product that, kinda like where do you keep it? And how do you move it? And a few things like that and so one of the things that we’ll start with, and there’s a series of shows that’ll go on talking about operations and efficiency and things like that, but one of the things that or where we’ll start is basically in your warehouse operation. And Tom, where do you think most people start in the vending business if they have a start a vending company? Do you they start with the-
Tom: Probably in the garage.
Larry: Yeah, probably in the garage is right. Or maybe just out of the truck and they use Sam’s club or one of the other warehouse clubs as their warehouse and that’s actually a great way to start but eventually you’ll get to the size where you need to start storing up a little product and usually everybody tends to move to their garage.
Larry: A couple of things about your garage. First off is, if you are married or you have a significant other or whatever, they general don’t like their garage full of snack food and drinks and things like that so it can lead to some tense moments in the family life and one has to just be aware that that might happen. But when you set your warehouse up and it really doesn’t matter how big your warehouse is, but you wanna have your, kind of your mind on efficiency and how do you move product easily.
Larry: One thing that we’ve done through statistics and things like that is that we’ve found that when we take products and from the time we receive a product to the time a product goes into the customer’s hands, we have actually handled it five times. And that’s an awful lot of moving of product if you think about it. If you’re gonna do some significant volume, if you say move a 100,000 items a year, you’ll have touched those items 500,000 times a year because you’ll have touched them five times.
Larry: So if you can remove one of those steps out of there, that’s say 400,000 times that you touch everything instead of 500 and that will lead to more profitability down the road. When you go in to laying your warehouse out, and this can be as simple as your garage, or it can be as complex as a very large drive in warehouse where you’re gonna be loading multiple trucks at any given time, you kinda wanna have a plan as to how you load your truck and subsequently your combines with your truck. Which your truck then should combine with your machines so that everything has a very smooth flow to it and that keeps you from having handle things too many times.
Larry: So I always say first off, in the vending business we have two basic types of products. We have drink products and we have snack products and those two things. What’s the difference between those two, Tom?
Tom: One is liquid and the other one’s not.
Larry: That’s correct. And the difference is, tell me a little bit about the weight of each of those items.
Tom: Well the drink’s gonna weigh more than the snack.
Larry: Absolutely. And the drinks are much, much, probably 400 times heavier, I don’t know the exact number but it’s quite a bit so when we go to lay out a warehouse, we always try to set. For me anyway, I always try to set drinks where they’re essentially at truck level when I bring ’em in. I try to set my warehouses up where I can back the bumper of the truck up to ground level and we can move things into the truck without having to lift them up and you’ll understand that if you get into the vending business and you go to load a hundred cases of drinks every day and you have to load ’em up three feet into your truck every day versus just rolling ’em straight across the dock plate or something like that.
Larry: Now that’s tough to do when you’re in your garage but you can set up a ramp system and you can make a kind of removable thing where you can actually roll your drinks up on a hand truck, into your truck, from the ground. And these are little things, but at the end of a long day, when you go to load your truck or the beginning of a long day, just depending on how you set up your particular route, these little things make a big difference as to how tired you are and how much extra work you can actually do.
Larry: We always set our drinks on the ground. We generally try to put them on pallets because what my goal was is, that even in a garage type situation, I put it on a pallet, I invested the money in a pallet jack because if I took my drinks, I could actually take a whole pallet and pull it right over to the back of the truck and load from the pallet into the truck. It makes it much, much easier, must faster, and then you can roll the pallet back and put it back where it goes because keeping things neat and orderly is what’s gonna help you make extra money.
Larry: If you go into a UPS warehouse or something like that, you’ll find a huge automated system that keeps things tracked and itemized and inventoried and in the vending business, Tom, what’s one thing about vending products that you know that’s critical in a vending product, they all have something printed on them, what’s that that’s printed on every vending product?
Tom: The date. Or UPC code.
Larry: There’s an expiration date. Yes. And the basic problem with expiration dates is, is that when that expiration date arrives, you need to throw that product away or eat it either way but it’s no longer sellable as of the expiration date. And one of the things that always, always, always when I ran my businesses or I run my businesses I should say that absolutely infuriates me is to have product go out of date sitting in the warehouse and believe it or not, it happens in every company and it happens because people try to cut corners so you have to have a flow system where the old date product, the longest purchase to go gets put on the truck first and this is done by good organization, making sure you can see all of your product, don’t have any place where product can fall down behind other product or get hidden by other boxes and when you go and you purchase product, make sure you move the old inventory up and push the new inventory to the back. Sounds simple but you’d be amazed how much it doesn’t happen.
Larry: And one other thing when we go to lay out a warehouse and particularly in a garage type situation, you really wanna make sure you use vertical space. And when I say that invest in some shelving or build some shelving, either way, it doesn’t really matter but get some shelving. You can good, inexpensive shelving. Pallet racks work really well. They’re very, very inexpensive and you can stack your products up vertically. Drinks always go on the ground ’cause they’re heavy and you really don’t wanna be lifting drinks but your snack products can go all the way to the ceiling ’cause they just don’t weigh anything. A box of chips only weighs, I don’t know not even a pound and anybody can pick up a box of chips, including women.
Larry: So that’s just some little tips. The organization of it is, is that when you go from your warehouse into your truck, you wanna have a flow. You wanna have everything in the same place and we always organized our warehouse the same way we organized our trucks, which in turn, was dependent on how our planograms were set up in the machines, meaning, as we talked about in the last show when we were marketing at the machine level, we had certain things in certain places. We then took, we worked our way backward from the machine level to the truck. When you walked into one of our trucks on the shelves, it looked just like the machine. The top shelf stuff was on the top shelf. The middle shelf and so forth and so on down the shelf so when you walked up to that machine and you wrote down you needed six of this and six of that and six of this and six of that, you went into that truck and the truck was exactly the same way, where the top shelf had all those products and the middle shelf.
Larry: And then, at the end of the day, or the beginning of the day depending on when you load, you go into the warehouse, everything is in the same place there as well so you’re never confused because you put something in the wrong place. Does that make sense?
Tom: That’s great stuff, Larry. Thanks for sharing. Tell us a little about your consulting business.
Larry: Well, we do consulting. We give these kinds of tips and more out to the various people that are particularly start up companies or companies looking to the make step in vending that are looking to move up and do more in the vending business but startups are really who need the most help. We can be reached at [email protected] and just drop us an email and we’ll see if we can get together and possibly help you out.
AN INTERVIEW WITH LARRY TOWNER, VENDING CONSULTANT.
Larry is a veteran vending operator who has had success in all areas of the vending business and in choosing a vending machine product. Listen to learn why it’s important to have the proper selection of products in a vending machine:
Know the number of times a product turns in a year
Know the difference between large and small profits
Most vendors shoot to turn once every 2 months
You want inventory to turn as fast as possible
The key to profits is product selection
Rotate products thru a cycle (the steak flavored potato chip)
How to maximize product turn
The McDonald’s McRib sandwich
When users know what’s there all the time they tend to ignore the machine
What’s new this week?
A VENDING MACHINE PRODUCT TURN CONVERSATION
Tom Shivers: I’m Tom Shivers with the Vending Business Show, here with Larry Towner, who is a vending business consultant. He’s been in the vending business for many years, and not too long ago sold the majority share of his vending business. Thanks for being here, Larry.
Larry Towner: Thanks, Tom.
Tom Shivers: In the last show, we talked about marketing at the machine level, and you pointed out a lot of interesting things. For example, which products sell best, product placement, presentation, setting the machine up, and then … a lot of other things that come into play there as well. Even another one was making the machine look fresh.
Tom Shivers: Why is it important to have proper selection of products in a machine>
Larry Towner: Ah, the magic question, why do you want the right products in the machine? Well, the basis of machine level marketing, or planograms, or whatever you want to call them, planograms is actually the picture of how your machine looks and where everything is placed, gets into a couple of different things, but the biggest issue there is to essentially give the people what they want, which in turn is going to give you what we call product turn. Product turn is the number of times that you sell a given product in a week, month, year, day, whatever it happens to be, but generally, it’s referred to as the number of times that a product turns in a year, and most businesses look at turn as being critical. Turn can be the difference between making large profits and making small profits.
Larry Towner: The key to machine level marketing is to make sure that you put the right products in there so that you can get enough turn to justify having the product in there, and when we say turn, what we mean is that if you sell a product … Just for example, if you sell one product, and you sell six columns of it, say, six full columns or 12 selections each, whatever, however you want to look at it, let’s just say you sell six versus selling 12, if your margin is the same, of course, you’re going to make more money selling 12 versus selling six, and that’s what we consider to be turn.
Larry Towner: Most people consider turn to be how fast you turn your entire inventory, and most vendors shoot to turn their entire inventory in, I’d say a figure of about six times a year, or once every two months. If you look at your dating on your products and things, that’s really where those figures come from. The figures come from the fact that most of our products have about a two month date one them, roughly, if you look at potato chips. Pastries, of course, are a little shorter, and any fresh food you do, of course, would be much shorter.
Larry Towner: But that gets to be the critical issue, is that you want your inventory to turn because you make more money when the product turns, or sells, basically. If you can turn your entire machine … If you take, and you take a 40 select machine, and you turn the entire inventory over six times a year, if you can make it turn seven times a year, that’s like adding another two month cycle into your year, so that’s like having your year be 14 months instead of being 12 months, and that can be significant money. The key to product selection and marketing at the machine level are giving your customers what they want, when it’s all essentially the same thing, that’s where it becomes critical, because to get the extra profit out of it, it adds up to some very, very serious money.
Larry Towner: At one time, I did a little study. I said, “If I can get each of my machines to turn one column more per week, that I would average,” on average it was something like, “an extra $5,000 a week in income,” and that’s significant in a small business. It’s significant in a large business. If you can get one more turn, you get an extra $5,000. So that’s why turn is so critical.
Larry Towner: Kind of interesting, isn’t it, Tom?
Tom Shivers: It is, it’s fascinating. It’s like you’re optimizing the whole business around the products that are selling in the machines that you have, though it sounds like you really have to experiment, perhaps, to find out which products turn the fastest or the best.
Larry Towner: Yeah, you actually, you do, you know? You want to try new products. New products always sell well. They always tend to turn pretty well, but the question is, do they have longevity? What eventually you’ll learn is, you learn at each given account what really sells, and what kind of cycles you can rotate things through.
Larry Towner: We rotate our products, or we always rotated our products through kind of in a cycle, and when I say that, I mean, we would give a product … I don’t know if I have a hard example, but an optional chip, we call them optional chips. It might be, say, a steak-flavored potato chip, and we would run those about every three to four months, just for example. We would find that when we would put them in, they would get snapped up and purchased very, very quickly. What we would do is we would watch to … at a point where they started to slow down a little bit, then we would take them out, and we wouldn’t run them for another four months.
Larry Towner: The best example I can give you of that kind of thing is McDonald’s, and I say it because right now, as we sit here, I know that McDonald’s has their infamous McRib back out in the stores, but they don’t run the McRib all year long. They only run it every so often, and when they do, they tend to get pretty good sales out of it, and so that’s a different kind of example, but it’s the same example. We always try to do the same thing with some of our optional chips.
Larry Towner: You’ll find that some of your chips will sell all the time, and when you get those chips, you leave those in, and they sell consistently, day in and day out, but your other chips, candy bars, it doesn’t matter. It all has its cycle, and you can cycle it through, and that gives you maximum turns, and so that’s how you get maximum turns.
Larry Towner: If you go … I’ll give you another example. Tom, have you ever had vending in any of the businesses you’ve ever worked in through the years?
Tom Shivers: Sure.
Larry Towner: When you walked up to the machine, and it was the same stuff in there that you saw for the past two months, were you real excited about buying any of it?
Tom Shivers: No. I mean, you know what’s there, so you just kind of ignore it, I guess.
Larry Towner: Yeah, you kind of ignore it. See, that’s … When you get at machine level marketing, that’s what we always try to not have happen, because we realize that … The difference is, see, a vendor goes to the machines, let’s just say, he goes once a week, or even if he goes on a daily basis, as a vendor, if you go to the machines, and the machines look stale and boring, and when I say stale and boring, it’s like, “The same stuff, the same blah, blah, blah,” it’s time to change the machine. Just change how it looks. Move stuff around, maybe add some new product.
Larry Towner: That way, what happens is, is people go to the vending machine. My goal, anyway, was always to have people go to the vending machine and say, “Hey, what’s new here today?” Or, “What’s new this week?” Pretty much every single time … We did the majority of weekly accounts, so every time we went, every week we went, we would try to add something new and take something out, so that the machine always had something different in it that people could look at and try.
Larry Towner: I’ve been in and worked in too many places in the past where nothing ever changed, and you just kind of got to the point where you’re like, “Yeah, whatever.” And so, that’s what our goal is, is to maximize turns, is to keep rotating things around and changing things up.
Tom Shivers: Yeah, it makes a lot of sense. I mean, you definitely want it fresh, like you said, and kind of like you were talking about the McDonald’s McRib sandwich is kind of a scarcity play, because you never know when it’s going to be there and how long it’s going to be, and then when it’s gone, it’s gone for a while.
Larry Towner: For a while, right. But they do tend to cycle it and bring it back, so you know it’ll come back sometime, and they sell it and that, and we do kind of the same thing, because we have, essentially, 40 selections or so, 32 to 40 selections, most of our machines are 32 to 40 selections, and drink machines run anywhere from five to 10, but even with the drinks, we tended to rotate drinks around a little bit. We’d always add a couple of optional flavors in that were … and I say optional in that pretty much our planograms had Coke, Diet Coke, Mountain Dew, Dr. Pepper, Pepsi, and then usually another … we would have flavors and things like that, but we would rotate the flavors around too.
Larry Towner: We’d run orange for a while, then we’d run grape, and then we’d run … Warm months we’d run tea, and then we’d run non-carbonated stuff in the summer, maybe chocolate drinks like Yoo-hoo or something like that in the wintertime. That way, you always had something that’s fresh and new also, even in the drink machines, because while people want what they want, they also do like to try new things, so that’s kind of the concept of turn, and that’s the way that you, or it’s the way that I’ve found that maximizes turn really well.
Larry Towner: That’s why we do it, and we do it … If you take and run the numbers sometimes, you’ll see it can add up to significant in money.
Tom Shivers: Yeah. Well, thanks for sharing, Larry. Tell us about your consulting business.
Larry Towner: Well, what we do is we do consulting. We give you tips like this and a whole lot more, just depending on wherever you’re at with your vending business. We work mostly with startups, or people that have been in business and are looking to get bigger, and/or are struggling with their business, trying to figure out what are they doing, how are they doing it, and how can they become more efficient?
Larry Towner: Efficiency is something that’s absolutely critical in the vending business. It’s probably a topic we need to talk about for another show, but efficiency comes out to how you make the decisions on which product to buy, and how you actually operate your business, how do you walk into the business and do your job when you actually get accounts? How do you, right down to the nuts and bolts … If we can save you minutes, we could save you dollars, so that’s what we do. We do analysis and we can help you with sales and marketing. We can help you with all kinds of things, all aspects of the vending business.
Tom Shivers: All right. You’ve been listening to the Vending Business Show, a production of A&M Equipment Sales.
An interview with Larry Towner, a vending consultant.
Larry is a veteran vending operator who has had success in all areas of the vending business. Listen in on how to max out end-user sales,
The efficient system Which products sell best?, Product placement, Presentation, Setting the machine up, Loading the truck handling requests, optional items, New products tend to sell rapidly Part science, part art, Make the machine look fresh as well as vending machine marketing
Tom Shivers: I’m Tom Shivers with the Vending Business Show here again with Larry Towner, who is a vending business consultant. He has been in the vending business for many years and sold the majority share of his vending business a few years ago. Thanks for being here, Larry.
Larry Towner: Thanks, Tom.
Tom Shivers: In the last show, we talked a little bit about what to do when you get a new account or your first account. And I’ve heard you mention going forward from there what you call marketing at the machine level and vending machine marketing. What does that mean?
Larry Towner: Well, vending machine marketing and marketing at the machine level, Tom, is basically if you consider a vending machine to be a mini store, more or less it’s a small convenience store that’s located in someone else’s business. So when we talk about marketing at the machine level, when you’re in the vending business, there’s two people that you market to. You market to the accounts, which is how you actually get the vending accounts, and then you also market to the end users in the account. And when we talk about an end user, we’re talking about the people that actually put the money in the machines and purchase product.
Larry Towner: When we talk about marketing at the machine level, that’s what we’re referring to, how you maximize your sales out to the people in the account. How do you get most sales and how to … And then we tie that in also with an efficient system to actually operationally run your company in a smooth and efficient way. And a lot of what we talk about when we talk about marketing at the machine level is first off, you need to get to know which products actually sell the best. And each product there’s … If you look at the industry standards, there’s a series of products that consistently outsell everything else.
Larry Towner: This information is available from the National Automatic Merchandising Association, and from the magazines like Automatic Merchandising and Vending Times. But in general, every year it seems like … Well, it actually seems like Coca Cola is the number one selling drink. Snickers is generally the number one selling candy bar. And in general things like honey bun is actually the number one selling pastries. These are consistent to statistics that occur year after year.
Larry Towner: So you need to read through some of those trade magazines and find out what actually sells nationwide or worldwide at a high level. That’s right where you start. The second thing is how you market at the machine levels. Now, when we were running our business, what we would do is we had a specific set of things that we would run in every machine because if you’ve got a 30 or 40 select machines, just depending on the size machines that you put in, there’s always lots of space for optional products, what we call the optional products. But we would always run a certain selection of products at the machine level, and some of those would include … Snickers, of course, has been the number one selling candy bar, so we would always run Snickers.
Larry Towner: We would run a M&M yellows also and honey buns and usually Cheetos, Frito’s, Doritos, barbecue chips, and plain chips. Those were generally the largest selling potato chips. Usually, we would run like a peanut butter cheese cracker, some kind of a multi-cracker, some kind of a cheese cracker, some kind of a sweet cookie, and usually peanuts as well if we had that kind of information available. And then usually we would run Cheez-Its as well. The rest of the machine became kind of optional.
Larry Towner: Now, when I talk about vending machine marketing & marketing at the machine level, one thing you need to do is you need to kind of understand that in a machine, much like in a store … Tom, when you go into the grocery store, what do you notice? Isn’t things kind of set up in a certain way?
Tom Shivers: Well, you got produce is on one side, and you got dairy up towards the back, and meat is in the back almost in every store. And then off to the other side there may be other items, and then in the middle there’s always something like frozen foods or something.
Larry Towner: Yeah. Does it always seem funny that all the stores basically lay themselves out all the same?
Tom Shivers: Yeah, it’s Kinda like a maze.
Larry Towner: It’s Kinda like a maze, yeah. Well, the idea there is that the grocery stores and the convenience stores and also the vending industry has spent millions of dollars in research to find out where you put things because you’ll find out that they sell the best in certain locations. And in the vending industry or basically it’s in all industries. Actually, people are drawn to the center of the aisles are the center of the machine in our case. And you tend to put your best sellers at eye level.
Larry Towner: So in vending machines, you want to take your best sellers and you basically want to put them in the center of the machine. And you want to try to get them at eye level, although that’s not possible because we work in a vertical arrangement, but best sellers in the center of the machine and work your way out from that way. This is a marketing technique. Another thing when you study marketing and actual selling, what you would call selling when you’re not there, which is what marketing actually is, is you have to be aware of presentation. And presentation includes things such as composition of the color or the package, how the package looks, and things like that.
Larry Towner: Generally, it’s not a good idea to put the same color packages right next to each other. So if you have two packages that happened to be red in color, you generally don’t want them sitting right next to each other because what happens is people look at it, they tend to get confused, and if they purchased the wrong product, then they tend to do things. In vending anyway, they’ll tend to hit the machine or get mad, and they might not buy from you.
Larry Towner: So you want to keep those kinds of things aware of what’s going on. When you’re looking at it, you want products that are in similar color packages to be separated from each other. Again, this is done at the machine level, and this is done usually the first time that you set … We call it setting the machine up. When we did our businesses, we set all of our machines up exactly the same way. We did that for a reason. We did that so that we actually set our machines up the same way. We set all our truck inventories just like they are in the machine, so when you’re working in your truck, as you do your pick list, when you go in and you actually pick out what you need and what items you need to restock, you just move just like you’re in front of the vending machine to pull all your product. If you do this at work very, very well.
Larry Towner: If you just go out and throw all the product in the truck, and you can’t find it, and you can’t this … The vending business is a business of minutes, so you want everything set up smoothly, well-organized so that you can find things. And that goes for in front of the machine. When I go to my machines now, and I still have a few out there, I don’t even have to think usually what’s in a slot. I know what’s in those slots because have been doing it for years. I know that in certain places there are certain products in all my machines, and so it just makes it that much faster. I also can track my sales a little better in my head. We don’t use a computerized system and never did to track our actual sales on at the column level, meaning how many times … How many Snickers are you selling in every machine, how many this, how many that? We use general statistics.
Larry Towner: We just found it to be a little more efficient. Although if you can mine that information can be very helpful, but it’s not necessary. So anyway, that’s marketing at a machine level. One of the other things, when you market at the machine level … Now, Tom, you, you’ve purchased vending products, is that correct?
Tom Shivers: Sure.
Larry Towner: If you had vending in your company, and let’s just say you wanted something special, would you want your vendor to supply that?
Tom Shivers: Oh, absolutely.
Larry Towner: Yeah, and that’s one of the things that we try to stress. Obviously, we’re in the business of trying to give people what they want. If you give them what they want, they generally will spend more money with you, and theoretically you should make more profit. So this is talking about requests. When we marketed a machine level, while we might put in many of the same products in each of the machines, we do allow for a certain number of optional type items. And optional means that it’s not part of your standard planning grant. It’s not so part of your standard arrangement. And optional items, for me, always came from customer requests. We would do a number of things.
Larry Towner: We had suggested in the last show when you put your first set of machines out that you actually hand the customer a request list with some of the items that you have and some of the items that might have or that they might want. And when you take those kinds of lists, we would post those, those lists up on the machines regularly throughout the year, usually once a quarter, maybe once every six months, just to see if anything’s changed or if anybody wants anything new. Oftentimes, people will tell you or make a request to you actually in person as you’re servicing the machine, but sometimes it’s just a nice memory jog or if they have a little note that they can write it down, hey I want Hershey’s with almonds or something like that.
Larry Towner: Whatever it is that they happen to have a hankering for at that particular time. And those particular items go into the optional columns or the slots that you don’t necessarily have your main line things because some things, they just sell well. They sell well all the time, and you want to keep those things. At the machine level, what we find is that when you put in something new, it tends to sell very rapidly quickly. So if you put a new product in that they haven’t seen for a while, you’ll get a tremendous spurt of sales initially. They’ll come out, and they’ll purchase that initial product, and they usually buy it out very rapidly because they liked something. It’s something different, but that doesn’t necessarily mean it’s going to have longterm sales. So you have to be kind of aware of what’s happening when you put things out there, particularly if the manufacturers introduce a new product, say a new potato chip or new … whatever, a new flavor.
Larry Towner: You put it in, and you’re probably going to get a rush of sales on it initially. But then, it will slow down. So you have to be careful because you can get stuck with a lot out of date inventory. But with that said, that’s what marketing at the machine level is. I’m going to say it’s part science, it’s part art, some of it is we would change things at the machine level fairly often because it gives the appearance of it being new, and that spurs your sales. Sometimes we would also take things, and we just changed the arrangement in the machine every so often just to make it look new.
Larry Towner: And that’s another little tip to do what we call machine level marketing, where if you’re used to running Cheetos on the right side of the machine, move them over to the left side of the machine, that kind of thing. It makes the machine look fresh. It also gives you the ability to let the people know that the product actually is fresh because freshness in the vending business is critical. Don’t run out of date product. If you do, you’re going to end up not being in the vending business for very long.
Larry Towner: What comes to mind for you, Tom? Do you have any questions as far as the marketing at the machine level? I can go on for a really long time on this. There’s all kinds of little tricks, but these are some of the highlights that we’ve used through the years.
Tom Shivers: Yeah, I liked the … It sounds like you found that there are certain things that bring high efficiency to the vending business, and these are the kind of things that attack … What’d you call marketing at the machine level, getting the end user … maximizing end user sales basically.
Larry Towner: Correct.
Tom Shivers: So that’s fascinating actually, and it’s interesting that you can utilize basic statistics overall rather than collecting statistics from each machine.
Larry Towner: Yeah. Well, the industry publishes some beautiful statistical stuff. Now, that doesn’t necessarily mean that your particular company is gonna abide by those statistics. And I use one great example that the people at the bottling companies love to hear me use, at least one bottling company they love to hear me use it. In my company we had the number one selling drink in the wintertime was Coca Cola, and we track it per season just because. But we would see Coca Cola would outsell all the other soft drinks in the winter. But in the summertime, in my accounts, we had kind of a specific demographic that we hit. Mountain Dew would overtake and surpass Coke in the summertime. And overall we sold more Mountain Dew than we did Coca Cola in a year by the time we added it all up.
Larry Towner: Now, that highly counter to what the national statistics are. National statistics will say that Coca Cola should outsell everything else about two to one. And in many of our accounts that would be the case, but we had a lot of accounts with a lot of young guys. And we’re here in the South, so it’s very hot for most of the year, and they would drink Mountain Dew instead of coffee. For my company, that’s what we found out. But that doesn’t mean that we still … It means we wouldn’t not run coke. It just means that we were aware that Mountain Dew might outsell coke in the summertimes, in the hot months. And that’s local information, but you take those national things, they’re a place to start. And particularly if you’re new in the business, look at what everybody else is doing.
Larry Towner: I forget how many vendors are in the country, something like 10 or 12,000 full time professional vendors, and those are bigger companies. Everything they do can’t be wrong because they’re in business, and they’re sustaining their businesses. And so you have to learn from what they do so that you can be successful yourself.
Tom Shivers: Yes.
Larry Towner: Learn from somebody that’s been doing it for a while, and then make your changes or your particular changes later on after you get used to what you’re doing.
Tom Shivers: Yeah. It sounds like some great … just good entrepreneurial tips. Learn from the successful person to be able to do the same thing, right?
Larry Towner: Basically. There’s very little innovation in business overall. There are always the Steve Jobs and things like that, but they comprise a tiny percentage of the market when you look at all of the business that’s out there in the world. And your best ability is to identify when the market is soft and take advantage of the market versus trying to create a market, as it were. That’s basic entrepreneurial advice I learned a long time ago.
Tom Shivers: All right, Larry. Well thanks for sharing. Tell us a little about your consulting business.
Larry Towner: Well, what we do with our consulting business is much of what we’ve just described things here. What we do is we help people become super efficient in their businesses so that they can be successful. We can teach all aspects of the vending business and other businesses as well. Actually, we were talking a bit about sales here last night, and some people have since contacted me and wanted to know more about just how to sell, and do we do any sales training? So we can teach you how to sell business to business, mostly.
Larry Towner: Now, personal sales or a different issue, but in a business-to-business sales, we can teach you how to do that, can teach you how to run your operation efficiently, can come in and do … After you’ve already been in business for a while, come in and do a market analysis a take a look at how you’re running your operation. Are there things you can do to improve? Our goal basically is to help you become more profitable, and we can make you become more profitable. We don’t really want you as a customer, not in a negative way, but our goal is to make you more profitable. That’s how we get paid. We can be reached at servicegroupinternationalatearthlink.net. And that’s the best way to get ahold of us, and we’ll go from there.
Tom Shivers: All right, great. And you’ve been listening to the Vending Business Show, a publication of A&M Equipment Sales.
Placing vending Machines An interview with Larry Towner, vending business consultant.
Placing Vending Machines Larry reveals numerous tips for identifying a good vending account. Listen in as Larry describes:
Identify what type of accounts you want to be in
The sales plan to land new accounts
Referrals are the life-blood of your business, so know and take care of the key people in each of your accounts
Minimize windshield time by focusing on a specific geographic area for your operations
Just because you have a location doesn’t mean you should have a vending machine there
It’s a numbers game that is focused on ROI, otherwise you lose
Call on friendly competitors to share leads in the areas where you do not focus
Placing Vending Machines Tom Shivers: I’m Tom Shivers with the Vending Business Show, here with Larry Towner who has been is the vending business for many years. Before we get going to far I just wanna point people over to the blog where you can see more podcast and the Vending Business Show, it’s amequipmentsales.com/blog.
Tom Shivers: Larry has been in the vending business for many years and he sold the majority share of his vending business a few years ago, today he provides consulting. And last time, well be fore we get going there, Larry thanks for being here.
Larry Towner: I appreciate it Tom.
Tom Shivers: We talked about the vending business, whether it’s a reliable venture or not and got into a few questions like what’s the history of the vending industry and you’re pointing out it’s a numbers game and we also got into the question of how would you know you’ve got a good location for a vending machine and you gave a lot of good tips on identifying a good vending account. What are some other good tips for finding a good vending account or a good location?
Larry Towner Placing Vending Machines : Well good vending accounts are, I wanna like, any business. It’s really more or less a sales and marketing effort. In the vending business you have two different areas that you do sales and marketing. One is the end consumer which is the person that actually purchases the product that you actually get your income from.
Larry Towner: But before that you have to actually do what’s called place the machines and in the process of placing the machines you have to create a marketing plan, we’ve already talked about doing a business plan. But there’s a marketing plan that goes along with that and that is what type of accounts do you wanna be in. And when I say that is, pick up an account that you have an idea of what it is that you wanna be. Do you wanna be in the amusement park because, do you wanna be in the apartment business, do you wanna be in the commercial business where you’re in people’s offices or their plants, do you wanna be doing street vending? There’s a very large number of types of accounts that you can get.
Larry Towner: So the first thing you do is you kinda decided where you wanna be and what you think you’ll be successful at. And then you go out and you start a sales process on getting these accounts. And a sales process is as simple a walking into an establishment or walking into your potential prospect of where you wanna place your machines and basically asking a few questions.
Larry Towner: I’m big in my sales processes to ask a lot of questions about what they have now and are they happy with it and how is their pricing. And I do things like I look at their machines, I wanna see what they have and sort of products they’re running and things like that. So that’s the beginnings of an actual sales process and we’ll talk about sales and marketing through this whole series of blogs or podcasts, I guess, that we’re gonna do because sale and marketing is the crux of all business really at this point.
Larry Towner: And you have to learn, if you’re not comfortable selling, you have to learn how to sell a little bit. Now that doesn’t mean that you go out and you become a professional salesman, what it means is if you just get comfortable with some of the basic sales steps that it take to get business.
Larry Towner: One of the big things I would say is consistency. And one tip that I tell a lot of people that aren’t sales people in general, is look, you don’t have to go talk to 25, 30 people in a day. A true professional salesman needs to talk, in the neighborhood, needs to talk in person to 10 people and he needs to talk on the phone anywhere from 50 to a 100. So you don’t need to do that necessarily. You might do that in your initial stages of your business, but I always say once you get yourself up and running and you’ve got yourself a few accounts, if you can do as little as stopping and seeing one or two people when you’re starting in a day, and as you get busier and busier it’s more like one or two people in a week and sometimes even one or two people in a month.
Larry Towner: At the end of my run in my vending business I would spend about three whole days a year selling, that’s all I needed to get me enough business to replace whatever I had lost or what had gone out of business or what had just needed replacing in a year. So at the end of my full-time vending career, I guess I wanna say, I’d sell three days a year, which is pretty nice actually.
Tom Shivers: Yeah, that sounds very convenient and I assume if you’re doing a good job you may have some residual from referrals.
Larry Towner: Referrals become a huge portion of marketing effort. What happens is, a lot of what happens is, is you’ll get key people in your accounts and the key people are, they’re just your end consumers and as long as you take care of them, you’re there and you’re talking to somebody in the break room and they ask you for something and you take care of them and you get them the product that they want or I give them a refund because they one that was bad or whatever, any of the number of things that encompass taking care of your customers and they remember you.
Larry Towner: Well they switch jobs, and they go from ABC company to XYZ company, and they get in there and the vendor that’s there isn’t doing as great a job, and they remember you or they call somebody in their former company to get your phone number, and you’ll get a huge amount of business that as long as you take care of your customers. And so it’s that, it’s also that business owners talk. Gee, I’ve got this vending guy, he’s just not doing it. Well geez, my guy does a good job, same thing, here’s his number.
Larry Towner: Really I also got more business from my end users. They would go from place to place and they would drag me in with them. Especially mid level managers, in general, the people that you deal with a lot, they’ll take you with them. Even end users, we do a lot of stuff with truck drivers and truck drivers are job jumpers and we would end up with going from this trucking company to that trucking company, to this one to that one and it all would be one or two people and they’d just be moving around and taking us with them and then we’d go in and give great service and we wouldn’t lose anything. So referrals do play. They’re really the life blood of your business.
Tom Shimmers: Yeah. It sounds like as long as you’re providing great service and you’re getting along with the mangers there, you’re gonna get referred by other … You’re gonna get referred out.
Larry Towner: Yeah, if you’re doing it right you will get referred out. There really is no doubt about it and it’s not all that difficult to do really well, we’ll go into that on a another show sometime, just some tips and tricks on the actually operate in a vending account pre say, what od you do when you actually show up, actually what do you do when you get there.
Larry Towner: We spent, I don’t know, 20 years figuring it out and basically we took all of the tips that we had learned from every vendor we had ever come in contact with which is a very large number of vendors and some from other countries and other states as well. So we tried to come up with a system that works really well and then we also list on the national [inaudible 00:07:37], but we’ll talk about that ina future show, that’s a whole show in and of itself.
Tom Shimmers: Okay. Well yeah, getting back to the good location for a vending machine, I know you were going over some of the things to avoid and the things you oughta be looking for that gives you a good indication. I imagine you have to say no a certain amount of times to stores or places or locations who really wanna a vending machine there but just aren’t a good fit.
Larry Towner: Yeah. It happens relatively often. There’s a large number of factors that go into choosing a vending company. Much of it goes back to your initial planning. We set ourselves up in kind, I’m gonna say geographical areas, we didn’t wanna operate outside of a specific radius from our main base of operation because for driving reasons, windshield time is unproductive time. And so our job really … Your most productive time is when you’re actually there filling machines, taking care of customers and selling product basically which is what filling machines is actually all about.
Larry Towner: So we always worked in a geographical basis. And probably our biggest reason for turning down businesses, we’ll get referrals from places that are outside of where we deem our area of operation. If it’s a single account that’s way across town and unless it’s extremely large it just doesn’t pay to go do a small account or even a medium size account if you have to spend 45 or 50 minutes in the vehicle because the other side of it is that you will have service calls and so it’s 45 minutes out and 45 minutes back just to unjam a coin or unjam a dollar bill.
Larry Towner: So that would be the biggest reason why we say no. The other ting that does come in is everybody thinks that just because they have a location that they can get a vending machine. And this is kinda something that a lot of the … Well a lot of vendors have done it to themselves. We’ve done it to ourselves in the vending business. Not everybody can justify having vending in their locations. And it has been, in the past, very much the case that if you got a phone call, somebody would take the account.
Larry Towner: Fortunately, I guess, in this tough economy, that is starting to be less and less and in fact even Coca Cola and Pepsi won’t place machines everywhere like they used to anymore. And when the big boys won’t do it it means that the small guys should be paying attention and should be understanding why not to do it.
Larry Towner: And basically it comes down to return on investment or gross sales or however you wanna look at it, you can’t just, if you have two people, you can’t place a machine there or if you have five people that won’t eat, you can’t place a machine there. You just won’t do enough business to justify your costs. It’s really not a magic formula, it’s just a numbers game and that’s what people don’t do. They go oh yeah, I put it in, I drive by there every day. Well you drive by there every day but if you go there every six weeks or every two months and you pull a 100 dollars out you’re really not paying to even have it there. You’re actually paying to have it there by the time you count your maintenance on it and your wear and tear on the equipment.
Larry Towner: So those are some of the things that you kinda have to avoid or reasons why you would turn down an account. Basically it’s not big enough, it’s outside your geographic area.
Larry Towner: Back on obtaining accounts. One of the things that I did is I had a lot, I called them friendly competitors. And what they are is they would be people that were in the vending company because I was primarily a small account vendor, had some mediums, and had a couple of big accounts, but primarily small account vendor, and what I got to do is I got to know some of the vendors that were around town that worked the other areas that I didn’t work because Atlanta is a rather large city and I basically broke it up into about four or five quadrants and I got to know a few guys that if I got an account, I was up on the north side, if I got an account call on the south side, I’d call up my buddy down there on the south side and say hey, I’ve got a lead for ya and it’s here, and I’d give them the description and who to talk to and all that sorta thing.
Larry Towner: And then they make the call [inaudible 00:12:03] but what ends what happening is if you do that with somebody and it’s somebody that you can trust, he will start sending you leads as well for the calls that he gets on the north side or however your city is laid out or however your area of operations are laid out. But that worked really well. It’s kinda like a referral, it’s basically a referral, but it’s another way to generate leads and plus you get to learn a little bit of the system if you get talking to somebody, how do they do business?
Larry Towner: And you learn what works for them, what doesn’t work for them. And then you’ll also find, in my case anyway, I always kinda had a thing that I knew the guys that I chose did business the way that I did business and so I very rarely, we rarely traded accounts, very very rarely did I ever take one of his or he takes one of mine.
Larry Towner: Usually if that were the case the customer was the determining factor not the other company. And I say that because a lot of people say you’re talking to competitors, that’s crazy, they’re gonna steal your accounts. And I’m like well, no not really because it’s out of the area of operation, they don’t wanna drive far. We would occasionally trade accounts right on the fringes but usually that was driven by the customer, not by the other company. Meaning, because they would be on our fringe of operation, our service level wasn’t quite where it could have been just because of the distance involved. So anyway.
Tom Shimmers: All right. Well Larry thanks for sharing. Tell us a little bit about your consulting business.
Larry Towner: Well we do consulting.
Larry Towner: We basically, if someone’s interested in getting in the vending business, I like to work with new vendors and what I like to do is make sure that they understand what they are getting into. We try to be pretty reasonably priced.
Larry Towner: We can do everything from operational to sales and marketing to product development, business plans, the whole thing. We can take you from start to finish, give you some ideas of what kind of equipment you need or what kind of equipment works and what’s cost effective, what’s not cost effective. We’re trying to help everybody make money is really what we do. And try to be as efficient as possible.
Larry Towner: You need to be really efficient in vending to be really profitable. And so it’s very helpful to have somebody that kinda knows the ropes and can give you the tricks and that’s what we do.
Tom Shimmers: And people can reach you at, what’s that email address?
Larry Towner: [email protected], one word.
Tom Shivers: Okay, great. And you’ve been listening toPlacing Vending Machines at the Vending Business Show, a publication of A&M Equipment Sales. More Vending Blogs New To The Vending Business?
On This week Podcast larry gives us Vending Business Tips
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.
Don’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?
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:
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