Do you base your commission percentages off GROSS SALES or PROFIT ?

[mizugori]

I just want to know what people usually do and which works better, because I am finding conflicting views on the subject and I want to be prepared to deal with the subject when it comes up.

[Profits]

In my opinion the only reasonable way to do commission is to split it after product cost, but before all other expenses. This is most fair and most reasonable, and locations will (should) respect that.  Only in vending have I heard people talking about splitting gross, and to put it simply I think those people are f#ck1ng nuts.  Nobody would expect that unless you're offering it, so don't offer it!

[fronk327]

Percentage of gross is easiest.

[Rick Falcon]

How do you find the time to sit there and figure out profit in each location besides if you are paying 8 cents per gmbl. and selling it at 25 isn't that your profit already?

[Profits]

It's a simple process to determine profit per vend. If you're splitting gross you're doing yourself a huge disservice.

[T BIRD]

It's a simple process to determine profit per vend. If you're splitting gross you're doing yourself a huge disservice.

Thats why its important to offer as little commission as possible with each location Mr. Profits.

[Faith Vending]

I do not want to disclose my cost basis or my expenses so I cut off gross. If there is a dollar in the machine the owner gets 20 cents or whatever you agree on. Simple, easy and no problems so far. I think pitching your deal based on gross is an easier sell also.

[mizugori]

Kelly I'm a bit confused because you keep saying it should be the same regardless of which way you figure it.

What I'm saying is, let's say you offer them 25%.

If that's 25% of GROSS SALES, and there's $100 in the machine when you service, you give them $25.

If that's 25% of PROFIT, and there's $100 in the machine, and you're vending items for 50 cents apiece, that means you sold 200 items. And if your cost per piece works out to 13 cents, that means your profit was .37 per piece (I think it would be overkill to figure in your mileage and etc so we're just looking at product cost here) so .37 x 200 pieces sold = $74 PROFIT. 25% of 74 is $18.50

Now the truth is I think this issue is one of those elephants in the living room, it's something everyone is aware of but not everyone is talking about it and I just want to know how you guys handle it. Because if I offer someone say 25% off gross, that's a lot, and then what happens when some fast talking golpher comes in and offers the owner a higher percentage, and the owner doesn't pick up on the fact that this guy is going to figure off profits, not gross sales. And then I lose the account because the owner thinks he got a better deal.

[sherlock]

It's a simple process to determine profit per vend. If you're splitting gross you're doing yourself a huge disservice.

The only way I can see this working is if you are sending the commission via check monthly or quarterly.

That gives you time to figure out profits while away from the location.

I would love to know your method if you are paying commission cash on-the-spot at the time of service...like most businesses require.

Do you mind sharing your process with us Profits?

I pay mine off gross.

Who's got time to break-down the COG on each product sold at a location to calculate profit?

As gumballprince posted -- that sounds like a nightmare.

Profits may share his process to simplify the calculation off profit while on location.

Otherwise, cut the commission off gross and let the location owner get on with his business while you get on with yours.

[havending]

In my opinion the only reasonable way to do commission is to split it after product cost, but before all other expenses. This is most fair and most reasonable, and locations will (should) respect that.  Only in vending have I heard people talking about splitting gross, and to put it simply I think those people are f#ck1ng nuts.  Nobody would expect that unless you're offering it, so don't offer it!

Keep it simple.  If your paying off profit are you taking out items like gas, office rent, postage and the other 20 items on my P&L.  Point being that when you say a % of profit it means nothing because there are so many variables.  Im not sure how many machines you have out but you will learn that doing it very simple will help you in the long run.  If yiur using some long fromula to figure the comm locations will think your trting to skim them.  They wana see sales and what they get and thats all.

[antoniocinisi]

i STARTED  out giveing commission of off gross,but a long while back steve explained on a certain topic that is not he way to go.basicly you are paying the location commission on your expenses too.his explanation was longer and better but it is the way to go.I didnt waste time trying to figure out how much profit per vend on each item ,I take 25 % off the top and give the commision off that.I did lose a location once I switchd so it is best to start off that way.25 % isnt my total expenses ecspecially since the tax rate alone is 8.25 % but no one else does it this way and i know for a fact.i have seen commission slips for what its worth.so I figure I am ahead of most operators in my area in that sense even if 25% is low.

once another location questioned me about it and I explained it to her and she was fine with it so it depends on who you are dealing with I guess.in a restraunt 25% is usualy the minimum one can expect to pay on labor costs alone not includeing food costs etc so most restraunt owners should understand.I also say I will give you xx amount of commission OF PROFITS when trying to locate.

[Profits]

@havending

That's why I specified in my original post "net after deducting product cost, and before misc. other expenses."

[sherlock]

@havending

That's why I specified in my original post "net after deducting product cost, and before misc. other expenses."

So what is your system Profits?

How do you calculate your commissions while on location?

[caserri]

i STARTED  out giveing commission of off gross,but a long while back steve explained on a certain topic that is not he way to go.basicly you are paying the location commission on your expenses too.his explanation was longer and better but it is the way to go.I didnt waste time trying to figure out how much profit per vend on each item ,I take 25 % off the top and give the commision off that.I did lose a location once I switchd so it is best to start off that way.25 % isnt my total expenses ecspecially since the tax rate alone is 8.25 % but no one else does it this way and i know for a fact.i have seen commission slips for what its worth.so I figure I am ahead of most operators in my area in that sense even if 25% is low.

once another location questioned me about it and I explained it to her and she was fine with it so it depends on who you are dealing with I guess.in a restraunt 25% is usualy the minimum one can expect to pay on labor costs alone not includeing food costs etc so most restraunt owners should understand.I also say I will give you xx amount of commission OF PROFITS when trying to locate.

Thank you for bringing this up Antonio.

This is the way I always did it and for those wanting to see my process or commission worksheet, it's posted right where it's always been.

You should never pay out commission on money that you spend on product. Like someone else said above, you'd be "doing yourself a huge disservice"

[mizugori]

Okay good. Like I said I'm not planning to figure mileage and such into the numbers when I calculate the commissions, because I feel like that might seem like stretching it / trying to screw them over, but the product cost I feel like they can understand easily.

And it's not difficult to calculate at all - I really think everyone should KNOW exactly what they are paying per unit on all of their products, or at least have the information readily available in a notebook or pda device. How else can you properly manage your business? I already have all of my product costs per unit calculated out in a spreadsheet, so it would be no problem to say ok I sold 50 sticky hands at 50 cents, glance in my notebook and see that they cost me 13 cents per unit, so I need to subtract .13 x 50 off the top before I calculate the commission...

[Profits]

One example here is 25% of gross...the other is 18.5% of gross.....but he makes it look better to owner when he tells them 25% of profit. To each his own but I think sometimes your location thinks "profit" is your gross unless you write them a reciept like Steve has made up.

Unless the owner of the location is retarded or otherwise mentally challenged, he will have no problem firmly understanding the meaning of "profit".

These are business owners we're talking about.  Calculating commission after profit has nothing to do with manipulating numbers or "skimming".

[sherlock]

   Well, first I pull my abacus out of its case.........

LOL 

If we're "f#ck1ng nuts" for paying off gross, I think we've got more nuts on Vendiscuss than you'll find in a Snickers bar.

[Profits]

@gumballprince

I'll be home in 2 hours and will deliver a response then.

[havending]

Profits,

Please dont take my post the wrong way. You will find that im a stright shooter.  When i post its from alot of experience.  i want you to enjoy vending and have much sucess with it.  

[JPVendCo.]

I have talked to ALOT of bad business owners.  I always think "how is this person running a successful business?"

[sherlock]

I have talked to ALOT of bad business owners.  I always think "how is this person running a successful business?"

That is VERY true of pretty much ANY industry.

Those people you wondered about JP were probably running a business --- but not a "successful" business.

It's hard for to see whether it's successful or not from the outside.

Having lots of customers doesn't always equal success -- much like having lots of machines doesn't equal a successful vending company.

I have plenty of experience working with business owners throughout different phases in my life (working for myself and working for others).

I have found a huge percentage of business owners do not have sound business sense.

It's no coincidence that the majority of businesses fail within the first few years of existence....it's usually just a direct result of the owner lacking business savvy...the business itself may have been a great idea and/or may have provided a great product.

[divango]

Well, I am new to the vending game so my opinion does not carry a lot of weight. I do have significant experience in another field concerning the impact of Gross vs Net and percentages charged. My industry is just the opposite in that we want to show a lower number, not higher. We charge a percentage of the gross or net for our services. Most companies charge on the net with a higher number, we charge a lower number on the gross and it gives us a bit of an advantage in perception. Remember perception is reality. We are VERY Clear on the front end that we are not charging on the net like everyone else and even go as far as saying that if you compare our numbers to someone charging on the net, we would be around X%.

At the end of the day, even though it is fully explained and we are charging commission on a larger amount that allows us to charge a lower percentage for the same dollars, the lower fee sticks in the customers head...

I can clearly see where if this were explained properly, you might have a business owner feeling good about a 25% of profit vs a 15% of gross... Not sure if Vend-Trak allows for configuring commissions on profit but that would help with the math. 

[Rick Falcon]

How about those locations that make anywhere from 15 to 20 a month if your going by net what do you tell the owner ,ok here is your dollar for the month of June.LOL.

[divango]

Ha Ha!! Tell him to eat more candy   

[matt-attack]

i,I take 25 % off the top and give the commision off that.

Lets say you offer 25% commission. You collect a total of $100. You take 25% directly off for COG then slplit the remaining $75  between yourself and the loc owner?

So really they're only getting 75% of their original 25% (being every quarter that goes into the machine)?