Yearly Budget Financing - Large Scale Full Time Business

[MrVendAlot]

Hey All,

Great site.  I have learned a ton from this site over the past year.   I got into vending by buying a close friends route as a part time job.   Since then I am now weighing out the options of scaling to a very large size.  I want to open up the question for vendors that have large routes and need to hire a driver(s), create budget, etc.   The primary information I am looking for is a understanding of your gross income and a percentage breakdown of your yearly budget after that(I don't care about your real numbers just want to get a understanding of your pay to employees vs. net income, repair, upgrade etc).  

For just a snapshot here are some numbers I am playing around with.  The route would be roughly 150 stops ranging in cashflow with 330 machines.  

Yearly Budget 400k Gross
(Assuming 200k loan w/5 year payoff - 6% interest)

Gross Income - $400,000
COGs - $204,000
Loan Payback - $46,000
Employee Wages/Taxes - $43,000
Van/Insurance/Maintenance - $5,000
Mileage - $10,000
Vending Upgrade - $12,000
Vending Repair - $8,000
Accounting/Tax Prep - $5000

Net - $67,000

Following the 5 year loan payoff and reducion of transportation cost(assuming can save there), I would be increasing the overall take and increasing the upgrade budget.  I would likely carry a $1000 month loan forever to expedite those efforts.

Can anybody tell me from experience that these numbers are way off(not enough labor cost, vending repair, etc)?

 

Thanks!

 

 

 

[AZVendor]

If you're basing this on your current route you didn't list your mix of machines or what your P&L looks like now.  Your repair cost is probably too low though and I can't predict it.   You left out warehouse rent and commissions paid to locations.  Mileage isn't an expense.  Your taxes and accounting won't be that high unless you're factoring in a VMS software package.  You also need to factor in upgrading to card readers unless that is part of your Upgrades line item.  You also think that your transportation costs will go down at some point but they never do.

[AngryChris]

You can deduct the mileage OR the vehicle's expenses but not both. The depreciation is separate though. Aside from that, the numbers are very realistic, but that doesn't mean the numbers are real.

What is the 400k "budget" supposed to mean? A budget is usually a limit on an expense.

 

Also, the loan "payback" is not an actual expense whereas the interest is.  It's okay to use it for the sake of cash flow predictions but not a writeoff.  I'm guessing you are asking about the cash flow though and not taxes.

[Southeast Treats]

As far as expenses vs income, AZ pointed out warehouse rent; I would also list insurance, utilities, and marketing.  Insurance includes commercial auto, commercial liability, and workers comp at a minimum; you might also want a renters type insurance on the warehouse.  Utilities would also include cell phones, internet service, and of course power, water and trash. 

If you have an employee working a route then you BOTH need vehicles.  One good guy can probably cover that size route if he is full time and experienced, but someone else will be doing repair calls, equipment moves, sales calls, banking, ordering and receiving inventory, etc... don't forget covering for your driver for days off. 

I would not attempt that size route without a good VMS program (especially with just one driver) so include that expense, plus the expense of cashless payment systems where needed.

Have you excluded your sales tax from your gross income, or will that need to be backed out as well?

[MrVendAlot]

Thanks for the replies.  Just for some more details to hopefully clear up some of the questions.  

AZ -  50k gross is already in place and I am running on my own 2 days a week.   The additional 350k gross is what I am considering buying.   The combination of the two routes would result in 144 soda machines, 130 snack, 30 snack/soda, 1 frozen, 2 "rotating" foods,  12 bottles.

On the repair cost.   The primary machines would be AP6000/AP7000 for snack and Dixie Narco on cans.  For longevity I would try to determine a balance of upgrading and repairing.  I would likely look to combine this budget and try to exceed my repair budget(whatever it lands on) to proactively upgrade higher volume accounts that have risk of needing repair.  From a yearly budget standpoint(I know all routes are different) does anybody have a formula off upgrade/repair planning?   I am working on a spreadsheet playing with estimates based off 100 machines and categorizing them as Soda "Non-MDB", Soda "With MDB" and  same with snack/combo but would be interested in someone doing yearly budgets and how they look at it.  

Angry Chris - That is meant for cash flow not taxes.  I am playing around with what the investment would be upfront(probly 40k or 20%).   Just wanted to get a gauge on the cashflow until that is paid off.  My estimates are that cashflow would be tight for first 5 years and after that I could open up the upgrade budgets.  

Thanks for the note Southeast on the coverage for the driver.   Some of that would have to be me stepping up but the other consideration is to hire two drivers for 3 full days(24 hours).   My thought is that I can run two drivers with two trucks on opposite ends of the week(M-W & W-F).   This would also free a van for me on 4 of the weekdays and using my personal vehicle if needed on Wed.  I also would minimize my risk of a driver quitting and having little to no support(I could pick up the other half until hiring again).  Has anybody had situations like that?   Or is better to just focus on one solid driver that you work to retain long term?   Also the sales tax would have to be backed out. Do you have a recommendation of a VMS program?  What type of cost does a good program have monthly?

 

Thanks for reviewing guys

 

 

[Southeast Treats]

I think you are getting warmer... I did some rough math, it looks like you are averaging out to about $100/month per machine.  Obviously, that's an average, so hopefully a lot of better machines, but a fair size group of really small accounts you will want to be rid of early on.  Slow accounts cost you in stales and labor.   That could give you some equipment to use for better accounts or to sell off for capital.  I know one of my problems is I hate to close accounts, but just like gardening you have to pull the weeds or the good plants get choked out.  You may also need to raise prices on the route you are buying, a lot of sellers won't raise prices before selling so they don't lose any accounts over it.  Don't be shy about making your prices reasonable.

I like the two part timers if you can find and retain 2 good people who can work part time.  Retirees maybe? 

I use ParLevel for my VMS, it works with on and off line machines.  There are other systems out there but I don't have experience with any others to compare.  If you don't do VMS now realize that the change is VERY time consuming (think months); there is a LOT of data to enter to get everything running correctly.  Do your research, and plan to switch in stages, and remember the programmers saying "garbage in = garbage out".  Take the time to do it right the first time.

I'm not at the level you are thinking about, only about half of that, and I am not sure you can generate as much profit as you want with a large debt service.  I knew one operator who was of similar size (500,000/ year), he ran with only one part time driver and his girlfriend counting money; no debt payments, and he claimed to take home about 20%.  He worked like a dog and was burnt out in a few years (just saying).   Personally, I like having employees.  Without them you are limited to your own production, and you end up spending so much time working your business that you have no time to run your business.

[MrVendAlot]

Yea - I am working through the "weeding".   I have a range of machines profits.  Some of the weeding is out of my control.  For example I have a office building that has a soda machine grossing $70 in the break room and another in the copy room that grosses like 4 dollars a week(ha).   They requested the machine so I sort of have to eat it.  There are some tiny accounts that I would rid myself of.   Is your normal steps to prospect a better location and move the machines, or do you normally just sell the location/machines to another vendor?

[AngryChris]

If you ask me, the normal steps depend on the locations as the situations vary.  I'm looking at selling off some of my farthest locations while also trying to cancel a few slower locations so I can rehab the equipment and place it in new accounts.  It really just depends.  My route has grown into a (roughly) 30 mile radius from the most central point, which I think is a very large area.  I would like to reduce that to something like a 15 or 20 mile radius if possible.  It would save me a lot of time.