Commissions to start off with

[loach33]

When a location brings up commission (I don't mention it in the initial pitch, but wait for them to bring it up).... What do you say?

When they say "Do we get a cut...or What kind of commission do you offer?"  I say "I generally start at 20% and see how the sales go."

I'm sticking to gb and toys so I'm just throwing that 20% out there at em expecting them to say "how bout 30%".  They don't seem too excited or turned off but then again they havent said yes to locating either.

So, at what % do you start the commission offer?

[hutchdavidson]

20% seems to be the standard around here

[havending]

Its best to pick a rate that's fair to both you and the location owner and stand firm on it.  If you allow the location to neg. You up you give them the upper hand.  In many cases they will pop up down the road and say "you can pay me .50 or take it out".

[JEREMYTINA]

Hav, do you pay the 50%?  Just curious.

[Rick Falcon]

As crazy as it might sound their is a big bulk vending company out here in New York "Great American Vending" which are going around offering locations 50%. I ask myself how do you make money if you are offering 50%.

[NinnJinn]

As crazy as it might sound their is a big bulk vending company out here in New York "Great American Vending" which are going around offering locations 50%. I ask myself how do you make money if you are offering 50%.

Yeah, you are right.  That is crazy!

[timberframe50]

My biggest competitor, offers cash when the machines are installed and 50%.CRAZY

[dperry]

As crazy as it might sound their is a big bulk vending company out here in New York "Great American Vending" which are going around offering locations 50%. I ask myself how do you make money if you are offering 50%.

By offering 1" for 75c and 2in for $1.

[Jax Snacks]

Or maybe they are just plain lying to the location!    Since most locations don't watch or verify the collection process.

Or maybe they are spinning the percent of gross versus net thing!  And simply hoping that the owner misinterprets what the percentage represents.  The location assumes gross and the vendor really does net.  On the rare occasion when the question comes up, the vendor responds, "sure we always give 50% - after product cost".  When I ask some prospects what the current competing vendor's percentage is based on - gross or net?  The location many times will reply, "I am not sure, but we get 50%"!

Bulk vending can be a sleazy business sometimes!

[NinnJinn]

Or maybe they are just plain lying to the location!    Since most locations don't watch or verify the collection process.

Or maybe they are spinning the percent of gross versus net thing!  And simply hoping that the owner misinterprets what the percentage represents.  The location assumes gross and the vendor really does net.  On the rare occasion when the question comes up, the vendor responds, "sure we always give 50% - after product cost".   When I ask some prospects what the current competing vendor's percentage is based on - gross or net?  The location many times will reply, "I am not sure, but we get 50%"!

Bulk vending can be a sleazy business sometimes!

One flea market I have my coke machine at asked if I do candy/gum machines and asked what I paid, and I said when I had a bulk route I paid 10% of what I took out of the machine.

She said, she just recently started keep track of what she gets from a triple and it doesn't seem like 50%, when she asked them to explain to her how they come up with the 50%, they said that they take the amount of quarters divide it by 2, then from that total they subtract the cost of goods sold, then subtract product lost, then subtract 2% for fuel.

When she told me all that, I looked dumb founded, so she showed me their chicken scratches and basically based on their chicken scratches for the last 3months after all their BS, she got roughly 4% out of their gross sales of $121.50 for 3 months.

Oh if only I was still in bulk!

[havending]

I do have a few locations where I pay 50 percent.  But they do 700 to 1200 a month.  And like dperry said one inch .50 and two inch 1.00

[loach33]

I do have a few locations where I pay 50 percent.  But they do 700 to 1200 a month.  And like dperry said one inch .50 and two inch 1.00

Uh, forgive my wide open mouth.      I assume 1000 a month locations are in chain stores and you have 20+ machines in there?  Man, to have just 10 of these locations and that's it.  Sweet life there.

[alboy88]

i only give anyone 10 %  cause if it goes any higher  than you have to raise the prices  and they dont want to pay it

[havending]

I have a 9 way and 4 col sticker and spiral gumball.  They are china buffet

[havending]

Alboy at 10 percent other companies are going to push you out

[nepavend]

This is a very complicated question and strategies are different for just about every vendor it seems.  Please consider there are many factors that influence commission rates such as the following:

1.  GEOGRAPHY - Different cities or states have different mindsets if you will.  Locations in rural areas usually don't bug you too much, more metro areas they think gumball machines are supposed to make them rich.

2.  COMPETITION - This is where all the games with the 50-50, up front payments, and other hijinks take place.

3.  YOUR CASH FLOW - If you are not that big you can't really think about paying high commissions.  Focus on lower commission and grow your business. 

4.  DEMOGRAPHICS - Chinese people are usually tougher to negotiate with, are approached the most, and hear the most stories because of all the buffets out there.  Barbershops can also be tough to deal with on commissions.  Spanish and Mexican people can be easier to deal with in some cases.  This isn't meant to be racist but is based on my personal experience of dealing with nearly 1000 different businesses and owners.

5.  YOURSELF - Are you looking to get machines out of your garage at all costs?  Are you trying to make the best/efficient use of your time to make the most profit?  Are you doing this as a hobby?  How much do you value your business?  How much do you value your time?  Believe it or not, your mindset about this business will affect commission you pay and how you deal with owners trying to place your machines.

All that being said, I agree with hutch that 20% is and should be the standard commission.  10% is too low and other vendors are very likely to offer more to try to bounce you out.  My standard machine is a single or double with gum/toys at .25 vends and this is really what I could afford and make enough profit to justify the location.  In better locations, I do 30% but try to get more equipment in, whether it is a 4-way or 5-way/sticker combination.  This is where I bring in the .50 vends and up.  I put out my first 1.00 vends in August and this has tested well, I will continue to expand this product line gradually. 

Another thing I consider in actually servicing and paying commission is in most accounts, the owner does not give me a hassle and does not make me count in front of them so I estimate by weight what is in my bag and pay commission accordingly.  I simply do not have the time to count 300 accounts and give commission.  Further, after holding 20 or 50 dollars in your hands a few thousand times you get a feel for what is there to a very close range.  If I am way off I give the owner the difference next service.  Most times that is appreciated by the owner.  I do have a coin scale on order and this problem will be reduced in 2011 so I can be more accurate and still save time of counting/wrapping quarters.

When owners want 40-50% your best defense is to try to explain that you have expenses such as product, overhead, loans, travel, etc. just like their business has.  If you give that level commission you reduce your profit drastically.  Even with locations that do 1200 dollars that is a heck of a lot of money to give up.  In a lot of cases people who offer those percentages should be suspect and I let owners know this as well, due to the net/gross dilemmas discussed often on this site. 

Let's say you have a chinese buffet with a 9-way, 4 column sticker, and spiral that does 1300/service and you are giving 50% gross commission ($650).  Assuming COGS of 20% ($260) you have $390.  If you have to spend 2 hours at the location servicing, filling, counting and paying commission, that is an awful lot of work not to be underestimated.  And lets not forget your overhead and other expenses, a smaller percentage maybe (11% based on my numbers this year) you are down to about $250 profit for this location.  The business owner (650) just made 2.5 times the profit you made on YOUR machines and YOUR labor and YOUR time (250).  This is not kosher in my view since I am doing all the work and spending all the time servicing and paying for all the product.  At 30% commission the owner gets $390 and I get about $500, more balanced but fair reflecting myself doing everything mentioned before.

Don't get me wrong, it is nice to have machines on location, but not at the expense of poor profitability since your time is and should be valuable. 

[antoniocinisi]

Alboy at 10 percent other companies are going to push you out

he does full line not bulk I believe.

[BorderJerry]

"The business owner (650) just made 2.5 times the profit you made on YOUR machines and YOUR labor and YOUR time (250)."

It takes at least 2 to 3 million dollars to build and open (ground up) one of those large buffets...

The vendor has invested less than $1500 bucks in that same business...

And you make it sound like the crime of the century that the restaurant owner is making more than the vendor???

[NinnJinn]

"The business owner (650) just made 2.5 times the profit you made on YOUR machines and YOUR labor and YOUR time (250)."

It takes at least 2 to 3 million dollars to build and open (ground up) one of those large buffets...

The vendor has invested less than $1500 bucks in that same business...

And you make it sound like the crime of the century that the restaurant owner is making more than the vendor???

I completely see your point Nepavend!  However, IMO  That 250 profit in one location a month is much better than having a total of 10-14machines sitting at home in the garage, having a nagging wife etc.  Plus you don't have to drive all over creation to service all those machines, they are all in one spot.

[havending]

A vending company may never last if you paid everyone half. But like any business their are adv. Profits and cost very with each location.  As long as you reach the adv. Profit for your business you will be fine.  I pay on the low side .20. And on the high .50 at only a few places.  If you walk into a walmart each of the products have differnt levels of profit and it cost them more or less to operate in differnt citys across the country.  The good make up for not so good

[nepavend]

Ninnjinn,

I appreciate your feedback to my post.  It really generates some thought, which is what I intended when I wrote my post.  Another factor to consider is your own skill as a negotiator and business person, which can result in better results with commission arrangements for yourself.  I am a independent business owner in every sense, which explains a lot of my strong feelings about my buffet 50% scenario.  If a location is dictating the commission to me then he controls my cash flow, not me.  So I always try to work with the owner and explain my position thoroughly regarding my business and try to come up with a compromise that works well for me and the location, and makes us both money.

[havending]

Kelly,

I would like to see us all take a chunk from service vending they are a thorn in my side. 

[antoniocinisi]

They are all over here too.

agreed.he is everywhere it seems