MintiFresh Posted October 18, 2012 Share Posted October 18, 2012 Thanks for all the honesty and support on the forum -- I'm very new to vending and have been pouring over your posts. This is by far the best resource I've found. I've done a bit of math and have decided to start out with one soda machine, vending cans. That seems to be the cheapest and easiest-to-handle machine that would give the ROI I'm looking for. I'm starting out as a sole proprietorship and without liability insurance (if that's legal?), to keep costs low. Would you guys please double check my numbers? Total Investment: $1K Machine & Delivery: $750 Soda ($10/32-pack x 16 pack: $160 Handtruck (> 250 lbs capacity): $75 Biz Registration*: $10 *Registration cost: In my city/state (northern Virginia), biz licensing seems to be very cheap as long as you stick to a sole proprietership and you bring in money below a certain thresh-hold (a fairly high one that I won't meet). If you guys know of anything I need to pay besides the licensing fee with the city clerk, though, please share -- I'd really appreciate it. Goal: 200 vends/wk (@ $0.75 price point) --> $150/wk gross Replacement Product: ($70/wk) Tax: ($21.20/wk self-employment tax + $15/wk income tax = $26.20/wk) Net: $54/wk - CoS* ROI: 7.5 mo // earn back initial investment + 13.5% return by end of 1st yr *Keep CoS $20 < x < $24 Link to comment Share on other sites More sharing options...
dogcow Posted October 18, 2012 Share Posted October 18, 2012 Yeah all adds up 150wk from a can machine no snacks may be a bit optimistic tho Link to comment Share on other sites More sharing options...
MintiFresh Posted October 18, 2012 Author Share Posted October 18, 2012 What do you think would be realistic? Link to comment Share on other sites More sharing options...
moondog Posted October 19, 2012 Share Posted October 19, 2012 I have a number of soda machines and only the best ones do $600 per month. My average is closer to $400 a month - still not bad. I service every other week so I make $100 per visit on average which works for me. Sodas are a lot easier to do than the snack machines but don't allow as much room to get creative which separates me from the competition hopefully. IMHO a soda machine is the only way to go if you're just getting started - you'd need at least 4 snack machines to control your stales (a problem you won't have with cans). Make sure you get a multipriced machine - Royal, Vendo or Dixie with at least a 500 can capacity. Link to comment Share on other sites More sharing options...
dogcow Posted October 19, 2012 Share Posted October 19, 2012 I have a number of soda machines and only the best ones do $600 per month. My average is closer to $400 a month - still not bad. I service every other week so I make $100 per visit on average which works for me. Sodas are a lot easier to do than the snack machines but don't allow as much room to get creative which separates me from the competition hopefully. IMHO a soda machine is the only way to go if you're just getting started - you'd need at least 4 snack machines to control your stales (a problem you won't have with cans). Make sure you get a multipriced machine - Royal, Vendo or Dixie with at least a 500 can capacity. 400+/mo soda-only locations are few and far between IMO.around here anywhere doing $75+ a week will want at least a small snack machine too, if u want to get the acct, i have some that are exceptions but few Link to comment Share on other sites More sharing options...
mission vending Posted October 19, 2012 Share Posted October 19, 2012 400+/mo soda-only locations are few and far between IMO.around here anywhere doing $75+ a week will want at least a small snack machine too, if u want to get the acct, i have some that are exceptions but few Ditto here. If you are going to stay with soda only you need to set your sights a little lower like 50-75 a week. Anything above that if your customer decides that they want or need a snack machine it quickly becomes a situation where if you don't do it they will get someone that will. I also heartily agree about the multiprice machines. Link to comment Share on other sites More sharing options...
MintiFresh Posted October 19, 2012 Author Share Posted October 19, 2012 Thanks for your input, everybody! Since the concensus seems to be that I should expect something like 75 - 100 vends/wk ($56-75/wk gross), here are the numbers for that: Price Point: $0.75/can 75 vends/$56/wk gross VC: ($30)/wk product Tax: ($56/wk x .9234 x .153 = $7.77 SE tax + $5.50 I tax (at 10% tax rate) = $13.27)/wk Net: $12/wk - CoS 100 vends/$75/wk gross VC: ($40)/wk product Tax: ($75/wk x .9234 x .153 = $10.60 SE tax + $7.50 I tax (at 10% tax rate) = $17.60)/wk Net: $17/wk - CoS If I only get something like $55 gross/wk, I'm not seeing how I could possibly recoup the $1K initial investment in a responsible time frame. Even if my CoS for the entire month were $25 (which seems low to me, since that would entail spending less than 3 hrs/mo on vending-related work), the initial investment would take me something like 3.5 years to recoup. Even at $75/wk gross, it would take something like 2 yrs to recoup. For anybody running a machine that's earning in that range, how does it pay off? Why do you keep the machine running? Is there any way I could boost my ROI without going over my $1K initial investment limit? Also, am I figuring the taxes correctly? I'm using the formula that I used for my estimated taxes when I worked freelance, but I'm not sure if there are taxes I'm not accounting for, or if I should use my regular income tax bracket (since this is a sole proprietorship), etc. Link to comment Share on other sites More sharing options...
moondog Posted October 19, 2012 Share Posted October 19, 2012 Your numbers look fine. The thing is, nobody really knows what your sales will be until you give it a try. I have small accounts - people wise - that just blow away some of my larger accounts. It just takes a few people who buy consistently to make a great location. Link to comment Share on other sites More sharing options...
sbishop Posted October 20, 2012 Share Posted October 20, 2012 Look on craigslist and pick up a old can machine for under $400 and cut you equipment cost by almost half once you include delivery. That way you cut the time it takes to recoup the int investment. Also you could cut your int can purchase in half and let the machine buy the invnetory if you are checking it weekly, it should not be a problem. There are 2 options to lower your enrty cost and cut the time to recoup your investment. One other thing. I did not see you account for sales tax, and your self employement tax might be high. You can deduct the cost of the machine and milage from your profits. That might lower your profit and your taxes. Link to comment Share on other sites More sharing options...
dogcow Posted October 20, 2012 Share Posted October 20, 2012 If ur using multiprice machine don't worry about time to recoupe the investment. Basically those locs are paying u to store until u find a big drink/snack acct. Unless u want to do soda only in that case do can machines or look into using bottler assets Link to comment Share on other sites More sharing options...
Gamvend Posted October 20, 2012 Share Posted October 20, 2012 I think your calculating your taxes on total sales. You should only tax yourself on your profit. So if you gross is $56 and your cogs is $30 you should only pay taxes on at most $26. Link to comment Share on other sites More sharing options...
mission vending Posted October 20, 2012 Share Posted October 20, 2012 First let me say that by looking at the numbers you are way ahead the regular beginner in vending. 1.You need to calculate to self employment taxes on your profit not total sales. That also means taking into account the depreciation or taking the expense of the equipment. With your deductions and expenses it is doubtful that you will have any self employment tax liability, more likely you will show a loss and reduce your taxable income from your job. 2. While the inventory purchase will be part of your initial outlay for accounting purposes I don't think it would be included in your ROI calculations. Its a consumable commodity not a piece of equipment. Additionally, in theory at least, you can sell the inventory without the equipment. Check with your accountant about this. Even making the adjustments you can see that these kinds of accounts are not very profitable and has been mentioned many times around here that if you want to be successful over the long term you need to plan to move up into bigger and better accounts. These smaller accounts are good for learning the basics of the vending business and that's about it unless you are just planning on this being a hobby that makes a little money for you. Nothing wrong with that either if that is what you want to do with it. Link to comment Share on other sites More sharing options...
MintiFresh Posted October 21, 2012 Author Share Posted October 21, 2012 Thank for the help, everyone! Thanks for pointing out my mistake in calculating my self-employment taxes. Even though you're correct, mission vending, that I probably will pay enough taxes through my job that I won't need to actually pay them, I want to run things in a way that can scale up as much as possible, so from the beginning, I want to put that "tax" money into a linked account instead of mingling it with the "net." That's also why I figure on taking out $20/trip from the net right from the beginning, despite my net being so low it's sort of a joke to do so. Anyway, with the new tax calculations, the picture looks a lot brighter: ROI within 1 Year 100 vends/wk // $75/wk gross VC: ($40)/wk product Tax: ($35/wk x .9234 x .153 = $4.95 SE tax + $5.25 I tax = $10.20/wk Net: $24.80/wk - CoS @ 2 trips/mo: Net = $91.60/mo ROI within 2 Years 75 vends/wk // $56.25/wk gross VC: ($30)/wk product Tax: ($26/wk x .9234 x .153 = $3.71 SE tax + $3.994 I tax = $7.65)/wk Net: $18.60/wk - CoS @ 2 trips/mo: Net = $43.70/mo Look on craigslist and pick up a old can machine for under $400 and cut you equipment cost by almost half once you include delivery. That way you cut the time it takes to recoup the int investment. In theory, that would be great, but I live in a very expensive, dense area and there just aren't too many machines that cheap for sale around here. On the upside, I've been checking out vending machines whenever I happen to see them, and they're all selling soda at $1/can, so maybe living in a high cost of living place isn't such a bad thing! you could cut your int can purchase in half and let the machine buy the inventory if you are checking it weekly, it should not be a problem. That's a good idea, because I figure I'll have to check the machine pretty frequently at first -- no reason to cram it full of soda and empty my wallet when I'm going to have to go back every few days for a while anyway to get a picture of what's working and what isn't. A half-empty machine would also make it easier to switch out product that doesn't sell well. I can easily see getting the mix wrong, even on soda -- I work in a restaurant, and the drinks people want are really all over the place. Even the big corporate chain I work for has mixed up the drink selection quite a bit in the past year. In particular, I would never have thought diet drinks would be so unpopular -- I almost wonder if it's better to put in some kind of ice tea instead. That is a big hit where I work, especially any fruit-flavored tea. While the inventory purchase will be part of your initial outlay for accounting purposes I don't think it would be included in your ROI calculations. Its a consumable commodity not a piece of equipment. True, the inventory should be separated from the equipment -- since I'm still planning to put in $1K for this first stage, I'll just dedicate that $160 to the purchase of the machine, since that's probably where I'm skimping right now. And thanks for the advice on looking for a multi-price machine -- I'll also look for one that vends bottles, if that's at all possible in my price range. These smaller accounts are good for learning the basics of the vending business and that's about it unless you are just planning on this being a hobby that makes a little money for you. I do see this first machine and these initial steps on setting up the business as a learning experience, more than a way to earn much money in their own right. Ultimately, I would love to branch out into larger accounts, snack machines, etc -- but for right now, I feel that would be getting ahead of myself. My immediate goal is to get a machine up and running without operating at a loss. In my mind, recouping (or being set to recoup in a reasonable time frame) my initial investment is a success indicator, and that'll be my green light to expand. Which is why it's important to me that I have a reasonable hope of getting onto that path even with one soda machine. It's not the $1K that's important to me per se, it's more that I want to be sure that I'm running things in a way that's sound business-wise and that would work on a larger scale. Link to comment Share on other sites More sharing options...
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