running my vending business legally

[bhumphrey829]

I am located in Texas and just purchased a route that consists 8 soda and 4 snack machines in 4 locations.  I pay no commission to any of the places, however, he was only doing it part time so he didn't do any legal stuff.  However, his prices are really low so I won't make any profit if I have to pay a lot in taxes and sales tax and stuff.  He has can sodas and he sells for 50 cents and cookies for like 50 cents.  the cost on sodas is 25 cents each and cookies 24 cents each.  Does this seem right?  If not, how do I raise the prices without running my customers off.  Any help/advice would be appreciated

[Lake Cities Vending]

That sounds like a route I looked at in Dallas. He had several mechanical Anteres machines and some nice snack machines. He had sodas priced at .50. That was my first thought, he had prices to low.

[moondog]

I am located in Texas and just purchased a route that consists 8 soda and 4 snack machines in 4 locations.  I pay no commission to any of the places, however, he was only doing it part time so he didn't do any legal stuff.  However, his prices are really low so I won't make any profit if I have to pay a lot in taxes and sales tax and stuff.  He has can sodas and he sells for 50 cents and cookies for like 50 cents.  the cost on sodas is 25 cents each and cookies 24 cents each.  Does this seem right?  If not, how do I raise the prices without running my customers off.  Any help/advice would be appreciated

You should get your butt legal.  As for raising prices, right now sodas go for 75 cents on the low end.  Unless your volume is really high you won't have any choice once you start paying your taxes.

 

If your customers won't pay the going rate then they're not really worth keeping unless you're running some kind of upside down charity.  Don't kid yourself,  people that use vending machines know what the going rate is.

[AZVendor]

You can bet that the reason he sold the route was that he wasn't making any money with those prices.  You have to be brave enough to keep your prices in line with your costs.  No matter what complaints or grumbling you get, you have to keep your prices up.  If you don't, you will be selling it again due to no profits. 

 

Find out what all your costs are for products - not for each flavor but by category such as can soda, chocolate, non-chocolate candy, chips, cookies, etc.  Then calculate what your prices should be based on different profit margins.  The very minimum you should accept for any category is a 50% profit but that really isn't enough to cover all the costs associated with running a route such as gas, repairs, sales tax and depreciation.  You should actually strive for a 60-70% profit, meaning your product costs should really be close to 30-40%.  Get to a figure you are comfortable with and then present the numbers to the locations as explanation for why you need to raise the prices.  Use the example of the last vendor selling the business because he wasn't making any money with it and support it with the profit requirements you have.

 

Stick to your guns and don't let them push you around.  Try not to give any commissions to the locations, but if that's a last resort because they think the new prices leave enough for them, too, then up the prices another nickle or dime to offset the commission.

[mission vending]

You need to do a couple of things, get straightened out on the tax part of the equation and have a conversation with your locations.

 

Something like this, Mr business owner as you already know I bought Joe's vending business from him. One of the reasons he got out of the business is that he wasn't making money at it and as a business owner/manager I know you understand the need to be able to make a reasonable profit to be able to cover overhead and to be able to repair, maintain and eventually upgrade equipment. Joe's pricing is well below the current market rate the items being sold and unfortunately I will have to raise some prices on some of the items in order for me to make enough of a profit to be able to afford to provide service to you. I'd like to hear your thoughts about if its better to do it all at once or do it incrementally over the next 6 months so that it won't be such a shock.

 

Be prepared ahead of time and have a handout for him that shows existing pricing and your target pricing. Know some of the unit costs of the items on the machines so if the question arises you can compare your cost vs. sale price.

 

The key to having this conversation successfully is to convey that you WILL be raising prices, but you are giving the the opportunity to tell you HOW it will be done.

 

I've never had a problem when I take the time to talk to and educate my customer about vending basics and being open, honest and transparent.

 

It is possible that they will want to look at other offers and that's fine they probably won't find someone that will give them their current deal, especially in small locations. And if you do lose a location, so what, you just might be better off by storing the machine until you find a better location for it

You can bet that the reason he sold the route was that he wasn't making any money with those prices.  You have to be brave enough to keep your prices in line with your costs.  No matter what complaints or grumbling you get, you have to keep your prices up.  If you don't, you will be selling it again due to no profits. 

 

Find out what all your costs are for products - not for each flavor but by category such as can soda, chocolate, non-chocolate candy, chips, cookies, etc.  Then calculate what your prices should be based on different profit margins.  The very minimum you should accept for any category is a 50% profit but that really isn't enough to cover all the costs associated with running a route such as gas, repairs, sales tax and depreciation.  You should actually strive for a 60-70% profit, meaning your product costs should really be close to 30-40%.  Get to a figure you are comfortable with and then present the numbers to the locations as explanation for why you need to raise the prices.  Use the example of the last vendor selling the business because he wasn't making any money with it and support it with the profit requirements you have.

 

Stick to your guns and don't let them push you around.  Try not to give any commissions to the locations, but if that's a last resort because they think the new prices leave enough for them, too, then up the prices another nickle or dime to offset the commission.

 

AZ, you posted this while I was typing my post, eerily similar, guess we both graduated from the vending schools of hard knocks.   

[TKK]

Oh man that's really low. That seems more of a hobby than anything. Some of my family tell me my prices r too high. But they don't know what it takes. I try to keep my cogs at 30%. Those .24c cookies ur talking about sell for $1 all day long. Famous famous, grandma's cookie, knotts, mnm. Sodas sell for .75-$1. Waters my favorite no taxes and I sell the members mark for $1 and cost is .9 cents. Try as stated above. Explain why ur raising prices. That old saying some profit is still profit doenst apply with small volume. Tell them if theyve gone to a gas station lately. You'll b cheaper and super convenient. Easy. I hope u didn't overpay for the route

[Uv77mc]

Hi all, first post here.

 

I'm new to the vending game, bought my first route late last year. It's only 5 machines in 3 locations, so it's more of a hobby for me.

 

At the end of the day, you have to decide for yourself whether to go legal or not. I'm sure that people will say "you should go legal to pay your fair share of the taxes". Well, the woman who I bought the route from wouldn't show me her Schedule C because it didn't match the income she claimed the route actually made. More often than not, you'll find that self-employed people file their taxes to suit their financial situation and not Uncle Sam's.

 

As for the prices, they are too low. As others have said, you have to be brave enough to raise your prices. The route I bought had the pop priced right, but the candy was at .75. I'm not going to pay .55 and sell for .75. Hell, even Walmart sells it for .68. I raised it to .85 and sales didn't slow at all. I don't go for an across-the-board ratio. I'm okay with making 200% on pop and 36% on candy because the overall profit margin is acceptable to me. You can ask whatever you like, but that doesn't mean people are gonna go for it.

 

If the machine(s) are in a bad location, sometimes it's better to just pull it out and find a better home for it. I had a machine in a location that was so slow that product expired, and lowering the prices didn't help move product. So, I yanked it out of there. I modified it to vend Monster energy drinks and put it in one of my existing locations. Now that location is getting more options, and I'm seeing more activity.

[donut]

What does your local gas station/convenience store sell the product at?  For soda, I find out what it costs (product + tax + CRV (here in California)) and bump it up to the nearest quarter....  I figure that no only are my customers buying the product, they're also paying for the convenience of not having to go get in their car and drive to the gas station for a drink....

 

My cost of soda runs $0.29-$0.32 depending on what sales I can get to....  My local gas station sells cans of soda at $0.86....  I charge $1.00...

 

My only change to this formula is Rockstar that I sell for $2.00.  The gas station sells them at $2.37 each or 2 for $4.42 (tax and CRV are included in these costs).  I buy for $1.15 each...  I figure I could bring mine up to $2.25 each, but I make more money by selling more....

 

Just my 2 cents....

[Vending How Chris]

I won't repeat what has been said above about making sure the math works. What I'd like to add is the process we use for raising prices. Like others have stated, some customers will be angry in the moment, but if you communicate it to them correctly it should work out fine.

 

My usual process is that I tell everyone I see at the location at least two weeks beforehand that I'm going to raise the price. I do this because it's something they can then get used to, as opposed to something that is potentially a conflict with them now. I tell them when I'll be raising the price, by exactly how much, and why. The reason I tell them isn't a lie - it often has to do with the rising cost of product that we buy. Another good reason is that we plan on offering them a wider selection of beverages. At the same time that I tell them this, I ask them how the service has been and if they have any requests. So, to summarize, I communicate that I'm offering them a service - both overall in that we have a vending service and in that moment when I'm giving them customer service by being up front and honest.

 

It'll go something like this.

 

"Hello x customer. How are you?"

 

Response

 

"I'm not sure if you know me, but I'm Chris with Custom Touch Vending. I service your vending machines here."

 

They may or may not introduce themselves.

 

"I just wanted to let you know that we are going to raise prices on our product in a couple weeks - the sodas will now be 85 cents and the candy will now be $1" 

 

"This is because our local bottler has raised prices on us a couple times and we've absorbed it. Now though, in order to stay in business we have to raise our prices to match the rising product price and still offer the same great selection." (This was the truth.)

 

At this point if the customer is going to get angry, they do so. To counteract this, I say this:

 

"Since I will be making some changes to the machine, is there any product you'd like?" (This makes the change more positive for them.)

 

Response...I'd like snickers, etc etc

 

Also note that I don't just ask for requests at the time when I change prices, but this is a good fallback place to end the conversation, since it ends with how the change can benefit them.

 

Anyone else have a different method?