How to account for commissions?

[CJvending]

Hi, how do you guys work out commissions in regards to keeping records of your income? I'm reluctant to get into commissions because I don't have a clue how it works.

[AZVendor]

Commissions are the worst thing that ever happened to vending and are a significant reason why profits are so low in full line vending.  Some wiseass decades ago decided he would use commissions to get all the vending business he could and before anyone knew what happened that sales technique traveled like wildfire across the country.  Don't do commissions if you don't want to and don't ever mention a commission until you are asked about it by the client.  You never want to lay all your cards out too soon and you don't want to give any money away that you don't have to. 

 

Commissions are generally and most easily calculated on the gross sales - all money collected from the machine.  Some people will say they pay commission on the profits and far too many vendors make whatever promise they make to the client and then don't honor it, paying whatever they feel like.  You will always know who the lying vendors are in town when their accounts claim they're getting 25%+ or even 30-40% from their vendor.  They are getting ripped off because no vendor can pay that on normal prices (bottlers can because they produce the product), but you will never get the customer to believe they aren't getting what they think they are.

 

It's entirely up to you whether you pay commission to any account.  You might want to reserve that option for only the accounts you can't bear to pass up or when that is the only way to get an account you know will be profitable.  Of course, you might be in a market where everyone pays commissions and you might not get any new business if you don't play along. 

 

I would begin with a 5% rate and then let the location negotiate with you.  At your normal vend prices, anything you give them comes off the bottom line, so if you are asked about commissions you should tell them that your prices would have to be higher if they want to earn money from the machines, as you still have to make your profit margins.  Don't go overboard, but you can usually get into an account without going over 10-15%.  Sometimes you have to go higher, usually because a lying vendor claimed that's what he was paying the account.  If you can get high prices, then you have more room to play with, so know what each scenario will net you before you get involved in a negotiation.  As a rule of thumb, the highest commissions are on soda, then snacks are usually lower but never higher than soda, and cold/frozen food is zero.  But that's just a rule of thumb.

[havending]

Hi, how do you guys work out commissions in regards to keeping records of your income? I'm reluctant to get into commissions because I don't have a clue how it works.

In book keeping expense it as rent

Commissions are the worst thing that ever happened to vending and are a significant reason why profits are so low in full line vending. Some wiseass decades ago decided he would use commissions to get all the vending business he could and before anyone knew what happened that sales technique traveled like wildfire across the country. Don't do commissions if you don't want to and don't ever mention a commission until you are asked about it by the client. You never want to lay all your cards out too soon and you don't want to give any money away that you don't have to.

Commissions are generally and most easily calculated on the gross sales - all money collected from the machine. Some people will say they pay commission on the profits and far too many vendors make whatever promise they make to the client and then don't honor it, paying whatever they feel like. You will always know who the lying vendors are in town when their accounts claim they're getting 25%+ or even 30-40% from their vendor. They are getting ripped off because no vendor can pay that on normal prices (bottlers can because they produce the product), but you will never get the customer to believe they aren't getting what they think they are.

It's entirely up to you whether you pay commission to any account. You might want to reserve that option for only the accounts you can't bear to pass up or when that is the only way to get an account you know will be profitable. Of course, you might be in a market where everyone pays commissions and you might not get any new business if you don't play along.

I would begin with a 5% rate and then let the location negotiate with you. At your normal vend prices, anything you give them comes off the bottom line, so if you are asked about commissions you should tell them that your prices would have to be higher if they want to earn money from the machines, as you still have to make your profit margins. Don't go overboard, but you can usually get into an account without going over 10-15%. Sometimes you have to go higher, usually because a lying vendor claimed that's what he was paying the account. If you can get high prices, then you have more room to play with, so know what each scenario will net you before you get involved in a negotiation. As a rule of thumb, the highest commissions are on soda, then snacks are usually lower but never higher than soda, and cold/frozen food is zero. But that's just a rule of thumb.

Mr business owner I want to set this machine up and use your power and not pay you a dime. When can I set up? Oh also please process refunds, sweep up the trash and fill my changer. Thanks bro.

Commissions are the worst thing that ever happened to vending and are a significant reason why profits are so low in full line vending. Some wiseass decades ago decided he would use commissions to get all the vending business he could and before anyone knew what happened that sales technique traveled like wildfire across the country. Don't do commissions if you don't want to and don't ever mention a commission until you are asked about it by the client. You never want to lay all your cards out too soon and you don't want to give any money away that you don't have to.

Commissions are generally and most easily calculated on the gross sales - all money collected from the machine. Some people will say they pay commission on the profits and far too many vendors make whatever promise they make to the client and then don't honor it, paying whatever they feel like. You will always know who the lying vendors are in town when their accounts claim they're getting 25%+ or even 30-40% from their vendor. They are getting ripped off because no vendor can pay that on normal prices (bottlers can because they produce the product), but you will never get the customer to believe they aren't getting what they think they are.

It's entirely up to you whether you pay commission to any account. You might want to reserve that option for only the accounts you can't bear to pass up or when that is the only way to get an account you know will be profitable. Of course, you might be in a market where everyone pays commissions and you might not get any new business if you don't play along.

I would begin with a 5% rate and then let the location negotiate with you. At your normal vend prices, anything you give them comes off the bottom line, so if you are asked about commissions you should tell them that your prices would have to be higher if they want to earn money from the machines, as you still have to make your profit margins. Don't go overboard, but you can usually get into an account without going over 10-15%. Sometimes you have to go higher, usually because a lying vendor claimed that's what he was paying the account. If you can get high prices, then you have more room to play with, so know what each scenario will net you before you get involved in a negotiation. As a rule of thumb, the highest commissions are on soda, then snacks are usually lower but never higher than soda, and cold/frozen food is zero. But that's just a rule of thumb.

Mr business owner I want to set this machine up and use your power and not pay you a dime. When can I set up? Oh also please process refunds, sweep up the trash and fill my changer. Thanks bro.

[mission vending]

Commissions are the worst thing that ever happened to vending and are a significant reason why profits are so low in full line vending.  Some wiseass decades ago decided he would use commissions to get all the vending business he could and before anyone knew what happened that sales technique traveled like wildfire across the country.  Don't do commissions if you don't want to and don't ever mention a commission until you are asked about it by the client.  You never want to lay all your cards out too soon and you don't want to give any money away that you don't have to. 

 

Commissions are generally and most easily calculated on the gross sales - all money collected from the machine.  Some people will say they pay commission on the profits and far too many vendors make whatever promise they make to the client and then don't honor it, paying whatever they feel like.  You will always know who the lying vendors are in town when their accounts claim they're getting 25%+ or even 30-40% from their vendor.  They are getting ripped off because no vendor can pay that on normal prices (bottlers can because they produce the product), but you will never get the customer to believe they aren't getting what they think they are.

 

It's entirely up to you whether you pay commission to any account.  You might want to reserve that option for only the accounts you can't bear to pass up or when that is the only way to get an account you know will be profitable.  Of course, you might be in a market where everyone pays commissions and you might not get any new business if you don't play along. 

 

I would begin with a 5% rate and then let the location negotiate with you.  At your normal vend prices, anything you give them comes off the bottom line, so if you are asked about commissions you should tell them that your prices would have to be higher if they want to earn money from the machines, as you still have to make your profit margins.  Don't go overboard, but you can usually get into an account without going over 10-15%.  Sometimes you have to go higher, usually because a lying vendor claimed that's what he was paying the account.  If you can get high prices, then you have more room to play with, so know what each scenario will net you before you get involved in a negotiation.  As a rule of thumb, the highest commissions are on soda, then snacks are usually lower but never higher than soda, and cold/frozen food is zero.  But that's just a rule of thumb.

 

To further expound on a few points....

 

In my area 10% is pretty much the "standard rate," meaning 10% of gross sales. If a location tells you that they are getting 20%, or more, and the vend prices are not ridiculously high then the vendor that is in there is lying to them and paying whatever he feels like paying. Most of the places that you see commissions that high are hotels and other tourist type spots where the price doesn't matter as much. We have one such location where we pay in excess of 20% and paid to the location over $20,000 in commissions last year. You usually won't have to pay commissions at smaller volume locations, if you want any chance of getting into the larger ones commissions are nowadays pretty much required.

 

If you are going after a location that is currently getting a commission then ask a few questions about what they are getting paid. More often than not there is no accountability provided to the location and they are just taking the vendors word for it that they are getting their due. We always provide a metered statement by machine so the location can see exactly where the money is coming from. When making a proposal, a generic metered statement is included to show the location how we do things. I can't tell you how many times I've taken a location from a vendor that was allegedly paying 20% or more and when I delivered the first check at 10% the location was amazed at how much more the check was compared to what they used to get. This also becomes helpful if you have a location with multiple machines and want/need to downsize it. Now you have documentation to review with the location that shows that it is not really needed and this makes the conversation much easier than walking in saying I need to take out a machine(s) because its not making enough.

[TKK]

Mr business owner I want to set this machine up and use your power and not pay you a dime. When can I set up? Oh also please process refunds, sweep up the trash and fill my changer. Thanks bro.

 

 

 

 

really? so I assume you pay commissions in every one of your locations? honestly anyone who pays all their locations commissions is selling themselves short.you can offset higher commissions for the good spots with the no commission locations. I never mention commission unless they ask for it, and even then I show them a chart I have. the more they make the more percentage they make. from 0%-15%

 

0-$200 a month 0%

$200-$500 a month 10%

$500+ a month 15%

 

I have one location I pay $7,000 a year but its worth it. now I too am interested since taxes r coming up soon.

 

 

[havending]

 

Mr business owner I want to set this machine up and use your power and not pay you a dime. When can I set up? Oh also please process refunds, sweep up the trash and fill my changer. Thanks bro.

 

 

 

 

really? so I assume you pay commissions in every one of your locations? honestly anyone who pays all their locations commissions is selling themselves short.you can offset higher commissions for the good spots with the no commission locations. I never mention commission unless they ask for it, and even then I show them a chart I have. the more they make the more percentage they make. from 0%-15%

 

0-$200 a month 0%

$200-$500 a month 10%

$500+ a month 15%

 

I have one location I pay $7,000 a year but its worth it. now I too am interested since taxes r coming up soon.

 

I am sure you have it all figured out with two years experience and some how you feel like your entitled to make money on another persons dime.  I have operated inline stores and understand ALL the cost involved.  I offer commission on EVERY account because its the right thing to do.  Business owners often spend their life savings or mortgage their house to open these places then they work some times 7 days a week to operate it.  What makes you or anyone else so special to walk in with their chest poked out saying I want to place a machine here but I am not paying you. That is so arrogant no matter what type of machines you have. Coke, Pepsi and Canteen all pay commission and Coke and Pepsi also offer perks such as free or reduced signs and lettering and all of that has a cost.  As you grow and gain some experience you will find that not everything works in the long term.

[musser]

Geez HA you sound like me! But I agree, when it comes to the big accounts its all about the money. With the big guys like Coke Pepsi etc they also have extreme advertising perks, shelvage pays, rebates, gift programs, supplier coupon deals, its endless and brutal.

[havending]

Geez HA you sound like me! But I agree, when it comes to the big accounts its all about the money. With the big guys like Coke Pepsi etc they also have extreme advertising perks, shelvage pays, rebates, gift programs, supplier coupon deals, its endless and brutal.

It just gets under my skin when people in business expect something for nothing.

[sherlock]

It just gets under my skin when people in business expect something for nothing.

 

 

Yes...business people should know better than that.

One of the first lessons we should get is that EVERYTHING costs money, because NOTHING is free.

Some people never get it.

 

Like when people come on this forum and extract all of the info/advice from experienced vendors.

Then, they never share any of their own insight as they gain experience...and/or they never make AT LEAST a one-time donation even after TVF members helped save them money by avoiding costly mistakes in the vending industry.

 

I'm not talking about you havending --- you share willingly of your experience AND are a supporter of TVF.

Just thought I'd throw in my pet peeve because it's somewhat in line with what you posted.

[mission vending]

Yep, I've gotten pm's from members thanking TVF for educating them and saving them thousands of dollars and they can't drop a 20 dollar bill to help keep the lights on around here?

[amc-vending]

Yep, I've gotten pm's from members thanking TVF for educating them and saving them thousands of dollars and they can't drop a 20 dollar bill to help keep the lights on around here?

 

 

I have gotten lots of great advice from people on the forums, and like to think I have helped a few people in return.  But I  have also several times donated to the forums to help keep it up and going. 

 

I believe all members should donate something once in awhile. esp when someone here helped them save 1000's of dollars