Commission offering

[drseuss8347]

How much do I offer for a combo snack machine. It's my first full line machine. I have a bulk rack that grosses 200 a month in a 24/7 laundromat at a 35% commission.

[AngryChris]

Rule #1 of full-line vending: don't talk about commission unless the customer brings it up.

 

Rule #2 of full-line vending: you only talk about commission when the customer asks about commission.

 

Rule #3 of full-line vending: commissions only happen when price increases happen.

 

Full-line vending requires far more expenses than bulk vending.  The machines are expensive, the parts are expensive, the labor can be expensive, the products can be expensive.  Everything adds up to a big chunk of your revenue being spent just to keep the wheel turning.

 

As a rule of thumb, 10% of gross sales is pretty high, while 10% of net sales may be average.  However, it is very difficult to determine what the net sales are so I like to keep it at less than 5% of gross sales.  Even then, it's pretty high in my opinion.  The price of the goods needs to go up by more than the commission.  If they want 10% of gross sales, everything needs to go up at least 10 cents.  If you normally sell a 20 oz bottle of soda at $1.40, and they want a 5% commission, I would go up to $1.50 on those bottles just to give you an example.  If they wanted any more than that, I would probably let them know that increasing the commission will cause sales to go down which will hurt my bottom line, their bottom line, and the consumer's bottom line.

 

Just don't offer commission off the bat unless it's a gimmick like I used to do.  I would give people a 1% gross annual commission without any need for negotiations.  If they did $4,000 in a year, they would get $40 in the form of a check.  It's not a lot of money but they didn't have to do anything to get it.. and $40 at once seems like a lot more than about $3.50 every month.  Full-line is nothing like bulk when it comes to commission.  

[AZVendor]

I agree with Chris, commission is the last thing you talk about and only if the location brings it up. This isn't bulk vending or amusements so protect your margins. If they insist on a commission then your prices should go up accordingly.

[moondog]

How much do I offer for a combo snack machine. It's my first full line machine. I have a bulk rack that grosses 200 a month in a 24/7 laundromat at a 35% commission.

Given that you are only dealing with a combo machine, any commission would not be warranted as this type of machine tends to be very low volume in terms of gross income.  Combo machines, due to their low product capacity,  can't make enough money per service cycle to possibly consider commissions.  In the future, you should avoid any scenario that only calls for a combo machine.

[Paveitall]

Here is the tactic we use with great success.  If discussion about commission comes up tell them yes we offer a commission, but explain that the commission is paid thru price increases.  when we visit a prospective location we have a listing of the products we offer along with the base prices of each assuming no commission.  If the location brings up commissions we have a spread sheet that shows them how much we will need to increase prices to cover the commission.  The price increase is based on 150% of the requested commission and rounded up. 

 

So an example is our chip base is $.75, if the location wants a commission of 10% we show them a table with a price increase of $0.15 or a final price of $.90.  Most business owners look at vending as a convenience and once they realize the costs will be passed along they rarely want commissions.    

 

We only have one location that is commission based, it has two snack machines, its a large public recreation center with a ton of traffic, we pay 12.5% gross, but I rake in an additional 20% with the increases prices.    

 

I guess my message is try to avoid commissions (they are a pain in the butt) but don't be afraid of paying commissions, if done right it can be a money maker for both operator and location. 

[Walta]

Do a little work for yourself then show us the math.

 

List your predicted costs and sales volume. Use the vend prices the same as the local convenience store. Add no commission.  Add 60.00 service fee for each time the machine needs to be serviced at cash box totals, combo machine =125.00 2 small machines=250.00 2 large machines=400.00.

 

Now do it again but with a 5, 10, 20 and 35% commission. For every 1% you increase the vend price lower the volume 2%.

 

My bet is you will not find a realistic set of numbers that will predict a profit with a combo.

 

I think you will find high commissions kill profits quickly.

 

 

Walta