EatMoreJunk Posted June 3, 2015 Share Posted June 3, 2015 I've owned 4-6 machines for years, decided to dive in much deeper (approx 40 machines) at the beginning of 2014. I know there are dozens of factors that go into net profit with vending, but assuming that someone is paying the appropriate taxes, insurance costs, vehicle costs, etc ...what is a reasonable and accurate profit margin? Single man operation. My COG in 2014 was right at 40%. Total net profit wound up being approx 26%. Is that about right? I do expect it to be a bit higher in 2015 due to some "start up costs" that I incurred early last year ...and the fact that I've improved my skills over time and don't have as many stales, etc. Link to comment Share on other sites More sharing options...
AZVendor Posted June 3, 2015 Share Posted June 3, 2015 You are right in the ballpark of what vending can profit. Your calculation is good in that you aren't just thinking that because your COGS was 40% that you then profited 60%. As you did, you must always deduct all of the fixed and variable costs from that 60% gross profit to get to your true net profit number. There is also depreciation and some other items that are mostly paper calculations but you are figuring this the right way. As you grow you may find that some of the variable costs will change as your sales change and that your fixed costs may remain the same as they are up to a certain point. There will be a threshold somewhere along the way that will require you to have higher fixed costs such as rent, insurance, payroll, etc. This profit that you have is far superior to that of the large operators, whether they are regional or national, where the net profit is and has always been in the 5% range. Link to comment Share on other sites More sharing options...
EatMoreJunk Posted June 3, 2015 Author Share Posted June 3, 2015 5% HOLY HELL ... why do they even do it ?? Thanks for the affirmation, Randy ... glad to hear I'm on the right path. Does my COG seem about right as well .. approx 40%. ? When we (my wife and I) decided to go much bigger in vending, we borrowed $70k and bought out a good sized local route, including his Isuzu box truck (lifesaver) ... that's where the 40 machines I mentioned came from We're determined not to take a penny out of the business until that loan is paid off. If things go as planned we'll have it paid off early 2016, which would be right at 24 months. That will be a happy day! Link to comment Share on other sites More sharing options...
65tremecgt Posted June 3, 2015 Share Posted June 3, 2015 Well the big guys have lots more overhead, having warehouse space, trucks, paying others to service the machines and such. Im surprised its only 5% though, although its 5% of a much bigger pie. I am drawn to this business as well since I have a truck, a 25x25 shop to store machines if needed and I don't plan on growing much past what I can do in about 15-20 hours a week. What was your biggest challenge stepping up from several machines to the big route? Link to comment Share on other sites More sharing options...
kiwi Posted June 3, 2015 Share Posted June 3, 2015 5% HOLY HELL ... why do they even do it ?? Because 5% of 10 million is still a lot of money... Link to comment Share on other sites More sharing options...
EatMoreJunk Posted June 3, 2015 Author Share Posted June 3, 2015 Because 5% of 10 million is still a lot of money... I get that .. but why is their margin so dang low? Is their overhead THAT much higher? Link to comment Share on other sites More sharing options...
AZVendor Posted June 3, 2015 Share Posted June 3, 2015 Think about it. Hundreds of routes with vehicles, salaries, product costs, payroll taxes, warehouse rents, utilities, income taxes (corporate), commissions, equipment payments, support people (repair, moving, HR, accounting, sales, executives). It all adds up as you get larger. In the nineties I ran 3 full line routes and at 90's prices we did 1 million a year in sales. After all the overhead of trucks, employees, warehouse rent, repairs, vehicle maintenance, payroll taxes, commissions, sales taxes and income taxes, I paid myself just $500 per week. And I reported all of my sales as income, nothing was under the table or unreported. It doesn't get any better once you can't do it all yourself. Link to comment Share on other sites More sharing options...
RJT Posted June 3, 2015 Share Posted June 3, 2015 This is my point when I am always bringing up doing accounts doing less than $75/$100 per machine per week. You will NEVER build up enough accounts to make any decent money without having a huge number of these type of low volume accounts. To scale based on that business model would mean would have to have a massive number of accounts to make enough money to do vending full time. A one man operation with low overhead can make a nice living in vending with the right accounts. However, you have to have safe guards in place in case that "one man" is down because you will loose your entire business in less than 30 days. Link to comment Share on other sites More sharing options...
EatMoreJunk Posted June 3, 2015 Author Share Posted June 3, 2015 This is my point when I am always bringing up doing accounts doing less than $75/$100 per machine per week. You will NEVER build up enough accounts to make any decent money without having a huge number of these type of low volume accounts. To scale based on that business model would mean would have to have a massive number of accounts to make enough money to do vending full time. A one man operation with low overhead can make a nice living in vending with the right accounts. However, you have to have safe guards in place in case that "one man" is down because you will loose your entire business in less than 30 days. Yeah that's my biggest fear, getting hurt/sick and being out for several weeks. I have a buddy who can service my 4 or 5 "larger" accounts (some once a twice, a couple that are twice a week) ... but he's not prepared or able to run the entire route over multiple weeks. The problems is that I cannot keep him (or anyone for that matter) trained and up to speed where they could handle it all immediately at any given time. I just try my best to be careful lifting stuff and take care of myself. Anyone else have any guidance or experience in this matter? Link to comment Share on other sites More sharing options...
SchligVend Posted June 4, 2015 Share Posted June 4, 2015 I was in the swimming pool cleaning and repair industry for years before going into vending, we were part of a Chapter which consisted of 5 to 10 other Pool companies (mostly one man owner operators but we had one larger company that had multiple employees) and we were all under one insurance company and also in this chapter we would be in agreement that if one of the 5 to 10 guys were out sick or hurt for over I think it was 14 or more days we would each cover a couple of his swimming pools while he was out... I know this would never work in the vending industry because vending guys are way to cut throat but I love the security of having that just in case Link to comment Share on other sites More sharing options...
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