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Starting out from scratch/ Taking out a small loan?


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My question is this. What options do do you take or advise when starting out with nothing, as in no vending machines or product? What is the best way to acquire a vending machine? I see that a typical standard quality machine averages around $3,500.

 

Is taking out a small business loan a smart move?

 

I am not looking at creating a full time business. I'd rather have this start out as a small side job to compliment my income and free up some time for myself. 

 

So ultimately my hurdle is I don't have $3,500 to throw down on a vending machine. I'm going to community college and pursuing other opportunities as well and would like to create some assets for myself. 

 

Any advice I would greatly appreciate it.

 

Thanks,

 

Cody

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You will get mixed answers on this subject but I will give you my opinion. First off getting a"business loan" for vending is going to be tough. Major machine manufactures offer financing for machines and much more flexible than traditional lenders. 

 

So now comes the question is a loan an good idea or not? Yes, it is fine if you can place the machine in a location that covers your payment and also leaves you a positive cash flow. Their is nothing wrong with financing assets (machines) to get your business started. People borrow money for all types of businesses and vending is no different. You just have to make sure you understand how to be successful and create enough cash flow to pay the loan plus make a profit.

 

Even current operators buy equipment on a structured payment so they can grow their business. Lets say they have the opportunity to get a large account that requires $50k in equipment but they don't have that equipment on hand. Do they just not do the account? Well that depends does the account cash flow the investment. I just turned down an account that does over 100k a year in revenue. Why? Because I could not get it to cash flow based on the equipment they needed. The reason was they had four break rooms with full banks of equipment. Which would not be bad if they generated enough revenue to justify that much equipment and the payment of that equipment. After debt service on the loan and all other associated expenses I just didn't have enough positive cash flow left over that made sense so I decided not to do a proposal and get their business.

 

This is why I say their is nothing wrong with a loan if it makes sense. However, DO NOT go get equipment without having accounts to put it in. Get the accounts first then get the equipment. 

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I would never recommend someone to buy new when they first start, 99 percent of accounts do not qualify for a new or a 3500 machine........unless you're not in the United States then that's another story

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What 3,500 machine are you getting?

For most good accounts a 1000 refurb is sufficient, accounts that require new machines are not good to start with.

 

 Do you mind explaining to me what you mean by this comment? 

 

If you can get an account that does $500 a week in drink snack why wouldn't that be a "good to start with"?  Nothing wrong with used and refurb equipment but some accounts justify new equipment and not necessarily a "requirement" to get it. I have taken many good accounts from operators that had older "refurb" equipment in them. I offer them new equipment (not required) and they are very happy to switch vendors because of it. Would I do this in a $100 gross revenue drink snack account? Of course not, it would not make sense to. Sometimes you can get them even without new equipment because they want to switch and not happy. In that case maybe a 1k refurb would be ok.   

 

Not all accounts justify new equipment because they do to low volume. However the ones that do I am more than glad to offer it to them and keep my supply of equipment new and updated with the latest technology. 

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I would never recommend someone to buy new when they first start, 99 percent of accounts do not qualify for a new or a 3500 machine........unless you're not in the United States then that's another story

 

99%? Maybe in your area but plenty of accounts justify new equipment in my area and many others.  What to you would "justify" new equipment? Lets just say a drink snack account. What revenue would you think is needed to justify new equipment?  

 

Like  I said in my other post you may not have a business model that uses new equipment but an operator that does can offer it to them and take an account from you or get chosen over you in a multi vendor proposal situation. 

Accounts that do 1000 a week still can have a refurb machine in it

 

Of course they can, never said they couldn't. I did say that if a another vendor willing to put in new equipment couldn't take that account from that operator. Like I also said new equipment is not always the answer and I run plenty of refurb equipment. I have even written (on this forum) about some cheap machines I have bought and refurbed and shown before and after. 

 

But to say it is NEVER a good idea to start with new equipment is just not the case. It is an option that can work if done correctly. Even with the $1k refurb machine if not done correctly could lead to failure. 

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Amount of revenue does not determine new or used...the type of account plus revenue will

Why would I put a new machine in a warehouse where I do 600 to 800 a week and it will get tore up and busted up in the next couple months ....that would be a dumb move

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Amount of revenue does not determine new or used...the type of account plus revenue will

Why would I put a new machine in a warehouse where I do 600 to 800 a week and it will get tore up and busted up in the next couple months ....that would be a dumb move

 

Correct but you said 99% doesn't "qualify" and I would assume you are talking about revenue and not vandalism. I just put three new pieces of equipment in a warehouse and never have an issues. Yes, if an account is suspect to break ins vandalism, etc then no new equipment would not be the way to go. Fact is if they are that "suspect" for this I would do them with any equipment.

 

If you are having that big of an issue in a warehouse with machines getting tore up in a couple months I believe I would be talking to management and getting that situation corrected.

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Most account that require new equipment (bids, large mfg) will either not want a newbie or a newbie will be in COMPLETELY over their head.

For a new guy it is better to wet their feet with a 50-100 dollar a week account with a used soda machine and see if its right for them before dropping thousands on rapidly depreciating new equipment and going into debt and being upside down on a loan form the start.

Plus, the accounts that justify new equipment also want snacks which will eat a one machine new guy alive with stale product.

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Most account that require new equipment (bids, large mfg) will either not want a newbie or a newbie will be in COMPLETELY over their head.

For a new guy it is better to wet their feet with a 50-100 dollar a week account with a used soda machine and see if its right for them before dropping thousands on rapidly depreciating new equipment and going into debt and being upside down on a loan form the start.

Plus, the accounts that justify new equipment also want snacks which will eat a one machine new guy alive with stale product.

 

If a newbie knows what he is doing this would not be a problem. This will take some due diligence, and research but it can be done. Another reason I started my consulting company 5 years ago was just for these type people and anyone else that didn't want to spend the next 2 to 3 years "getting their feet wet" with $50 a week drink accounts. 

 

Not sure I understand your last sentence but if the justify new equipment then stales will not play a part.  

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If a newbie knows what he is doing this would not be a problem. This will take some due diligence, and research but it can be done. Another reason I started my consulting company 5 years ago was just for these type people and anyone else that didn't want to spend the next 2 to 3 years "getting their feet wet" with $50 a week drink accounts.

Not sure I understand your last sentence but if the justify new equipment then stales will not play a part.

So if this guy came to you and he wants to get going and wants to get a loan and spend 3k plus on his first machine you being a consultant would tell him to do it?
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Correct but you said 99% doesn't "qualify" and I would assume you are talking about revenue and not vandalism. I just put three new pieces of equipment in a warehouse and never have an issues. Yes, if an account is suspect to break ins vandalism, etc then no new equipment would not be the way to go. Fact is if they are that "suspect" for this I would do them with any equipment.

 

If you are having that big of an issue in a warehouse with machines getting tore up in a couple months I believe I would be talking to management and getting that situation corrected.

Sometimes mgmt doesn't want to hear the vendor golpher and moan.

 

If a newbie knows what he is doing this would not be a problem. This will take some due diligence, and research but it can be done. Another reason I started my consulting company 5 years ago was just for these type people and anyone else that didn't want to spend the next 2 to 3 years "getting their feet wet" with $50 a week drink accounts. 

 

Not sure I understand your last sentence but if the justify new equipment then stales will not play a part.  

I do realize my stales comment was wrong. My apologies.

However, OP's goal was to have a side job, not a full time commitment with large accounts requiring extremely frequent service.

In addition, many of these large account require references, they don't care who trained him, they want experience.

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So if this guy came to you and he wants to get going and wants to get a loan and spend 3k plus on his first machine you being a consultant would tell him to do it?

 

Yes, I have helped many either start their business or expand their existing. Do some fail? Yes, because they didn't have the drive to succeeded but no matter how much money and coaching these people would never make it. They just don't have what it takes to make it as a business owner. Others have been very successful and done very well for themselves.  Each situation is different and no matter who your "coach" is if you don't have the desire and ability you still can fail. 

 

I look at it like this. You want to become a boxer. So you get on YT and watch some videos and chat on some forums about it. You jump in the ring with someone and get clobbered. Now you take that same guy and get him with a good coach and he has the correct desire and ability and his chances for success is much greater. Could a guy watch some videos and chat about boxing do ok? Sure if he had the correct desire and ability. He just may get the crap beat out of him a lot longer before he sees that success.  

Sometimes mgmt doesn't want to hear the vendor golpher and moan.

 

I do realize my stales comment was wrong. My apologies.

However, OP's goal was to have a side job, not a full time commitment with large accounts requiring extremely frequent service.

In addition, many of these large account require references, they don't care who trained him, they want experience.

 

That still can be done. I just placed an account that is worked one day a week (any day is fine for service because they are 24/7) I placed new equipment (two drinks and one cold/frozen) along with bottler assets and it does enough revenue to justify my monthly payment. This account could be done by anyone starting out because of the flexible times it can be serviced and only needing one day a week service. You could do two days if you really wanted to based on the numbers but because it is spread out over three machines I put in one day works fine. 

 

I give references all the time on proposals and 95% of the time they are never called or verified. So references are not always necessary if you represent yourself as a professional vending operator. Image and how you represent yourself and company is much more important than references.  

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Yes, I have helped many either start their business or expand their existing. Do some fail? Yes, because they didn't have the drive to succeeded but no matter how much money and coaching these people would never make it. They just don't have what it takes to make it as a business owner.

My point exactly...so why would you coach someone that has no idea what vending is and if they have what it takes to succeed in this harsh industry to spend that much money on one machine when they could get 3 or more used good machines for that cost and really get a feel if they will like vending ....
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Yes, I have helped many either start their business or expand their existing. Do some fail? Yes, because they didn't have the drive to succeeded but no matter how much money and coaching these people would never make it. They just don't have what it takes to make it as a business owner.

To me a new guy getting new machines is like giving a new driver fresh out of driver's ed getting a supercar- yes, some get lucky but most proceed to wrap it around a tree.

Why are suggesting that op go out and get into debt with machines he can't afford and get accounts that he'll be over his head in without your consulting?

What makes you think that he can afford 750/yr consulting when he can't even afford a machine?

And people can still make it full time without new equipment- Cajun Candy does full time with a mix of older machines, Allen Watson does it with dinosaurs, and Moondog like his AP7600's and used Royal GIII's

In addition, C*n teen (not that they are a good example of service or vending) uses used equipment with new stuff for big accounts.

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My point exactly...so why would you coach someone that has no idea what vending is and if they have what it takes to succeed in this harsh industry to spend that much money on one machine when they could get 3 or more used good machines for that cost and really get a feel if they will like vending ....

 

I dont think you guys are following what I am saying. Not sure why you think it is so "harsh" I find it pretty pleasant. But heck life is harsh in all reality sometimes. I also NEVER said he shouldn't get 3 machines over a new one. I said new equipment is an option and should be considered if that is what he needs to do. Their are also companies that will finance used equipment ($1k machines) which is another option. I am just saying it is not an accurate statement to tell anyone that new equipment is not an option to consider because it is. 

 

The OP said he didnt have a lot of free cash to buy equipment. In that case buy new or used equipment on a loan is an option. 

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To me a new guy getting new machines is like giving a new driver fresh out of driver's ed getting a supercar- yes, some get lucky but most proceed to wrap it around a tree.

Why are suggesting that op go out and get into debt with machines he can't afford and get accounts that he'll be over his head in without your consulting?

What makes you think that he can afford 750/yr consulting when he can't even afford a machine?

And people can still make it full time without new equipment- Cajun Candy does full time with a mix of older machines, Allen Watson does it with dinosaurs, and Moondog like his AP7600's and used Royal GIII's

In addition, C*n teen (not that they are a good example of service or vending) uses used equipment with new stuff for big accounts.

 

If he had my consulting why do you think he would be "in over his head"? That is the point of hiring any consultant is to have a person to guide you and help you make decisions to keep you from getting in over your head. 

 

He may very well cant afford the $750 but that is not what it was mentioned. I mentioned it in response to your post about someone new "getting their feet wet" with $50 a week drink accounts. 

 

For the last time I NEVER said new equipment is the ONLY way to go, I said it is an option and yes even for new people. I started out with used equipment like many. 

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I dont think you guys are following what I am saying. Not sure why you think it is so "harsh" I find it pretty pleasant. But heck life is harsh in all reality sometimes. I also NEVER said he shouldn't get 3 machines over a new one. I said new equipment is an option and should be considered if that is what he needs to do. Their are also companies that will finance used equipment ($1k machines) which is another option. I am just saying it is not an accurate statement to tell anyone that new equipment is not an option to consider because it is. 

 

The OP said he didnt have a lot of free cash to buy equipment. In that case buy new or used equipment on a loan is an option. 

You were pushin the new option pretty hard.

Most of the time a new guy getting new is a poor idea, and a loan is also a poor plan.

I give references all the time on proposals and 95% of the time they are never called or verified. So references are not always necessary if you represent yourself as a professional vending operator. Image and how you represent yourself and company is much more important than references.  

Are you saying that you should lie on a proposal?

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You were pushin the new option pretty hard.

Most of the time a new guy getting new is a poor idea, and a loan is also a poor plan.

Are you saying that you should lie on a proposal?

 

No I was saying that new is an OPTION and if done correctly can work for new people to the industry. Yes, it can be a bad idea if not done correctly but like I have already said that can happen with 3 $1k machines if someone does not do it correctly. Both have different consequences but same results a failure is a failure.  

 

Lie? Not sure how you took what I said and make you think I was insinuating that myself would lie or encourage anyone to lie on a proposal. 

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If he had my consulting why do you think he would be "in over his head"? That is the point of hiring any consultant is to have a person to guide you and help you make decisions to keep you from getting in over your head. 

 

He may very well cant afford the $750 but that is not what it was mentioned. I mentioned it in response to your post about someone new "getting their feet wet" with $50 a week drink accounts. 

 

For the last time I NEVER said new equipment is the ONLY way to go, I said it is an option and yes even for new people. I started out with used equipment like many. 

 

That is exactly my point- you say that he won't be over his head with your consulting, and go on to say that he might not be able to afford it. So why are you recommending an option that will require your consulting?

 

No I was saying that new is an OPTION and if done correctly can work for new people to the industry. Yes, it can be a bad idea if not done correctly but like I have already said that can happen with 3 $1k machines if someone does not do it correctly. Both have different consequences but same results a failure is a failure.  

 

Lie? Not sure how you took what I said and make you think I was insinuating that myself would lie or encourage anyone to lie on a proposal. 

I do apologize.

However even if the references are not contacted they could still have been considered.

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That is exactly my point- you say that he won't be over his head with your consulting, and go on to say that he might not be able to afford it. So why are you recommending an option that will require your consulting?

 

I do apologize.

However even if the references are not contacted they could still have been considered.

 

The idea of getting consulting is just an option like any other. New equipment, used equipment, buying an existing route, starting from scratch, starting with $50 a week drink only accounts, getting consulting, or not getting consulting. They are ALL options and people will have to decide what works best for them. Their is no one shoe that fits for every situation.  Consulting may not be an option for him at all just like having cash to buy used machines. Don't know his particular situation cause I have never spoken with him. I am just responding to what others have posted. 

 

I promise you if he or anyone else spent the money on consulting (with me or any other reputable vending consulting company) would save the money they spent on the consulting many times over. That is just the facts of it and why people hire consultants and consultants exist. Even some of the largest companies in all segments of business (banking, hospitals, manufacturing, restaurants, vending etc. )hire consultants for a reason. In the end if the consultant knows what they are doing it saves their company. Think of it as hiring a full time experienced vending manager without paying them $75k a year. You get the luxury of having someone with the experience and knowledge for a fraction of the cost. A bank for example may hire an consultant to implement a new service. They see the value in trying to get it right the first time and not "getting their feet wet" and working through it. 

 

If someone has the time and ability to research and learn about vending over about 6 to 12 months then they may could do just fine starting out. They still need some basic business knowledge and desire to succeed.   

 

 

As far as the part about references you are correct if you want to list references that is appropriate. I am just saying it is not always necessary to acquire new business even the nicer accounts. The most important part is representing yourself (and your business) as a professional vending operator. This means dressing correctly, correct handout material that looks professional because all this matters in peoples perception of doing business with you.  We do business with people all the time that I have never gotten a reference for. Buy from people all the time on the internet without a reference. These people are just making a decision and not actually spending money. Dont get me wrong nothing wrong with having and using references but not always needed. 

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I would highly recommended NOT buying new equipment. I have been doing vending for a pretty good amount of time now and still have yet to buy a new piece of equipment. I would recommend going out and buying a good refurbished unit. You can pick up a good used machine for 1/4 the cost of a new machine. The companies that are buying new machines are putting them in universities or air ports, and they are using the fact that the machines are new to help in the bidding process. For most accounts a used machine that is properly set up will do perfectly fine.

 

If the first machine I bought would have been a new one I would have lost money because when I first started doing vending I had practically no clew what I was doing. Now a days I would be more willing to buy some new equipment for larger accounts with a contract, however most of these accounts are locked up with the big guys.

 

You can get as much consulting as you need on this blog imo ;D

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That is exactly my point- you say that he won't be over his head with your consulting, and go on to say that he might not be able to afford it. So why are you recommending an option that will require your consulting?

 

I do apologize.

However even if the references are not contacted they could still have been considered.

 

So lets take this one point. Lets say he has $1k to spend and that's it. You think that money would be better spent on buying a used machine and going it alone than taking that same $1k and hiring a consultant (me or anyone that is reputable) and learning how to do vending correctly and using the new/used with financing option.

 

You think it would make better sense for him to spend that $1k on a machine and place it in an account doing $50 a week?  You think that better than paying $1k for consulting and learning and getting an account that does $500 a week (with financed equipment)?  

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So lets take this one point. Lets say he has $1k to spend and that's it. You think that money would be better spent on buying a used machine and going it alone than taking that same $1k and hiring a consultant (me or anyone that is reputable) and learning how to do vending correctly and using the new/used with financing option.

You think it would make better sense for him to spend that $1k on a machine and place it in an account doing $50 a week? You think that better than paying $1k for consulting and learning and getting an account that does $500 a week (with financed equipment)?

We do consulting here for free......so yes I say buy a used machine for 900 stock the machine with the other 100 ....there is no experience or training like on the job real life training

...I've always said I would hire someone with 2 years experience working on the job then someone that read a book

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