Paying off of the Gross / Paying off of the Net

[ButlersVending]

Deriving the Percentage to be paid to the location is always an important consideration. The Operator must earn a living, pay for his expenses, and hopefully be able to save a portion of that which he makes for a rainy day.

The considerations of the COG, and all other overhead, including your time and effort, vehicular cost and fuel, taxation, etc., must first be considered. Then, establishing what, if any, percentage to pay to the location is the next most important factor.

These are the five major factors in establishing the percentage to be paid to the location:

• Paying off of the Gross ... the simplest, but when compared to the percentage derived at by Paying off of the Net, it compares poorly to the uninitiated.
• Paying off of the Net ... deducting only the COG, initially seems more than that paid by the operator who pays off of the Gross. However, this can be a distinct disadvantage to the operator, inasmuch as the location may ask the price, or even proof of the price, of the goods vended, which may prompt the location to completely do away with the operator, and to purchase their own machines. {Many locations are convinced that the COG is always very low, regardless of the product vended.}

  • There are those, who are poorly versed in mathematics, to whom 35% of the Net seems more to them than 25% of the Gross, are the most difficult with whom to transact. Depending upon the COG, either one may be more.  The ultimate battle ground of words here depends upon whether the location understands the difference.

• Paying off of the Net-Net ... seldom done, as this involves the COG, plus all of the other legitimate deductions as overhead, taxes, vehicle cost, insurance, fuel, time and effort, etc.

• Bottom Line ... {This is done, usually in conjunction with Paying off of the Gross.} Assuring the location that they will receive more from you than they would / will from a competitor. This can be accomplished by inviting a location to try both your machine and one of a competitor, and asking them to determine for themselves as to which operator is more worthwhile. ... {We pay off of the Gross, and have successfully encouraged many of our locations to compare their "bottom line" incomes from other vendors to ours.}

• Space Rental: Paying a set amount for the space in a location regardless of the type of machines used, etc. This usually is done by the year. If an agreement can be reached whereby both parties satisfactorily benefit, it's to the advantage of the vendor as he can quickly service the machines without having to count the money ... just leaving a check. The potential downside is that if the location begins to have poor business, the amount that they're paid remains the same.

There's more than one way to get a job done. Choose that which works best for you. And, if the current method which you're using seems as if it could be improved upon, then the preceding may offer another option.

Bob

[caserri]

Great Points Bob.

I think the bottom line is that it depends on what the operator feels comfortable doing. In my case, my routes are my business, not the locations business. Because of that, I do not allow the location much latitude to dictate how I operate. That also goes for product selection as well as commissions. As far as I am concerned, my commission payout structure is carved in stone. I pay what I pay. I learned quickly not to negotiate because it wastes too much time and usually cost me way too much money in the end. The location either accepts what I offer or they do not and I move on.

It's no secret that I pay commissions off of simple net. I subtract only COG from the gross and pay 50% of what remains. I will not pay a location a percentage of what I pay for product. That turns into a "double cost". I've never been asked to document my COGs but if I were, I'd have no problem providing the information. I'm not worried that my locations would kick me out in favor of running their own machines because my locations are not vending companies. They have no interest in becoming one. In fact, they do not even seem to care, one way or another, that my machine is there. They look at my monthly commission check as a bonus, not something they bank on.

I'm sure that how I operate would not go over too well in other areas of the country. It depends on what area you operate in. Here in the Northeast, people are not that friendly. They don't want to be bothered with idle chit chat. They want quickness and efficiency. They don't want to listen to spiels about how my commission payout is derived compared to another vendor and they are not too concerned about where I count the money. (Although I always count in plain view.) I also have many rack locations that pay 0% commissions because the locations just don't want to be bothered by what they feel is an insignificant commission check. On the other hand, I spent the first half of my life living just outside Nashville TN. The way I operate here would definitely not work in that area.

Steve

[guile]

I also have many rack locations that pay 0% commissions because the locations just don't want to be bothered by what they feel is an insignificant commission check.

I'm curious how you managed this. Are these locations friends and/or friends of friends?

[caserri]

g,

They are simply locations that granted me the space without asking for a cut. It's not that uncommon. Like I said, the general consensus around here is that these things don't make very much so why bother.

Steve

[guile]

I could see some biz owners thinking that about smaller machines no racks. Hey, more power to ya;) I hope you continue to find those type of locations. Hopefully one day soon, so will I.

g

[caserri]

g,

To be honest, I don't think it has anything to do with me. It is a geographic thing. There are just areas of the country where income from bulk machines is not considered significant enough to want a cut. Some places do, some places don't. I'd say I'm at about 50-50 right now.

I was recently servicing a non commission rack in a local pizza shop. After I serviced everything and was on my way out, the owner said to me, "Seems like a lot of work for just a few quarters." I just smiled and said we all have to make a living somehow. That is a common sentiment I get from a lot of locations.

Steve

[ButlersVending]

Several locations have told me that the money wasn't important, and that I could keep it. But, it's always been in the back of my mind that it'd be better to pay them ... and, so far, I've insisted that they take it for whatever reason, as "An employee appreciation fund, or coffee fund, etc."

So far, each service interval, they've always taken the money. Some of those same locations, and many others, too, do acts of kindness to us, too, as discounts on meals, on oil changes, and the occasional "Here, this is for you!"

Much of what all of us do, must, and does, reflect our personalities, likes & dislikes, etc.; it's normal.

Bob

[caserri]

 Some of those same locations, and many others, too, do acts of kindness to us, too, as discounts on meals, on oil changes, and the occasional "Here, this is for you!"

What is this "act of kindness" you speak of Bob? I must be on the wrong side of the Mason-Dixon for I know not what it is!  LOL

Steve

[antoniocinisi]

 Like I said, the general consensus around here is that these things don't make very much so why bother.

Steve

this is very true steve.

luckily everyone under estimates how fast quarters add up.

[BluePlate]

I serviced 7 locations today. I was given a free turkey grinder (that's what we call a sub in the Northeast) and another location gave me a free order of buffalo wings, I must of looked hungry today!!