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Marginal sales advantage for each additional head


kai1836

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T bird,

Thanks for the info. I am still researching so I dont really know but I was thinking if I did only one thing and did it well (gumballs, DI, or Livewire). Then maybe I could do enough locations to make it profitable. In other words like have 40 or 50 stops each day for 4 days a week and reserve the 5th day for relocating. But I can see if I get to many different items to stock, carry, and track this might not be possible. What are your thoughts?

Gerald

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Best of luck to you. I don't mean to be a doubter, and I'm certainly not saying it can't be done. I don't think it would be efficient or prudent though. If this is your goal, you will need a very large city to push one item that hard because population would become a factor in smaller cities. I'm starting with just doubles and singles, but by june I plan to have a rack. I'm just doing this part time, but it's a very fun hobby and it provides income. I'd be concerned pressing yourself so hard into such a strange niche might diminish the fun of vending, as well as the RoI.

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Gerald,

I have the same long range goal as you and I have run some calculations about this exact sort of thing.

To be full-time in vending and provide an income large enough to take on such a responsibility, it has to at least replace what you are making now, or a certain level you can live with for 1-2 years while you focus aggressively on growth and reinvestment.

I am figuring, like you, that I will work a certain number of hours each day and allow time for prospecting and relocation.  Do not forget about time allotment for UPGRADES!!!  For myself, The numbers will ideally break down like this:

-3-4 days per week - servicing accounts (8-9 hours per day, approx. 30-35 stops per day) 

-1-2 days per week - pull bad spots, upgrade good spots, locate new spots! (0-8 hours per day, depending on needs/wants/goals)

-Balance of 5-6 days of workweek - Inventory management, strategic planning, accounting, paperwork, all the other business management nonsense that goes into owning your business, fix/clean/prep machines, etc.

-SUNDAY - Day of rest!  every week without exception, except if I tinker with used machines or mechs, fixing/cleaning them while watching football... which I have been known to do.

As you can see, when you are growing you really own a job it seems rather than a business, that's why you must make sure your commitment level is high enough to weather the storm through all of this.  If you can't, you must either get a spouse or business partner involved or reconsider whether this is the right move for you.

Now back to the numbers:

**Assume 4 weeks/month...

At 30 stops per day, 3 days per week, that is a total of 360 stops per month.  Operating on an 8-week cycle gives you a maximum capacity of 720 stops per 8-week cycle.

At 30 stops per day, 4 days per week, that is a total of 480 stops per month.  Operating on an 8-week cycle gives you a maximum capacity of 960 stops per 8-week cycle.

The reason I allotted so much time for upgrades/pulls/prospecting is so I can maximize the effectiveness of my service time (i.e., when I get the paid!) since I can only do so much myself, even with full-time availability to dedicate to my business.  Plus I don't want to be a slave to my business and make it just another job.  Therefore I want to pull bad spots, upgrade the good, and seek new locations to maximize revenue, keep averages up, profitability up, etc.  I won't go into details there since I have already posted about those topics previously.

After you max out this capacity, you have to either have another partner, or hire an employee, which presents new challenges mentioned in other posts.  You dont want to give away profits to partners or employees when you can just prune out the bad fruit of your business regularly and keep a lean mean vending machine going!  :)

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I think it is part evolution for a certain percentage of us vendors. Most start with charity machines and some move on to commission. It is easy to start with bulk single, doubles or triples adding one machine at a time. Then you get to a certain size and can get those bigger deals of 10+ machines or add smaller routes to help you grow. Some are fine with this and some give in to the curiosity of the rack. Now bitten by the rack bug some move away from the origional bulk plan into some or all racks. Some vendors will feel the draw towards full line and evolve down a different path but most have roots in bulk. In the end we are all trying to grow our own variety of money tree but we don't know what it will look like when we plant the seed.

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Beer, you are onto something here.  The law of diminishing returns... it is basically a lesson in economics... at some point, you max out what you can get out a particular location for the amount of time/equipment you invest in a location.  In a lot of instances it is a judgment call.

In my example, I got a Chinese buffet that is my best spot now in July 08, that I started with two Eagle Mini Giants, 1" gum and toys.  For one month it did nearly $50. 

I immediately got permission and put in a 5-way rack (.50 Dentures, .25 1" Gum, and 3 toy/ball .25 heads on bottom) and the first 8-week service brought $275 (160% increase), a great jump, so then I added a wing on the rack with another .50 toy head and a 4-column sticker machine in.

The next 2 services were at $465 and $450 (70% increase).  I have now swapped the 4-column for an 8-column sticker machine and will soon put a 7-way rack in.  Do I expect the services to jump at the same rate, to $850?  Not necessarily.  More likely  they jump to $600-650 (another 35%).  This is diminishing returns in a nutshell.

You additional return on more heads with racks is still pretty high in this example even as diminishing returns kicks in.  If I can increase my sales by 20-30% by adding 2-3 more heads by getting a bigger rack or sticker machine, I will go for it most of the time, especially in the prime spots.

I am about to repeat this example at a pizza shop that is my #2 spot, that has an Eagle Mini Giant triple, going to a Beaver 5-way, 2 Mini Giants, and a 4-column sticker machine.  The triple has averaged at least $120/month gross sales for the past 2+ years and the potential sales increase is huge.  So I will gladly throw as many extra heads as I can in there, starting with a 5-way (Dentures and .50 Mix on top, Mike & Ike, a special gum flavor, and toy balls on bottom) and 4 stickers, and flanked by two Mini Giants with Assorted .25 gum & Assorted .25 toys.

I guess the biggest thing with racks is to get into them.  Don't be afraid, don't out-think the room, even with diminishing returns you can make $100 spots into $500 spots (or more).  It isn't 100% certain but with bigger machines the chances are better.  If you get a chance to lock down a spot and have the means to get a rack or racks, do it now before someone else comes in behind you.

That is AWESOME stuff.  Do you give a commission on the racks? 

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Wouldn't you think that the first introduction to a location should be a charity single or double? Then once you see the potential of that location then you should start thinking about upgrading it to a rack/commission? Or do you find locations that already have multiple charity machines and then offer a rack as your way in?

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I was just reading an article which relates to this topic in the Vending times. Basically it was saying that one of the keys to sucess in vending density, density, density. If you have the account, then put more machines there. Put out a crane machine, or a kiddie ride. Make the most out of the location.

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