Why do most people fail in the vending business?

[nam]

 

The odds of being successful in any new business are against you but seem to be very rough on people trying to start into the vending business.  I bought more machines yesterday from yet another person more interested in getting  the machines out of the garage and putting this vending experience behind them.  It certainly seems the majority of people cannot make it in this business.  I just bought 11 machines which is so typical of people getting out of the business.  They seem to never have had enough machines to have made any money if they were in good locations.  Why bother running the route and fooling with all the issues and taking your evenings or Saturday to make $50 to $100 per month?  I'd get tired and want to bail out as well after awhile.

I've decided not all but most failures come from one or two basic problems.  First is not enough machines to make any money.  Many try buying new machines and end up not only over paying but with too few machines to reach their goals.  This business takes alot of machines to make any money and if you don't have enough to buy alot of new machines then I say stay away from new machines entirely and buy as many used machines as your money will allow.

The second reason people tell me they want out of this business is they can't locate their own machines or get taken for a ride by professional locators.  I think if you don't have much money and can't afford to buy alot of machines and can't afford to pay a locator to locate all these machines then you have to learn to locate yourself. 

This is just what I hear over and over from people as to why they are selling their machines.  It isn't because they aren't willing to work hard or weren't smart enough to do it.  This is just my opinion and I'd love to hear yours.  Why do you think so many people fail and want out of this business?

nam

[sbishop]

I think too many people get into vending under the "get rich quick" idea. They get told by a salesman that they will make thousands with a few machines. When they realize that it is not true, they get discuraged.

The second reason would be locations. They bought machine with locations and do not have the time or desire to relocate the ones that are lost. Next thing you know most of the machines are back in the garage.

[Rustinm]

I think part of the problem is that people dont understand what they have when they have a vending route. I am 22 years old and have never made more than about 650$ per week bring home, and that was working 2 full time jobs and working over 85 hours per week! I have done the math on my route and with another year of work i will be able to easly make more than that and still be part time! I dont think people understand that it is not just a job or just a home based business. I think vending is financial sucurity. I know that nomatter what happens in the work force my vending machines WILL make money. I dont understand it when i hear people say that they dont have time to keep up with their bulk machines, i have over 30 locations and growing and i can still service all of them in one day, and if i dont stop for food or mess around it can be done in about 6 hours! How do you not have time to make 65$ per hour once per month? I think people bail out because they dont really consider how little work it takes to make a good amount of money and then they only have 5 machines and dont make enough. They dont look at it like they only worked an extra couple of hours this week and make 150$. My other theory is that people start vending and have no idea what they are doing. They feel like they cant get the information they need and dont know if they are heading in the right direction with it. I know when i started i had no idea what i was doing and didnt have a clue on how to expand. I think people get dicourged too easly and need to just keep going instead of giving up as soon as they get unsure about something. I also think that if people would sit down and do the math and see that they make 50% or better net profit and they compare it to any other business they would think twice about giving up!

[MrEen]

I believe unrealistic expectations due to false and/or misleading advertising is a HUGE factor.

I'll bet this line of thinking gets a lot of people;

This case of gumballs costs $35 and will return $212.50 when sold. That's $177.50 PROFIT! Now with 10 machines out there working for you, you would have $1775 PROFIT. Imagine what you could do with that money every month!

While it was never stated you will sell a case of gumballs from every machine every month, many people probably make that connection in their heads (intended) and are quickly discouraged when the numbers don't even come close to one tenth of those figures.

Scott

[davidsurvz]

I think a lot of people also don't realize how much work is actually involved in having a successful route. A lot of people think they will have lots of locations just waiting for their machines and they can basically just cruise around for a couple of hours a month and collect big $$$MONEY$$$ and the business is just that simple..... Then they find out it isn't quite that simple and don't think it is worth the effort it takes for a successful route.

I also agree companies like 1800 and Vendstar and others make it sound like all you have to do is empty out your 30 machines and you get $7,200.00 I actually have their booklet right in front of me. They make it sound like you will just have quarters pouring into your machines and the product will be pouring right out and in just a couple of months (on an 8 week cycle) you can empty your machines and you are looking at some big money. If you do that twice you have earned back more than your investment....... Blah, Blah, Blah.... If you do that even 4 times a year........ Oh Please, how many people on this forum (or any vending forum) have grossed $28,800.00 off of 30 Vendstars in a year???

I know that there are success stories with biz-op customers but they are the exception not the rule.

Sorry, I just get started on the biz-op thing and just keep going. I just think of how many people have been screwed by these biz-ops and it really ticks me off! Some of these people had very little money to start with or were unemployed they even borrowed thousands of dollars to buy into these things and they are stuck. (OK, I'll stop going off about biz-ops) Fortunately I have never been taken by one of these things.

 

[lurtsman]

I knew biz-ops were out there, and so I searched for about 4 hours a day for a forum with professional vendors. Many people refuse to do research, or not technologically literate enough to find the right places to meet people who will help them.

All in all, I think unrealistic expectations are a HUGE factor. Overpaying for new machines is a large factor, and IMO, people being used to being overpaid for producing little value at work is a large factor. Going into vending I had the advantage of knowing what it's like to be constantly underpaid for what I achieved for the business. I knew how important it was to be in business for myself.

When the guy who would work at the desk next to me doing very little work gets a story of how to do the same measly effort and get paid huge amounts of cash, he signs up right away. Lack of responsibility can lure in the young. As for the older people that get sucked in, I think they aren't used to how scam-happy the companies are today.

[Rustinm]

Hey david,

Just thought i would let you know that i have around 30 vendstars out, some of which need to be pulled due to poor performance but i can say that im nowhere near 29k. Its more like 500$ per month, after i replace the bad locations! i agree, i think these biz-op a holes should be sued for false advertising! I cant believe noone has tried because they are just flat out making false claims. Those figures mean that ever machine would have to make 80$ per month, and thats just to gross 28,800.

[nepavend]

Failures of small businesses - within 1 year, 9 of 10 fail.  Within 5 years, 95 of 100 are out of business. 

The vending business is no exception to this rule.  There are several prevelent reasons for this:

[align=left]1.  The classic mistake most people make when they are attempting to buy assets:

[align=center]"You make the money when you buy, not when you sell."

[align=left]What I mean by this is when you overpay for your inital investment into any business, your ROI suffers horribly. 

Example 1:  Johnny bought 30 Vendstars for $9,000 with a 5-year loan at 8% ($300 per machine, $100 per head) and puts them out on location himself over a 3 month period (no locator fees).  He makes a collection after 8 weeks and grosses a total of $1,200 (just under the national average).  Since they are all candy his COGS are around 30% ($360) and he pays $1/mo to NCCS charity ($60) leaving $840, then he has to make loan payments of $183/mo ($366) to the bank, leaving $474, or a 6% ROI for the 8-week cycle.  Of course, this is before travel expenses, meals, supplies, tools, lost locations, spare parts, etc, which makes this ROI even more disappointing.  Johnny was better off leaving his money in a bank CD instead of borrowing.  He ends up putting his own ad out looking to sell for $40 per location and $20 per machine in his garage about one year later and has to eat the balance of his loan.  He will never do vending again, he swears!

Example 2:  Teddy bought 50 Eagle Doubles used from a Craigslist ad for $750 cash he saved up ($15/machine, $7.50/head) and puts them out himself in 3 months.  He vends gumballs and toys mostly, with a few businesses specially requesting some candy heads.  He also finds two of his spots that do well and converts two doubles into a 4-way that he builds a stand for himself.  His collection for an 8 week cycle is $1,400 (about national average).  After paying for COGS of about 15% ($225) due to toys and gumballs costing less than candy and $1/mo to NCCS ($100) and no loan payment to make he is left with $1,075 before other expenses.  This is an ROI of 144%!  Much better than Example 1.  This is the power of profit when you BUY!  Teddy can even offer commissions to business if confronted with losing a location and still make a big ROI.  With the 9,000 loan that Johnny got, Teddy figures he can buy a few hundred machines and the product to fill them over time, and even get into racks and sticker machines and further amplify his ROI!  Move over Roger Folz, Teddy is excited and can't wait to move forward! 

CASH IS KING!  Return on capital invested is a great measure of profitability.

2.  Locating machines proves to be intimidating for would be vendors.  They give up after a few no's, do not try to refine techniques or try new ones, and soon machines are piling up in the garage.

3.  Servicing machines becomes less fun after not making money for a while and soon they begin to empty and dirty.  This compounds the problem of losing locations.

4.  Getting out of the mindset of the rat race and into the mindset of a business owner is too much for many people to take.  This has nothing to do with being smart, just mental programming.

5.  To them it sounds easy until you have to do the process of locating, servicing, upgrade/pull, and relocate, as well as get other machines fixed, etc.

[/align][/align][/align]

[nam]

Joe,

Excellent example of the difference in how you "buy" right to make money in this business! You got a POTD for this my friend!

nam

[dperry]

It's interesting to see what makes a Johnny and what makes a Teddy. Look at all the back posts and see all the people on this site who are no longer here and posting. Looks to me like they are all Johnnys while we are all the Teddys.

[nepavend]

Haha... I guess that is something that we can say! 

[BudLeiser]

If I leave vending it will be because of the locating. If however I can hire someone to locate at the right price, and get average returns. The math should go in the right direction.

[nam]

Budleiser,

I am not very good with alot of technical computer issues, making excel spread sheets or even using the GPS. On a scale of 1 to 10 I'd say I'd be lucky to rate a 6. My point is I have learned enough to get by with these things even though I know lots of people are better at using them than me. You can learn to locate yourself even though you may not ever be as good as someone else you can learn to do it well enough to get by. This is better than having to rely on someone else and paying someone else to do it. You doing a so so job of locating is still better than a good phone locator. You can make a better choice of where you want your machines placed than a locator. The phone locator can't see the size of the restaurant. The phone locator can't see the neighborhood. The phone locator can't read the location and the owner the way you can doing it in person. You can get better locations over all than a phone locator. Not to mention that you have alot more at stake and are more likely to pass on a location that a paid locator would take - on the phone or in person. No one is as concerned about your business as you are. You need to be in charge of this critical area yourself in my opinion. You just need to learn how to do it.

nam

[pdavid]

nam,

In my opinion, it depends...I bought some 1-800's dirt cheap, and I had Midwest locate a few for me and promptly made my locater fee back in the first month. They have some corporate connections and got me into a couple places I never could have gotten into myself. I pull $40 a week out of one of these locations.

I have located most of my machines, but am glad I also used Midwest.

[nam]

pdavid,

You are right and I agree. In certain circumstances the locating company may do better but not over all in my opinion. Phone soliciting is not easy work. There is a big turnover amoung those you hire. They may do well for awhile but burn out. Their results begin to go down hill and if they don't quit you have to let them go. I've only ever had a couple that could keep with it and do a good job month after month. I've run appointments set by my own phone crew, after listening to them make the appointment only to get to the appointment and have the owner gone or deny having made the appointment. Also drove out on locations that I'd didn't stop my car because the areas were too bad. At least when you hit the street yourself you see the area you are in. You can either talk with the owner or be told no right now without all the bs. You can just plain make a decision yourself based on alot of different factors that the phone solicitor doesn't have access to. If the phone people aren't really good they can waste alot of your time running around. I still say you are better off having control of the locating side of this business as it is so critical to make or not make any money with those machines. Now if I could call Midwest and request nothing but certain locations that they have the connections to get into then I would go for it. As for small business locations up and down the streets of any city USA I'd rather do it myself.

nam

[havending]

The sales people from machine companies get guys and gals all hyped up about the bags of money they will make onle working a few hours a week. Then they call a chairty to get their dollar a month lables. As the days pass by waiting for UPS to arrive they lay in the bed at night and dream about all that money. Now comes failure as they hear the word NO as their placing machines or the place one where there is all ready 3 or 4 LOL. To be in this business you have to be a positive person. When you hear no you have to smile and thank the person for their time and get out there and work on the yes. Another problem is that they are trying the same business the same way that thousands of other people are doing. And the market is saturated with "chirity type vending" If you want to be a sucess be unique and keep going no matter what. I have a ton of machines and cover 4 states and when I look into the back of the van and see a rack I drive un til its placed. Most of the folks in this business dont have the DRIVE that it takes.

[nam]

havending,

I really can appreciate what you're saying here. It's great to have another vendor in the forum with your experience and look forward to reading more from you. You really must cover alot of ground as I know where you are located and to cover 4 different states you put some miles on your van!! I'd be interested in hearing what different types of machines you're running as well as any other advice you can send our way in the future.

nam

[jaharra]

Havending,

Do you have any tips on being unique to share with us?  Jaharra

[BudLeiser]

Lol. Yes please tell us how we can all be unique... together.

[havending]

We are all chasing the same quarter but as far as being unique are you dong it differnt and better than the next guy. I have some machines that had speical made from NW. Its a tower that is built of two 25 inch machines stacked and placeed on a round base painted either sky blue or white. I vend one inch caps at .50 now im running monking around and splaterz. Yes I run .25 toys for .50. Both of theese have a priceved value higher than .25 These machines will hold over 2500 caps in each section so I use them in outlying areas of my route or areas that are very far away so I may only service them 2 times a year dut when I do its a great pay day. There are many ways to set your self apart in your busines.

[havending]

Thanks,

I have alot of the Tomy style then mostly racks and some sticker machines. I had NW make me some custom machines for the location I only do a couple times a year.  They hold about 2500 in retail dollars. I got into this industry with the drive to be the best and 14 yrs later im still going strong.  I still remember my first location it was a skate board shop and did about 60 every three months wow was excited.  I am however a stright shooter I do not sugar coat and somtimes folks dont like that. 

Good Luck

Anthony

[chowchowjailboss]

IMO doing your own locating is the wa to go for many of the reasons metioned. You may get 8-10 "nos" but the one "yes" makes it all worth it to me. Plus, there is no greater fealing that walking by one of your machines that you purchased, located, placed, and service yourself and see someone droping a quarter in. It may sound corny but it works for me.

[candyman_1984]

I almost did thebiz op blunder. I had already sent a deposit to u turn for 50 terminators. I found this forum and posted the info and you guys saved me about $40,000. Thanks to all who replied. This has to be the most informational and  truthful forum that I have ever found. I have since used ebay and craigslist and have so far purchased 10 machines for about  67.00 per machine shipping included. This forum saved my saving so to speak.

[nam]

candyman,

Wish all the business opp stories had an ending as well as yours! Don't let that stop you from buying U Turn Terminators though. Just keep searching the craigslist and ebay ads for them. 

nam

 

 

[lurtsman]

Saving 40,000 is pretty great.

Watch for Nam's craiglist deals also. I can get most of my machines for under 25 bucks that way.