Help with start up troubles

[matt92099]

Hello I was posting this to Reddit on a vending form, I was recommended to post it here as well so here it is copy and pasted.

 

Forgive me but incoming wall of text. So for a while me and 2 other friends wanted to start up a vending machine company. we did a fair bit of research (enough to what we thought was a good starting point). We saw all these posts online saying how easy and cheap it is to start a vending machine gig. I went as far as getting a "class" or "instruction" from a vending operator who has a good foot hold. All these places/things/people said you could easily get a start up going for 6k. Well me and my two friends did it. We all put in 3k each (9k total) and after running since August - We dont see how this is profitable/sustainable. Ill break down my cost below to indicate why.

$150/month machine payments (financed machine)
$10/month Nayax card reader fee
~$500/year Mass excise tax
$14.04/month Phone number(business line)
$6/month email
$1000/year Quickbooks
$192/year website
~$300/year Insurance
$520/year Mass LLC upkeep
$800/year Accountant and other misc services
so that's 6k running costs (roughly other misc items not listed)

we are clearing about $300-$500 gross a month from the machine so with our one machine we are clearing about ~5k a year **Gross** estimated net around 2.5k. so we still need to come up with 3.5k out of our golpher. How does anyone make any sort of money doing vending? What am I doing wrong? Ill list some key operation factors that people may have input on.

We only have one machine right now (due to capital being almost gone) will more machines see better situations? by the math above another machine would increase our running cost to 7800, and our net to around 5000 still same situation in my eyes. yes knocking down the payments would help but by that time we would need to have been running 14 years just to get 2 fully paid off machines..

are our prices wrong? I was told golden rule is 2.1xunit price is a good metric. Right now we have had complaints about anything above what I would consider to be the lowest we would possibly go. Im talking our chips are $1 when unit price to buy them turns out to be about $0.60. That leaves us $0.40 profit. but wait then nayax takes 6% of the sale so really we are getting about $0.34 cents profit a sale. How do we get better numbers there. I cant see paying $3 for a bag of lays but its not even worth the effort for 34 cents.

Is our snack source wrong? We use BJs (big wholesale store). They have very very limited selection, most items are nearing expiration date and we cant always get the same items but we dont know where else to get wholesale. Like where do all these mega vending companies get their snacks from? I see snacks in vending machines that I cant find in bulk anywhere to save my life? any ideas on better sources then BJ?

I know this was a wall, and im sure I have forgotten points I wanted to make, thanks to all that read this. Im really looking for guidence or for people to tell me what im doing wrong. Did I have unrealistic expectations? I mean Im just looking to bring in a small amount even break even at first would be nice. Not looking to be a billionaire But as of right now this doesnt seem worth it. Not even workload compared to profit more so 0 profit. Id love to chat with people in the replies.

 

 

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[Fermo Vending]

$1000 a YEAR for quickbooks??? Mine is $30 a month for the online version. If you only have one machine, why do you pay for quickbooks or a website? I can't imagine one machine requiring an accountant to handle your taxes either.

I purchase my snacks at Sam's club, and my COGS are about here:

 

.30 for a 1oz bag of chips-- Sold at $1

.90 for candy-- Sold at $2

.80 for pastries-- Sold at $2-2.50

.50 for cookies like linden-- Sold at $1.50

.40 for nuts-- sold at $1.50

 

Sodas I buy at Walmart and opt for the 16.9oz bottles and charge $2 across the board. COGS range from .60-.90.

 

Also, I've never financed a machine, I only pay buy them outright. I've never liked owing money in any capacity. What kind of machine did you buy, and was it new? Only buy used or refurbished. 

To quote an expert on this forum @AZVendor "this is a volume business". If you want to make any money you'll need to expand, or find much better locations. 

[AZVendor]

$150/month machine payments (financed machine)  Not smart to buy new and finance it.  Your original $9000 would have bought you 3 to 6 good used machines.
$10/month Nayax card reader fee  This is your only logical expense.
~$500/year Mass excise tax  What is this?  You probably jumped the gun on some government overreach.
$14.04/month Phone number(business line)  You don't need a special phone number.  Your cell phone is sufficient or you can use Google Voice.
$6/month email  Gmail is free, so what gives?
$1000/year Quickbooks  Please explain what you are getting from QB for $1K/yr.  Just buy the program or pay the monthly online fee.
$192/year website  A website will do you no good, especially with one machine.  You can't even say what your experience is or what sets you apart - you don't even know that yet.
~$300/year Insurance  What are you insuring?  Machine insurance is useless and definitely not recommended.   Vendors do not insure their machines.  Maybe a liablilty policy per customer request?
$520/year Mass LLC upkeep  You jumped the gun on this.  You may find you lose interest very soon.  
$800/year Accountant and other misc services  You don't need an accountant yet either. 

***You guys went about this all the wrong way.  Whatever info you got from the interwebs is a crock of $%#&^.  You have wasted all of that $9000 on what you THINK you should do instead of asking real veterans about what you should do.  One snack machine?  Totally backwards.  We always recommend soda machines to start and to put them in blue collar locations.  This allows you to learn the business with minimal investment until you're sure you want to be in this business.  You will not break even on snacks until you have 5 solid snack machines out.  

 

[orsd]

Your overhead is killing you. That amount of overhead is appropriate for someone with 20+ machines.

You’ll need to expand to make money. Personally I’d keep the phone number, insurance, and tax. Maybe the website and email if you plan to expand. Drop the accountants and quick books,  just use an excel spreadsheet or Wave, which is free.

Get good used full size machines, don’t get new unless you land an awesome account that demands one. Probably a location doing 1000-1500 a month gross is when you should start considering new equipment, so 3-4 times the size of your current location at least. 350-500 a month, used machines all day every day. If a small location like the one you have balks at used equipment they aren’t worth the time.

Product cost should be no more than 40% of sales price. Screw the complainers, they’ll always be there and usually don’t buy squat. You could sell a bag of chips for 50 cents and there will still be some boomer that thinks it’s a ripoff because he’s still stuck in 1985.

Just curious, what make and model of machine did you buy?

Edited February 22 by orsd

[tblake05]

I can’t read all the blah blah blah.

very first mistake you made was starting a business with your friends. (Bet your not as good of friends anymore)

second mistake was listening to YouTube university and believing it that running a vending business was easy income.

beyond that I stopped reading. Good luck to ya.

[AngryChris]

I also don't get why some of the costs are so high.  I don't know what the excise tax is for or why it's $500/year but it seems high.  Paying $150/month for the machine is not ideal but it is what it is.  Which equipment you purchase is really a separate issue here.

I, too, am confused about such high quickbooks and accountant costs.  I paid $100 for quickbooks 2010 or 2011 way back when.  Today, you have to pay either monthly for QBO or annually for the desktop subscription.  Either way, it shouldn't cost you more than $360-$500 MAX per year.  And an accountant... Yeah I don't understand.  If you are paying for THAT level of accounting software, you don't need an accountant to do anything except receive your year-end P&L to submit to taxes