My first ever full line versus bulk dilemma. Help please!

[s.weir]

Hey everyone,

So I am a little stressed right now over exams and stuff, but this dilemma is really not helping.  I have two options to buy some pretty decent deals, one a full line and the other bulk and since its the end of the year, I am a poor student and I don't really want to use my credit card temporarily for this (I start full time work May 1st, but I won't get paid for a bit after that) I basically have to choose one of two options (and I have posted about the bulk one before so sorry for the redundancy):

Option 1:  Put a down deposit of $400 (total being $3000 for both, not each) for 2 combo machines (seaga HF-2500) on locations each making $150 each monthly.  The locations are repair shops and they are located in the scope of my small full line route.

Option 2:  Purchase 3 separate Beaver vending units (all as a lot from one seller). One is a two head quarter machine and the other two have five heads consisting of two large loonie (Canadian $1 coin) 2" capsule heads  and three of the quarter vends. The description is here:

http://calgary.kijiji.ca/c-buy-and-sell-other-Vending-machine-BEAVER-candy-prizes-toys-money-W0QQAdIdZ198403176

He is selling it for $550 now and I think I can easily get it for $400. 

So the dilemma is I have $400 (If need be I could use my credit card for the like 2 week period until I am paid) and I am trying to decide if I should put a down deposit on the one and purchase the other or if I should just do one or the other because you guys think one is not as great of a deal.  I am into full line right now and like it but have some high volume locations I can put the bulks at (even the racks) without a locator.

Any advice, help, suggestions are great thanks!

Scott

 

[s.weir]

Well while I still want peoples advice and i have until next Thursday to decide i think i am probably going to go with both options.

[mtsoccer4]

Can you work the full line down a bit in price? At $300 a month for both machines (gross, I'm assuming) you're looking at maybe $125-150 month net for both machines, approximately. You're looking at 18-22 months before you'll get them paid off, which seems like a shame to me. Price seems steep to me....anyone else?

[s.weir]

The $300 a month is Net actually.  The price was originally $2000 each, I don't think they will move much more.  I suppose I could always wait until like September and see if they are still trying to sell them then, but i think by that point they will have gotten desperate, they have been trying to sell these for a few months already.

[spdydre]

I wold get the bulk then the full line later on if you have the backup funds.  With full line anything can happen at any time that might be expensive to repair.  You always need that buffer of money just in case any one of your machines breaks down I would say at least $1500 to be safe.  With bulk repairs are alot cheaper and not as prone to break just my 2 cents

[s.weir]

Thats a good point, but I won't be taking possession of a lot of my machines until September, at which point I will have a fair amount of cash for emergencies.

[Beergut]

I'd do both deals. You seem to have a plan to get the credit card paid off quickly, so you're not really going into debt on those machines, and since you'll be woning the Beaver machines outright, you can use some of the money from your job you are starting to begin paying off the balance on those two full line machines.

Are you looking at dedicating all profits from those two machines to paying them off? You would have your debt retired in 10 months, if you did that.

[s.weir]

Yes all of the profit from my machines goes back into buying more machines.  The initial money going into them is like start up money and I will be giving myself a small wage with which it will slowly pay itself back with.

[s.weir]

So I just talked to the guy with the bulk racks over the phone and we have agreed upon $500 assuming everything is good when I view them Friday.  It is higher then I wanted, but it is still a good deal, good equipment and I don't want to loose them.

[mtsoccer4]

Weir, if $300 is the monthly net, you NEED to pull the trigger on this one!

[s.weir]

Can you clarify? Pull the trigger as in go for it or pull the trigger as in kill the deal?

[s.weir]

Like I said as long as the bulk machines are in good condition i will be buying those, but while i will be viewing the full line combos on Friday i think I will wait until next Monday to decide (for financially smart reasons, i need to figure out some stuff first). If someone wants to take a guess at if mtsoccer4 was saying yeh or neh I am all ears! 

[mission vending]

Can you clarify? Pull the trigger as in go for it or pull the trigger as in kill the deal?

my guess would be that he means to go for it.

[s.weir]

Mission, you a full line operator and I have a lot of respect for your experience, what do you think about this deal?

[mission vending]

One thing to consider doing full line. IMO its important to get enough snack machines out to reach critical volume. That is, getting enough turns to move most of your product while offering a good variety and selection without having major out of date issues. Nothing kills motivation faster than having to throw away half or more of your profits on out of date product. For most it seems to be around 8-10 full size snack machines (3,4 or 5 wide).

I know NOTHING about this brand of equipment other that what I've read here.

So with that in mind...... if you are looking to build volume and cash flow then it's worth serious consideration, IF those are true numbers, then netting appox 300 monthly is good for these small machines. If you do it I wouldn't wait too much longer. As you said, they having been trying to sell for a couple of months so the odds are better than even that service is beginning to suffer. You don't want to walk in with a location very unhappy, you might be the "new" owner but you've still got the same "old" equipment.

If you already have achieved the critical volume and are focusing on building a business and not being just a guy with a bunch of vending machines I would have to think really hard about it. Even with those numbers you won't make much once you hire some help to do the work for you. The first major repair (compressor) will wipe out a years profits.

There is no way that I would even take the time to look at the stuff today, 10 years ago I would have thought about it and 12-13 years ago I probably would gone for it. So I guess where you are in the growth cycle of your business also plays a role in the decision making process.

With the limited information about how it all fits together, growth plans, locations, costs, etc. if I was in your shoes I'd probably give it a go.

Remember this opinion is worth what you paid for it, its still YOUR decision. Good luck, let me know if you need anything else.

[s.weir]

Thanks alot mission.  To adrress a few things you mentioned:

1. I will be doing fine as far as not having stuff goes stale o me having 3 high volume locations.

2. I will be confirming financial data on Friday, apparently they have statements and stuff

3. I am definitely having this as a business no matter what size it ends up being.  I do things in a business style and not a random income way (not that there is anything wrong with that).  I have the necessary plans, time, skills, forecasts and budgets in order to run it as one.

4. Of course it is my decision, I just figured I would get your valueable 0.02 

One thing that is of concern to me and I will seriously assess this on Friday when i view the machines is like you said the length of time until I take them over.  I would just be leaving a deposit now and wouldn't actually be taking over until September (I am going home for THIS summer, while my machines are still not under my command yet, from September on this will be my permanent residence so it works well).  With my other route the lady I bought it from all the people in the locations love and she takes good care of the route, plus as a condition I made her get a contract with the locations before I would buy.  These machines I will probably try to do the same and make sure the guy I am buying from is not an idiot who will loose me the locations.

Thanks! I will keep you all posted.

[s.weir]

So I have an update. I visited both machine sets today and I have purchased the bulk ones and will be purchasing 1 of the two combo machines (the other the sold already).  I must say I was VERY impressed with these two different guys.  The first guy was very professional and down to earth, presented me with a printed out sheet of all of their financial info for the location (and they are realistic), showed me the location, obviously knew the people who worked at the location asking them about their coming weekend and just overall a generally cordial convo with them.  This I like because it shows i won't loose the location in the mean time, in fact the building will be getting another business upstairs so my vending sales should double when that happens.  Currently it makes about $120 per month, but I think because I own a few machines I can cut down product costs (they have that listed on here as well, all of it is seems perfectly acceptable for the location). 

The second guy had to give me directions to his location (entered the wrong one in my gps, but was still just a street over) and was very nice about it.  I saw the machines, got the keys and a written agreement of sale and to hold them for me until September. 

All in all I am quite impressed, for anyone that has read my "UPS and DOWNS of vending..." post this is a nice thing to see.  The first guy was selling because he works up north and isn't in the city enough to service them during the winter (he can only get to it once or so every 2 weeks during the winter). The second guy it was just a classic case of bought some bulk machines, had locations, lost them and had no need for them so he sold them to me.

Cheers! 

[s.weir]

I was reviewing the numbers on the combo machine and I need people opinions it makes about $120 gross per month so approximately $84 profit per month. Considering this machine is going to cost me $1500 is it worth it? Unfortunately there doesn't seem to be much room for movement on the price. 

[mission vending]

Do you have info about the pricing of product in the machines? 84 profit on 120 gross is a 30% COGS, that's way low so the prices must be high. Or the calculated profit is wrong. The price for me would be too high with those sales numbers.

[s.weir]

Agreed, (btw the prices are a bit high but still sell so that would explain it).  I don't know what to do here because it is expensive for how much it is making but the building it is going in has the potential of getting another whole floor of offices in soon and that would be a shoe in for me to put a machine in up there.  Ugh I have to let them know soon.

[mission vending]

Tough decision.. Pass on the deal or pay too much (IMO) in the hope of getting more down the road. Please keep us posted with what you decide to do.

[s.weir]

This is made all the worse since yesterday a machine exactly like this sold for $800 because it was owned by an office that wanted it out of there that day and obviously didn't care about making any money off the machine.  The average LOWEST price you will see around here for a HF-2500 is $2000, and that's usually not overly common, generally they are sold at $3500 (which would be stupid to purchase at) so I guess getting one for $1500 in a O.K location is still a good deal.  I can always relocate it to one of my high volume locations that have mechanical in them. I think I will think about it until Friday then send the money quickly.

[s.weir]

Not sure if anyone has been following this, but i did decide to go for the machine and paid the deposit today.  My justification is:

1.  Its cheap considering most of the other machines in my area are listed at anywhere between $2000-4000 (people buy them new from biz ops so assume they are worth a tone of money... they aren't)

2. Even though the location is only OK, at least it comes with an okay location for the price.  I can always relocate it or switch it with one of my high volume locations that has an Antares.

This was such a hard decision to make, I spent the past week writing pros and cons lists, crunching financial scenarios and considering alternatives.  Not alot of fun, but I am happy with my decision. 

[mission vending]

Look at it as a learning experience, even if it turns out down the road that you think you've made a mistake. Its a relatively small amount of money and there is no long term harm even if it does blow up. At least you did not spend 25K of borrowed money that you have to figure out how to pay back like some of those biz op victims. If it works out great, if not lesson learned.

[s.weir]

Very true, yeah it is a good learning experience regardless I suppose.