Snack machine COGS

[dogcow]

do you guys usually look at average COGS in snacks, or each product when deciding to raise prices?

My average is about 45% but in some items 55-65% (candy)

[mission vending]

I look at my COGS for the whole business. If it starts approaching 55% overall over a month or two then I will start looking at where I am at on pricing at the location and item level to see where its most appropriate to raise prices. Then I will look at which location has had the most recent increase .

For me to get more in depth than that requires more effort than I want to do at this point.

[dloiselle]

I actually went through Sams one day and calculated each and every item I was considering putting into the machines. IE: pop tarts are 18 packages to a box at a cost 0f $7.88 COG on them is $0.437777777 etc. I put them in the machines at $0.85. This is how I handle every item I offer in the machines.

[dogcow]

I look at my COGS for the whole business. If it starts approaching 55% overall over a month or two then I will start looking at where I am at on pricing at the location and item level to see where its most appropriate to raise prices. Then I will look at which location has had the most recent increase .

For me to get more in depth than that requires more effort than I want to do at this point.

so you just take your total sum of purchases and divide by your gross revenue?

[mission vending]

so you just take your total sum of purchases and divide by your gross revenue?

Basically yes. I also pay attention to the inventory level in the warehouse. Nothing written down but I take a pic at the end of the month and then compare to the end of the next month. So if my COGS is oustide my acceptable range the first thing I look at is are there significant changes in inventory level. I don`t worry so much about the level in machines as for me it does not change that much.

After that I look to see if there are any price increases on my invoices that I missed.

If things are still out of whack I`ll watch a little closer the next month while I am also evaulating pricing at locations.

With price increases that I am aware of I will immediately begin looking at vend prices for that particular item and that category, cookies for example. If one type of cookie goes up do I start phasing in another one that is cheaper or do I try to get a price increase on all cookies at a few locations to offset the increase?

Its far from perfect, but its pretty simple and has worked for me

[dogcow]

Basically yes. I also pay attention to the inventory level in the warehouse. Nothing written down but I take a pic at the end of the month and then compare to the end of the next month. So if my COGS is oustide my acceptable range the first thing I look at is are there significant changes in inventory level. I don`t worry so much about the level in machines as for me it does not change that much.

After that I look to see if there are any price increases on my invoices that I missed.

If things are still out of whack I`ll watch a little closer the next month while I am also evaulating pricing at locations.

With price increases that I am aware of I will immediately begin looking at vend prices for that particular item and that category, cookies for example. If one type of cookie goes up do I start phasing in another one that is cheaper or do I try to get a price increase on all cookies at a few locations to offset the increase?

Its far from perfect, but its pretty simple and has worked for me

how do you factor/reconcile in cost to service?

that is to say, i computed my COGS and as i said its 45% average,which isnt bad though candy could go up in price. however my cost to service has

increased considerably due to the price of gas going up. is this something you just eat, if the costs of product hasn't gone up?

[mission vending]

how do you factor/reconcile in cost to service?

that is to say, i computed my COGS and as i said its 45% average,which isnt bad though candy could go up in price. however my cost to service has

increased considerably due to the price of gas going up. is this something you just eat, if the costs of product hasn't gone up?

To some degree yes, you just eat it, but only as much as you have to. Let me explain....

For the month of April last year my numbers were:

Revenue per stop: $113.28

Cost to Service: $33.68

COGS 50.9%

So doing the math .509 X $113.28 = $57.66. $113.28 - $57.66 (COGS) - $33.68 (Cost to Service) = $21.94 profit per stop.

For example, if my Cost to Service went up to $38.00 per stop and COGS stays the same then my profit is reduced to $17.62 per stop. So now that I know the numbers and knowing that I want to try to continue to maintain my profit level I have several options. I can raise prices and lower COGS which will bring profit back up. I can increase revenue per stop which will bring profit level back up. Or I can do some combination of the two.

To get the revenue per stop back up I go back to the ol spreadsheet and look at revenue by location and see which ones are performing below my average. Those are the accounts I want to take a good look and and see if they might be a candidate to extend the service interval by a day or two which increases the revenue per stop average. Just because a location is performing below the average does not mean that I will automatically extend the service interval, there might be a reason I want to service more than necessary. Perhaps the location and driving distance makes it more convenient to do so, maybe they also get coffee service and are accustomed to the current frequency. Maybe I just like the folks and don't mind doing it. The point is you also have to balance the level of service with the customers expectations in order to keep the account over the long term as well.

Everything you do in your business will have an impact in more than one area, you have to pay attention to everything so that you don't get "out of balance" so to speak. If you focus primarily on COGS, or profit and lose sight of service it could eventually lead you to the loss of an account(s). For me at least, that's what I love about having my own business, the never ending challenge to keep everything in balance.

[RJT]

Mission,

It is a “balance” to say the least. I think good communication with your customers is key. Let me give people and example. Lets say you have an account you service once a week that has a 5 wide snack and a 501E. It is doing about $60 in drinks and $40 in snack a week. Currently you service them 1 day a week. However, you know they could go 9 to 14 day between service.

Meet with the contact at the account and explain to them that cost of everything is going up. ASK them if it would be possible to spread out their service time as long as it does not cause an issue with products running out. Tell them this is a way to keep from doing price increases and that you feel based on their current volume they should not notice a difference in anything if service time was expanded. Also tell them if they ever run out of something to call you and you will come out that day to get them filled up.

I promise you if you have laid the ground work of them knowing you as Bob, Steve, Bill Jill, etc and not “the vending guy” they will work with you on this. A strong business relationship is important in this business. I don’t mean get on a personal level I mean a true business relationship where they feel like their business is important and appreciated by you. If they feel that way I promise 99% of the time they will work with you on these type things.

Customers are much mor forgiving if you talk to and explain things. Just changing their service level without talking to them does not go over well most times.

I know I am preaching to the choir on some of what I have said but I felt the need to say it…

[mission vending]

Mission,

It is a “balance” to say the least. I think good communication with your customers is key. Let me give people and example. Lets say you have an account you service once a week that has a 5 wide snack and a 501E. It is doing about $60 in drinks and $40 in snack a week. Currently you service them 1 day a week. However, you know they could go 9 to 14 day between service.

Meet with the contact at the account and explain to them that cost of everything is going up. ASK them if it would be possible to spread out their service time as long as it does not cause an issue with products running out. Tell them this is a way to keep from doing price increases and that you feel based on their current volume they should not notice a difference in anything if service time was expanded. Also tell them if they ever run out of something to call you and you will come out that day to get them filled up.

I promise you if you have laid the ground work of them knowing you as Bob, Steve, Bill Jill, etc and not “the vending guy” they will work with you on this. A strong business relationship is important in this business. I don’t mean get on a personal level I mean a true business relationship where they feel like their business is important and appreciated by you. If they feel that way I promise 99% of the time they will work with you on these type things.

Customers are much mor forgiving if you talk to and explain things. Just changing their service level without talking to them does not go over well most times.

I know I am preaching to the choir on some of what I have said but I felt the need to say it…

Well said. While it may be preaching to the choir to some extent, the relationships we build with our customers are a vital part of our business and is a point worth repeating.

[dogcow]

thanks guys i think im getting it now

i already did reduce my service days, it actually cost me $200 extra to do so because

i had to replace a malfunctioning machine that required frequent service but hopefully

that will pay off in the long-run and ill recoup some after i sell off the old one fixed