Wednesday, April 2, 2008

Tales of A Gum Lord: Part 2

What did I learn from my little adventure in candy vending? I'm glad you asked. Most people who go into this business don't make money. Here's what I learned:

1. Don't buy new machines. The machines I bought retailed for over $700 each. Most vending machine companies are seriously unethical in the way they sell their machines (especially Wrigley's who makes the Excel machines): they justify the huge cost of their machines by inflating the "projected sales" numbers. The people who we bought the business off of paid over $30,000 for their entire business! We bought it off them for $4000. It's terrible! Only buy good quality used machines. Personally I wouldn't pay more then $150 per machine for any vending bulk vending machine.
2. Buy machines already on location. Unless you are a natural salesman and have lots of time on your hands buy already established machines. It's way less work and hassle. Of course if you do the work of locating well, you can make some serious coin. . .
3. Don't buy wall mounted machines. Why? They're hard to move and if you do, you'll have to pay to repair walls.
4. The location is everything. Some locations do well and some don't. It's almost impossible to predict. One of the biggest reasons why people get out is they spend thousands of dollars on machines that are poorly placed and they get discouraged and sell. Instead they need to move the location. A route that has premium locations for all machines can be a very profitable business. It takes work to find those locations though.
5. Don't buy a route that won't pay for itself in 6 months. Seriously. It's difficult to figure out how much money any route will make and records are usually scarce. This is a higher risk business and so you need to project profit after 6 months: make your offer accordingly. That way if it takes you longer, you'll still be OK. If a route makes $6000 profit in a year, offer at most $3000. Remember what Donald Trump says: The money is in the deal.
6. People who are getting out of this business want out bad. Some people (myself included) don't like servicing machines. I tried it a few times and delegated it to Jobina (who didn't mind it) and we were all good. People who don't like it can't stand the thought of doing it again. This puts you in a good bargaining position. Also if people are moving, use that to your advantage as well.
7. A good way to find a route to buy is to look at the phone number on a vending machine at some place, call the owner, and say "Hey, would you like to sell your route?" Maybe they aren't enjoying it and would give it away for a song. It doesn't hurt to try.
8. Get all the info. Here's what you need to know about the route: make and model of machines, product cost, monthly net/gross sales, places to buy product, specific or general location of machines, time it takes to service the route, how often machines need to be serviced, etc. Also, ask "how many machines should be located to new locations?"
9. There are a lot of "sheisters" in this business. We almost got taken quite badly with a con artist here in the city. Also, people fudge their numbers, lie about their reasons for getting out, or forget to give you very important information. Be extremely careful. Use your gut and your mind when it comes to dealing with people.
10. For the right people and the right price, this is a good business. It can produce passive cashflow and for a day or two a month a couple hundred dollars in income (depending on the size and success of the route). People are always looking to sell and so there is lots of opportunity. If you are interested in purchasing and would like some another person's counsel on how good the deal looks, let me know.

May Light increase!

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