Factors Effecting Vending Business Profitability

Even after investing considerable time, efforts and money in your vending business, you may get inadequate profits. Your vending machines may be generating good amount of revenue but certain factors may prevent you from achieving a high level of profitability. Usually, these factors can be classified as follows:

i. Cost of operations
These may vary for different vending machines and depends on your ability to cut down on unnecessary expenses. For Planet Antares vending machine operators, the operating costs usually include:

• direct labor and vehicle
• equipment depreciation
• commission
• sales tax

ii. Gross sales
The population at the location of vending machines will have a direct impact on the sales. If the population rises, there is potential for higher sales while lower sales may result due to lesser customer traffic and availability of substitutes. You must monitor the gross sales closely to enable accurate estimates of profits from your vending business.

iii. Gross profits
When you deduct the cost of goods sold from gross sales, it gives you the amount of gross profits. If the selling price of your Planet Antares products remains same while purchasing cost rises, there is bound to be a fall in the profits from that location.

On the other hand, a dishonest employee or location owner may not return all the revenue collected from the vending machine to you. This in turn results in a fall of reported sales while product costs continue to be the same, leading to lower profit margins.

iv. Net profits
After determining the gross profits, you must deduct all the operating expenses to calculate the net profit. This figure should be calculated in dollars as well as percentages form.

v. Return on Investment
In simple words, the return on investment (ROI) is the net profit earned from the location as expressed in percentage. It is the annualized net profit as percentage of capital investment. If the annual profit of a particular location is $5000 and it requires $25000 as capital investment, the ROI will be 20%.

Most vending machine operators make estimates of expected ROI before starting a vending business.

All these factors must be kept in mind while predicting and achieving profitability targets by you. To get best results, you must ensure that there are no problems or issues that result in higher costs, lower sales or profits.