Alas, the world has changed; the number of obtainable vending accounts has shrunk dramatically, accompanied by a precipitous drop in discretionary consumer spending. This double whammy has wounded all vending operators, some fatally.
It is time to get serious about replacing the lost vending revenue, and OCS is a logical option.
In seeking OCS accounts, there are many more doors to knock on than vending. However, there is also more competition. While I endorse a separate but equal business model for OCS and vending, there certainly are synergies in warehousing, purchasing, occupancy costs, etc.
The need to expand into new areas of business has been accepted as a prerequisite to sustaining profitable operations. The question is, how?
There are a number of ways a vending operator can get started in the OCS business:
- Go it alone. Become a serious student of OCS; read everything you can get your hands on; memorize all the best practices others have used; scour your competitor’s Websites; reach out to your suppliers and trade associations.
- Hire a partner (not an employee) who is an OCS pro and give him/her your unconditional support in financial and management matters.
- Buy an existing OCS company and use its personnel and practices as a foundation for growth multiples. Note: you’re not buying it to run it; you’re buying it to grow it.
- Hire a consultant to help with the startup. Caveat: Use this approach only if you can answer “yes” to all of the following questions:
- Can you afford it?
- Are you serious about a meaningful change in
- After you pay your consultant a lot of money, will
you take his advice?
- Are you sure you won’t waffle when it comes time
to make the hard decisions?
- Will you personally participate in the process?
- Can you guarantee that you will keep the progress made in place after the consultant leaves?
If you can answer “yes” to these questions, then use of a business consultant could be a wise move.
There are some comparisons/analogies regarding
relationships between vending and OCS:
- Recognizable brands are powerful.
- A vending company merchandises, an OCS company sells.
- Account retention is more dependent on relationships than contract enforcement.
- Marketing cannot promise what operations
- The low-cost producer usually wins the day.
- Just as not every vending account needs a food machine, not every OCS account needs a single-cup brewer.
- Nutritional awareness and healthy products are to vending what sustainability and green products are to OCS.
There are certainly costs to consider to add OCS to an existing vending business.
To secure bank or SBA financing, you will need a carefully crafted business plan from startup to profitability and every step in between.
The capital required for startup can be minimized.
You will need some equipment and product for demonstrations and free trial promotions immediately. Beyond that, don’t buy the product or the equipment until you have
Equipment, depending on your market, can sometimes be scoured on a loaner basis. Some product brokers will work with you on consignment inventory for coffee and allied products.
COSTS TO CONSIDER FOR EXPANDING INTO OCS
The printing of sales aids and mailers plus Web page design, software, computers and the addition of a vehicle to the existing fleet are some of the necessary costs that must be considered.
The largest cost is labor. Understanding and accepting that you are going to be incurring payroll expense without offsetting revenues in the beginning is very important. I recommend calculating this cost over a period of one year.
Here are a few of the common mistakes that vending operators new to OCS make:
1) Combining the OCS route with the vending route.
This seems perfectly logical; after all, the vending driver goes to the same location. But in the end, it just doesn’t work.