Automatic Age

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AUTOMATIC AGE
C o n s id e r E a r n in g
In v e s te d
W h e n
September, 1937
P o w e r P e r D o lla r
B u y in g
M a c h in e s
By Dave Bond
u r i n g the past two
years, there has been a
decided increase in the
cost of all types of automatic
equipment. This was made nec­
essary by the ever-increasing
cost of labor and materials; So­
cial Security and pay-roll taxes,
etc.; and the vastly improved
construction of the newer ma­
chines.
It is idle to contend that the
manufacturers increased prices
arbitrarily, for any such course
of action would be suicide. The
manufacturers realize full well
that they are subject to competi­
tion and, further, that it is de­
sirable to place as low a price as
possible upon their products, in
order to secure adequate volume.
A m anufacturer increases a
price with great reluctance, and
only on account of absolute
necessity.
As a matter of fact, the prices
in this industry are entirely too
low, compared with the mark­
up secured in other businesses.
Upon a comparative basis, coin
machines are sold cheaply and
much below the standard mark­
up enjoyed by any other indus­
try; particularly when it is con­
sidered that in many industries,
a volume production is secured
far in excess of the coin machine
industry. This is particularly no­
ticeable when an executive from
another industry steps into this
field and is really surprised at
the existing conditions. It is a
tribute to the ingenuity of the
merchandisers and engineers in
this field that they are able to do
business on such a close margin.
D
D a v e B o nd
Too many operators are price-
minded and are only interested
in the number of machines they
can buy for their investment,
rather than what their invest­
ment will earn. The only real
test is not so much the price per
unit, but rather the earning
power per dollar invested. This
is the only real test.
It does an operator little good
if for an investment of $5,000
he can buy a thousand units at
$5.00 each. The important thing
is what his investment will re­
turn to him after he has consid­
ered all the elements of expense,
such as installation, servicing,
etc.
Recently a local operator
about to purchase a route of
merchandise machines investi­
gated the field very carefully.
He happened to run across a
route of handkerchief machines
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of the counter type, which he
was able to purchase for $2.00
each. There were five hundred
machines in this route and he
seemed very gleeful about his
purchase, and felt that he had
made a real buy, and that he
would profit nicely on his invest­
ment.
However, after a few weeks,
he began to realize that the turn­
over upon this type of merchan­
dise was very slow and, further,
that the cost of servicing was
very large, and that it took him
a considerable length of time to
service this route properly.
Within a relatively short time,
he offered the route for sale and
at the present time, the route is
so unprofitable he is not even
bothering to service the ma­
chines, and the likelihood is that
they will be left on location and
simply neglected. This operator
was blinded by the fact that he
could buy a lot of machines for
a small investment.
An operator should estimate
the cost per call to determine
whether a collection at a partic­
ular spot is profitable. For ex­
ample, suppose an operator val­
ues his time at $50.00 per week
and the expense of his car as
$15.00 per week. This means
that he has an expense of $65.00
per week. Suppose he can make
twenty calls per day comfortably
in servicing merchandise ma­
chines, and that he works five
days per week. This would mean
that his expense would figure
$13.00 per day, and that the cost
per call would be 65c. In other
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