3 ms·

What was the initial investment?

by hugh3 15y ago

DanielBMarkham 15y ago
As I remember, $160 covered the first machine and bag of gumballs. We don't spend a lot on Christmas, so this was her "big" present that year. It was interesting listening to her telling her friends about what she got! It took her about six months of operating to save up enough for the second machine. Once that machine was operational, it took another 4 months for the third machine, and so on. (I think the fourth was a birthday present). It's been a great applied lesson in exponential growth. To answer the other commenter's question, she placed the machines in places she visited once a month anyway. Civic groups, local hairstylists, etc. A couple of these spots didn't work out, so she had to find new places. I would be lying if I said I wasn't disappointed that these two are sitting at home (even though she still manages to weasel 1 or 2 sales a day from the family, the little rascal) and I've wanted to talk to her about placing her machines where there is lots of foot traffic, but I've been biting my tongue. Mostly. I figure you can't motivate somebody from the outside. Every month when she comes back home with her and mom holding a big bag of quarters, I feel like that should be feedback enough.
- qq66 15y ago
  Hahah! Your daughter is going to be your boss someday. :)
- hugh3 15y ago
  Whoa. $160 initial investment for seventy cents a day profit? Your kid is investing at 160%! If I spent $50K on these, I could retire! (Except I wouldn't be retired, I'd be driving around all the damn time taking care of my three hundred and twelve gumball machines. But still!)
  - DanielBMarkham 15y ago
    Don't forget it's all cash income -- no waiting on invoices to post or people to write checks. You crack open the machine, and it's like Christmas. I think if you did this with a higher-margin item, say DVDs or electronics, you could retire. But the trick is, as you note, scaling all the footwork and overhead. It's not like you can farm out the collection and restocking, not unless you really, really trust somebody. And chasing around 100-300 machines, the people that manage the site, and the product that works? It's not a trivial thing to do at all. Not only maintenance, there's also always moving the machines around, and pitching store owners to put a machine onsite. Some of them look at it like competition. A couple guys refused to place them unless they got a piece of the action! After she finished pitching, they decided they would go out and buy their own machines. All for 20 bucks a month. Dang cheapskates. And don't forget there are big, serious players out there who wouldn't think twice of using dirty tricks (and the know them all) to quash you like a bug. She's lucky she's under the radar. Somebody dropping a couple hundred thousand for a few dozen high-end machines would not go unnoticed. I actually like the business model a lot. It encourages direct selling, there's lots of business math, and there aren't a lot of tricky issues involved. So yes! Kinda. If you could retire on 400-1200 bucks a month, I think it would work. Past that point, though, it gets ugly. Small scale? It rocks. Large scale? It looks much better on TV than it actually is.
    - DanielBMarkham 15y ago
      Something fun to try on a rainy Friday night -- I interviewed Katrina about her business [video link] http://www.youtube.com/watch?v=0Dc0f3WtR7Y http://www.youtube.com/watch?v=0Dc0f3WtR7Y Posted on HN here: http://news.ycombinator.com/item?id=3170488 http://news.ycombinator.com/item?id=3170488
      - marcamillion 15y ago
        Daniel...this is awesome. It's pretty epic to put a video/face to the nickname. I am definitely going to do something similar with my 3.5 year old when he gets a bit older...have to figure out what though. I love these little things that come up on HN...this video really adds a new dimension to the story. Awesome!
    - vacri 15y ago
      Electronic and DVD inventory goes stale much faster than gum does. You end up with a lot of 'unfashionable' inventory on your hands.
    - anigbrowl 15y ago
      A couple guys refused to place them unless they got a piece of the action! After she finished pitching, they decided they would go out and buy their own machines. All for 20 bucks a month. Dang cheapskates. This one part of your comment baffles me. Exactly why should they share their business traffic rent-free with your daughter? Sure, she's young and presumably cute and it's just a gum machine, but it seems to me that she should be splitting the take with them or at least offering them a few bucks as a nominal rental payment. This is, after all, the situation that most business owners are in with regard to a commercial landlord. Sure, for such small sums it seems silly, but the marginal profit on most retail purchases is tiny. If the machines cost $160, the retailer sensibly sees that the capital expenditure is covered after 8 months. I think you missed an opportunity here. If you had encouraged her to negotiate and hit on a business with more than one branch, the vending machines could be in multiple locations; if not, a quid pro quo still generates a lot of good will. My local corner store owner has a kid of 8 or 9; I suspect that his response to a proposal of this sort would be to buy his own kid his own vending machine, rather than hand 100% of the profits to your daughter. Maybe I'm missing some part of your story? On a side note, I wish you would consider vending some other product besides gum, which isn't much good for kids' teeth. You wouldn't have bought her a cigarette vending machine if those were still popular, or at least so I assume. On a small scale, it's a classic example of externalizing the cost of the product you sell.
  - fennecfoxen 15y ago
    "Whoa. $160 initial investment for seventy cents a day profit? Your kid is investing at 160%!" -- It's rather easy to earn that return on capital if you have free labor. For example: plant a garden in an unused plot of land* for a few dollars' worth of seeds, compost, and depreciation on your tools: get tomatoes and beans and cucumbers and strawberries. Of course, you'll also need to till it, plant it, weed it, and all sorts of other stuff... So if that's your idea of cheap fun, go for it, but I wouldn't go so far as to pay anyone else to manage it. (Herbs are probably the simplest option. It's usually expensive to buy them fresh, and they are dense and simple to take care of.) (* Also, land is much easier to come by in places which are not California, and hey often get real rain during the summer.)

What was the initial investment?

by hugh3 15y ago

What was the initial investment?

As I remember, $160 covered the first machine and bag of gumballs. We don't spend a lot on Christmas, so this was her "big" present that year. It was interesting listening to her telling her friends about what she got! It took her about six months of operating to save up enough for the second machine. Once that machine was operational, it took another 4 months for the third machine, and so on. (I think the fourth was a birthday present). It's been a great applied lesson in exponential growth. To answer the other commenter's question, she placed the machines in places she visited once a month anyway. Civic groups, local hairstylists, etc. A couple of these spots didn't work out, so she had to find new places. I would be lying if I said I wasn't disappointed that these two are sitting at home (even though she still manages to weasel 1 or 2 sales a day from the family, the little rascal) and I've wanted to talk to her about placing her machines where there is lots of foot traffic, but I've been biting my tongue. Mostly. I figure you can't motivate somebody from the outside. Every month when she comes back home with her and mom holding a big bag of quarters, I feel like that should be feedback enough.

qq66 15y ago
Hahah! Your daughter is going to be your boss someday. :)
hugh3 15y ago
Whoa. $160 initial investment for seventy cents a day profit? Your kid is investing at 160%! If I spent $50K on these, I could retire! (Except I wouldn't be retired, I'd be driving around all the damn time taking care of my three hundred and twelve gumball machines. But still!)
- DanielBMarkham 15y ago
  Don't forget it's all cash income -- no waiting on invoices to post or people to write checks. You crack open the machine, and it's like Christmas. I think if you did this with a higher-margin item, say DVDs or electronics, you could retire. But the trick is, as you note, scaling all the footwork and overhead. It's not like you can farm out the collection and restocking, not unless you really, really trust somebody. And chasing around 100-300 machines, the people that manage the site, and the product that works? It's not a trivial thing to do at all. Not only maintenance, there's also always moving the machines around, and pitching store owners to put a machine onsite. Some of them look at it like competition. A couple guys refused to place them unless they got a piece of the action! After she finished pitching, they decided they would go out and buy their own machines. All for 20 bucks a month. Dang cheapskates. And don't forget there are big, serious players out there who wouldn't think twice of using dirty tricks (and the know them all) to quash you like a bug. She's lucky she's under the radar. Somebody dropping a couple hundred thousand for a few dozen high-end machines would not go unnoticed. I actually like the business model a lot. It encourages direct selling, there's lots of business math, and there aren't a lot of tricky issues involved. So yes! Kinda. If you could retire on 400-1200 bucks a month, I think it would work. Past that point, though, it gets ugly. Small scale? It rocks. Large scale? It looks much better on TV than it actually is.
  - DanielBMarkham 15y ago
    Something fun to try on a rainy Friday night -- I interviewed Katrina about her business [video link] http://www.youtube.com/watch?v=0Dc0f3WtR7Y http://www.youtube.com/watch?v=0Dc0f3WtR7Y Posted on HN here: http://news.ycombinator.com/item?id=3170488 http://news.ycombinator.com/item?id=3170488
    - marcamillion 15y ago
      Daniel...this is awesome. It's pretty epic to put a video/face to the nickname. I am definitely going to do something similar with my 3.5 year old when he gets a bit older...have to figure out what though. I love these little things that come up on HN...this video really adds a new dimension to the story. Awesome!
  - vacri 15y ago
    Electronic and DVD inventory goes stale much faster than gum does. You end up with a lot of 'unfashionable' inventory on your hands.
  - anigbrowl 15y ago
    A couple guys refused to place them unless they got a piece of the action! After she finished pitching, they decided they would go out and buy their own machines. All for 20 bucks a month. Dang cheapskates. This one part of your comment baffles me. Exactly why should they share their business traffic rent-free with your daughter? Sure, she's young and presumably cute and it's just a gum machine, but it seems to me that she should be splitting the take with them or at least offering them a few bucks as a nominal rental payment. This is, after all, the situation that most business owners are in with regard to a commercial landlord. Sure, for such small sums it seems silly, but the marginal profit on most retail purchases is tiny. If the machines cost $160, the retailer sensibly sees that the capital expenditure is covered after 8 months. I think you missed an opportunity here. If you had encouraged her to negotiate and hit on a business with more than one branch, the vending machines could be in multiple locations; if not, a quid pro quo still generates a lot of good will. My local corner store owner has a kid of 8 or 9; I suspect that his response to a proposal of this sort would be to buy his own kid his own vending machine, rather than hand 100% of the profits to your daughter. Maybe I'm missing some part of your story? On a side note, I wish you would consider vending some other product besides gum, which isn't much good for kids' teeth. You wouldn't have bought her a cigarette vending machine if those were still popular, or at least so I assume. On a small scale, it's a classic example of externalizing the cost of the product you sell.
- fennecfoxen 15y ago
  "Whoa. $160 initial investment for seventy cents a day profit? Your kid is investing at 160%!" -- It's rather easy to earn that return on capital if you have free labor. For example: plant a garden in an unused plot of land* for a few dollars' worth of seeds, compost, and depreciation on your tools: get tomatoes and beans and cucumbers and strawberries. Of course, you'll also need to till it, plant it, weed it, and all sorts of other stuff... So if that's your idea of cheap fun, go for it, but I wouldn't go so far as to pay anyone else to manage it. (Herbs are probably the simplest option. It's usually expensive to buy them fresh, and they are dense and simple to take care of.) (* Also, land is much easier to come by in places which are not California, and hey often get real rain during the summer.)