Starting a business can be risky and finding the right opportunity is not always easy. But if you are looking for a business idea that is relatively inexpensive to start and easy to operate, then you should consider starting a vending machine business.
Vending machines are a great way to generate passive income, and with the right location, they can be quite profitable. Here we will cover the benefits of running such a business and the steps you can take to get started.
The advantages of a vending machine business
Launching a vending machine business has a number of advantages that make it a particularly attractive opportunity.
Vending companies have relatively low start-up costs, with the most significant expense being the purchase of your first vending machines. After that, it’s just a matter of paying for stock, machine maintenance and repairs.
It is also an excellent method for producing passive income. The machine handles all the transactions for you, and all you need to do is go collect the money!
It is also a very scalable business model; Once you find success with your first few machines, you can branch out and outsource management to others, giving you more time to focus on other business ventures or just kick back and let the money flow.
However, to get your small business off the ground, you’ll need to take a few steps to ensure success.
Figure out a business plan
Before you can start your vending machine business, you will need to figure out what type of products you want to sell. Here we will look at some of the most popular products.
Food and drinks
Vending machines that sell food and beverages are the most common type, accounting for about 30% of vending machine sales in the US. For example, you might have a vending business specializing in healthy, organic snacks and target gyms or office buildings. Or you could have a moet chandon champagne vending machine in a luxury boutique or exclusive hotel.
Toiletries and hygiene products
Toiletries and hygiene products are other common items found in vending machines. They are typically placed inside public restrooms and contain things like tampons, laundry products, condoms, and diapers.
Vending machines that sell office supplies such as paper, pens, and staplers are often found in office buildings or universities. These types of products have high margins, so they can be quite profitable.
Hot food vending machines are becoming more popular and may sell things like pizza, hot dogs, or pastries. These machines usually come with a microwave that can quickly heat refrigerated or frozen meals. They work best in areas of high foot traffic like shopping malls or airports.
Coffee machines are typically found in office buildings, bus stations, and other high-traffic public areas, as they provide a quick and convenient way for people to get their caffeine fix.
Bulk vending machines are often found in supermarkets and sell a single item, such as candy, stickers, gum, or small toys. They typically have a lower profit margin than other types of vending machines, but they can make up for it in volume.
Another option is to go with a vending machine franchise, which can be advantageous because they come with an established brand name and product range.
They also usually come with support and guidance to help you get your business up and running. For example, Pharmabox is a franchise with machines that dispense over-the-counter medications such as allergy medicine, pain relievers, vitamins, and beauty products.
Just keep in mind that franchises typically require more startup costs that can range from $20,000 to over $250,000. You’ll also likely be required to pay royalties, adhere to stricter guidelines, and have less creative freedom when it comes to your marketing or product range.
Do some research to determine what type of product would be most popular in your target locations.
Get the correct licenses and permits
Depending on your location, you may be required to obtain licenses and permits before starting your vending machine business. This is particularly true if you are selling food, as there may be additional health and safety regulations that you will need to adhere to.
It’s better to be safe than sorry, so it’s always best to err on the side of caution and get proper documentation before proceeding.
Although you can start a retail business with a sole proprietorship, you may want to create a business entity such as an LLC (limited liability company) or corporation. This will not only allow you to choose a business name, but will also help protect your personal assets and scale your business in the future. You can get an EIN or Employer Identification Number for free from the IRS and websites like legal approach, my corporationY Nolo makes it easy to form an LLC or corporation online.
It is essential to obtain a separate business bank account and credit card from your personal accounts. This will help you keep track of your finances and make it easier to do your taxes come tax season.
Find an ideal location
Once you know what kind of products you want to sell, it’s time to find an ideal location for your first machine. Look for spaces in business areas that are not too far from potential customers. When possible, choose areas that have some form of surveillance to mitigate the risk of vandalism or theft.
Some of the best locations include:
- Office buildings
- grocery stores
- Bus stations and airports
- Malls and shopping centers
- medical buildings
- apartment complexes
- Hotels and Motels
You may need to contact your local Chamber of Commerce to see if there are any zoning regulations or compliance you should be aware of. Public spaces must also comply ADA Compliance Standardswhich means you want to make sure your machine is in a suitably accessible location.
Once you have sandblasted in an ideal location, contact the property owner or regional manager to place the machines at their facility. You will also need an owner’s contract that sets out the terms of the commission. Typically, the owner can request up to 25% of the profit as compensation for space and electricity.
As with all legal matters, it is important to have contracts reviewed by an attorney before signing.
Buy or rent your first vending machines
As long as you’re not shopping for a franchise, you’ll need to find a vending machine to dispense your products. The type of product you sell will determine the type of machine you need, be it bulk, electric or mechanical.
From there, you will need to find a machine to buy. You can buy them used at places like Craigslist and Kijiji, but you should be careful as these machines may not come with a warranty.
For a little more peace of mind, you can buy a new one from a reputable dealer or dealer. Expect to spend anywhere from $3,000-$10,000 for a machine.
Some vending machine operators lease their machines, which can be a good option if you’re starting out on a tight budget. Just make sure you read the fine print and understand the terms of the lease before you sign anything.
Shop your inventory
The next step is to buy stock for your vending machines. Some providers you can consider include:
Membership stores like Costco are ideal for new business owners who only have a few machines and don’t require as much inventory. You can find a variety of food and non-food items in bulk for a reasonable price. However, always do cost comparisons to make sure you save the most money. For example, candy bars may be cheaper at BJ’s than at Sam’s Club.
E-commerce wholesalers or distributors
If you’re comfortable buying your stock online, consider e-commerce wholesalers or dealers. You can find a wide variety of products from these vendors and have them delivered right to your door. Just be sure to compare shipping costs before making a purchase.
Some popular eCommerce wholesalers are:
scale your business
Once you start to have success with your first few machines, you may want to grow. There are several ways to scale your vending machine business when the time is right.
Add more machines
This is the most obvious way to scale your vending business. You may want to expand to more remote locations to reach more customers.
offer more products
Add more products to your machines to appeal to a wider range of customers. For example, you might want to add drinks to a vending machine that only sells snacks.
At first, you will likely do all the storage, maintenance, and pickups for the machine yourself. But as your business grows and you add more machines, you may want to hire an employee or two to perform those tasks for you, freeing you up to focus on other aspects of the business.
Franchise your business
If you are having success with your vending machine business model, you may want to consider franchising it. Franchising allows you to grow much faster than if you had to add machines on your own. The franchisee essentially manages everything while you get a piece of the revenue!
With relatively low start-up costs, minimal ongoing maintenance, and tons of potential to scale, a vending machine business is an excellent opportunity for new entrepreneurs looking for a passive income stream. Do your research and start small, and you can potentially grow your business into a highly profitable venture!
For more information on starting a vending machine business, check out Liam Buckley’s book, Start your own vending machine business.