If you’re looking for a business that you can start on a part-time basis, then the vending machine industry might be a route you want to explore. Starting a vending machine business gives you more scheduling and location flexibility than a traditional retail business offers, but you still have the opportunity to grow your business, increase your profits, and contribute to your own success. Whether you want to start up with just a single machine or have hopes of owning a fleet of machines, starting a vending machine business could help you to make your goals as an entrepreneur into a reality.
Vending machine business owners own, install, and manage vending machines in multiple locations. These owners establish agreements with other business or commercial property owners who generally agree to allow a vending machine to be installed in exchange for a monthly fee or a percentage of the machine’s profits.
Vending machine business owners may own just a few machines, or they may establish large routes of machines in many different locations. They are responsible for stocking the machines with inventory which can range from food and beverages to retail and convenience items like pain medication, first aid items, and other essentials.
At first glance, entering the vending machine industry might not appear to be a sound investment, but there are opportunities and lessons to be learned from the industry’s financial trends. According to IBIS World, from 2014 to 2019, the vending industry declined at an annualized 0.4 percent rate, and a decline of 2.5 percent was predicted for 2019 alone. During that five-year period, the number of businesses decreased to 20,809, and industry employment also declined to 50,766. In 2019, vending machine sales were predicted to bring in $8 billion in revenue.
While those figures may seem discouraging, it’s important to understand the factors driving that financial decline. Traditional vending machine products include junk foods like candy, chips, and soda, and with the increased focus on healthy snacks, demand for those foods has decreased. It’s also important to recognize that during that same period, disposable income has increased, meaning that more people have the money to spend on vending machine purchases if they choose. While traditional vending machine use may have declined, creative business owners can see this shifting trend as an opportunity to offer vending machines stocked with new, exciting, and in-demand products that will sell.
In addition to monitoring the trends that dictate which foods and beverages are in demand, vending machine business owners also need to be aware of the other trends shaping the industry. Global Industry Analysts, Inc. predicts that there may be as many as 31.6 million vending machines in existence by 2025, but those machines won’t be the traditional machines that we’re used to.
Corresponding with the increased demand for healthy food choices, we may start to see more vending machines that offer healthier snack options like organic foods. Machines that incorporate calorie counters can also complement the healthy eating trend.
With an increasingly digital world, vending machines need to keep up. Machines incorporating digital inventory management reduce the work associated with maintaining the machine and can maximize profits by ensuring there’s always a plentiful supply of inventory. We may also see an increase in machines equipped with credit card readers to keep pace with the decreasing use of cash as a payment method today.
Vending machine businesses market to different types of purchasers. For instance, a machine positioned by a gym will market to a different audience than a machine located in a shopping mall will. It’s important to understand the needs and preferences of each individual market to stock each machine with inventory that will be in demand.
Businesses also need to market to property owners in order to get permission to install a vending machine. Establishing and maintaining relationships with these property owners in order to negotiate the placement of a machine is an important part of running this type of a business.
Skills, experience, and education useful in running a vending machine business
Starting a vending machine business doesn’t require a business degree, but certain skills and experiences can increase the chances of your business being a success.
Technology repair background. Vending equipment will only bring income while it’s functional, so if a machine breaks, being able to promptly repair it is important. A business owner who can do at least some of their own repair work can save on the expense of calling in a professional repair person, and can also get the machine up and running quickly so it can continue to bring in money.
Customer Service. Even though a business with vending machines rarely sees their customers, it’s important that the owner have good customer service in order to secure and keep prime locations. Vending machines in key locations will make far more sales than those that don’t receive much foot traffic.
Retail trend knowledge. Being able to keep up with vending machine retail trends is key to stocking machines with inventory that will sell. A business owner needs to stay aware of what products are becoming popular and will constantly need to adjust their inventory to reflect those most popular products.
Networking skills. Networking is a particularly important skill in this industry, since business owners will need to establish relationships with store and property owners and then negotiate an agreement that allows them to place their vending machine on the property.
Purchasing skills. Owners will need to keep on top of knowing what products sell in their various locations in order to stock products people are willing to pay for.
Organizational skills. When a business is responsible for multiple vending machines, keeping each machine stocked and service will require an organized approach. These organizational skills are also important in managing inventory.
Attention to detail. A business owner needs to focus on the details of their business, from product pricing to monitoring the expiration dates of inventory.
Steps to Starting a Vending Machine Business
Step 1. Write the Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC. Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements.
Related: Comparison of Business Entities
Step 3. Select your Location
While it’s possible to start a vending machine business right out of your home, as that business grows, you may need additional storage for inventory. You may need to rent a storage building or office, though this is probably an expense that you’ll only need to budget for after at least a few years in business.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
Some states require vending machines businesses to be licensed. Additionally, there may be general licenses and permits depending on where the business is located such as a sales tax permit, Employer Identification Number, and Occupancy Permit among others.
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a vending machine business is another. Funding to start a Vending machine business can be difficult. In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs.
Step 6. Get your Marketing Plan in Place
While vending machine businesses typically rely on their machines to do their marketing to the public for them, business owners do need to actively market to business and property owners in order to secure new locations for additional machines. This marketing can be accomplished in many different ways, including email marketing, direct mail marketing, and even online or print advertisements. The cost of marketing will depend on the type and volume of the activity that’s performed. Business owners who can do some or all of their own marketing can help to keep costs down and save on the expense of hiring a professional marketer.
Step 7. Get Insurance
A vending machine business will need multiple types of insurance:
- General liability insurance protects the business if customers are ever injured as a result of the machine or a product purchased from it. This insurance helps to protect the business in the event of a lawsuit.
- Commercial property insurance protects the business against the financial loss it could face if its inventory or equipment is damaged in an event like a fire.
- Commercial auto insurance covers legal fees and medical bills that could result if a company-owned vehicle was involved in a car accident.
- Worker’s comp insurance covers medical bills, lost wages, and other expenses that could occur if an employee were injured while on the job.
Insurance policy cost will vary depending on factors like the value of the business’ machines and whether the business has employees. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. Then, compare those quotes while looking at factors like the premiums, deductibles, and policy exclusions and coverage.
Step 8. Hire Employees
At its onset, a business may be small enough that the business owner can service and maintain all of the machines on their own. As routes grow and a business expands, it may be time to hire employees. According to Payscale, vending machine route drivers make an average salary of $36,000 per year.
In addition to budgeting for employee salaries, a business that hires staff will also need to budget for expenses like worker’s comp insurance, paid time off, and health insurance contributions.
Related: Hiring your first employee
Amazon has several books that go into detail on starting and running a vending machine business:
Passive Income with Vending Machines: Step By Step Guide to Starting Your own Vending Machine Empire (Free on Amazon Kindle Unlimited)
How to Start a Vending Business (Free on Amazon Kindle Unlimited)
Vending Revolution!: How To Start & Grow A Vending Empire At Any Age!
The Vending Bizz: How to Start A Successful Vending Machine Business In 6 Steps
Costs to Start a Vending Machine Business
One of the major benefits of starting a vending machine business is that this business requires a relatively small initial investment. You can start a business with a single vending machine and then use your profits to gradually increase the number of machines you own. Plan to spend about $5,000 to start up a business with a single machine.
Common startup costs include:
- Vending machine purchase
- Vehicle, like a van or truck
- Equipment, like a hand truck
How much can you potentially make owning a vending machine business?
Many variables affect how much your business will earn, and these variables can also affect the performance of individual machines. Factors like location, the inventory offered within a machine, how reliable the machine performs, and even the pricing of items will all affect sales and profits. A machine in a prime location could bring in as much as $1,000 per week, but rates under $100 per week are more common for high-performing machines.
Keep in mind that one of the advantages of the vending machine industry is that nothing is permanent. You can relocate machines to better locations and change your inventory until you find a setup that maximizes profit.
Things to consider before starting a vending machine business
There is a lot of misinformation online and elsewhere that a vending machine business is as easy as finding a location and then it just makes money on it’s own. To be successful, there is a lot of work finding profitable locations, managing relationships with the location owners and maintenance of the machines.
If you’re thinking of starting your own business but aren’t yet ready to leave full-time employment, the vending machine industry might be the right option for you. You can start (and probably should start) a vending machine business on a part-time basis. By reinvesting the profits from your first machine back into the business, you can grow the operation and purchase additional machines without having to invest significant amounts of money.
When it comes to establishing agreements with local business owners so that you can install a vending machine, think about the benefits that you can offer the business or property owner. Preparing statistics on your other machines’ performance, offering an appealing percentage of your machine’s profits, or finding another creative incentive can all help to seal a contract. This might be one of the most important elements of running your business, so carefully think about why business owners should agree to let you bring in a machine.