How to Start an ATM Business
With Americans increasingly relying on convenience and accessibility when it comes to banking, automated teller machines (ATM) are becoming more popular than ever. By starting an ATM business, you can take advantage of this trend and help business owners to offer ATM services right on their properties. Running an ATM business offers plenty of flexibility in terms of your business hours and locations, giving you financial independence and full control of your business structure.
ATM businesses own and supply ATMs for public use, making their money off the ATM fees that customers pay. According to Forbes, this business model involves three parties: The ATM owner, the owner of the venue where the ATM is installed, and the ATM processor, which processes the paperwork that keeps the ATM functioning. Those three parties share the ATM processing fees. ATM processors may have network accessing fees per transaction, while venue owners usually receive $0.50 per transaction. With ATM fees ranging from $1 to $8 per transaction, the ATM business/ATM owner receives the rest of the ATM transaction fee.
An ATM service will first locate a good location for an ATM and will negotiate with the property owner. Once an agreement is reached, the ATM business will buy and install an ATM and load the machine with cash. Most ATM businesses load additional cash into the machines daily.
Owning your own ATM business is often promoted as a passive income opportunity; however, there is still work to be done as you will have to load cash and ensure the machine is working properly. That said, the time spent on the business is very flexible, and commitment isn’t high provided there isn’t much travel time between machines. This is easily a business that can be owned while still working a full-time or part-time job. Nurturing relationships with venue owners can be a long-term process, so don’t get frustrated if you don’t quickly reach agreements when you’re starting.
According to Allied Market Research, the global ATM industry held a valuation of $20.58 billion in 2019. It’s predicted that the industry will experience a 5.2% growth from 2020 to 2027, reaching a valuation of $30.50 billion in 2027. Current key players in the industry include Euronet Worldwide Corporation, Hess Cash Systems, Source Technologies, Triton Systems of Delarae LLC, and more.
Many factors are driving the predicted growth in the ATM industry. The 24/7 availability of banking services that ATMs facilitate is a major advantage that drives their popularity. ATMs are no longer cash dispensers but instead have more features and capabilities, including deposit and bill transfer capabilities, allowing banks to provide more comprehensive services at all hours.
Many trends are affecting the ATM industry. According to ATM Depot, many old ATMs are currently being replaced with new models. These new models have greater capabilities, including mobile pre-staging, dynamic branching, video banking, and contactless transactions. Equipped with touchscreens, new ATM models appeal to a younger demographic.
These newer ATMs also offer ATM owners the chance to personalize the ATM with marketing messages. Personalized messages and season-based marketing mean that ATM owners can potentially increase their profits by selling products and services to ATM users.
Smart ATMs are also on the horizon. These ATMs are capable of an even greater range of services, including multi-currency cash dispensing, loan repayment, bill pay, ticket dispensing, and account opening. These services can reduce staff costs for banks, delivering customers unparalleled convenience and new options. As they become more popular, having a smart ATM could help a bank to win business over a competitor without this smart technology.
Other technological improvements will make ATMs more practical and safer. Solar and wireless machines will be able to operate in locations that aren’t currently ATM-accessible. Security features like cardless transactions will also help to protect customers and banks.
An ATM business’s target market is the venues that allow the business to install an ATM. These venues may be banks, malls, convenience stores, restaurants, and any other locations that would benefit from having an ATM available.
Checklist for Starting an ATM Business
If you’re thinking about starting your own atm business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
The first step in starting your new business is to write a business plan. Your business plan will need to outline all elements of your business in detail, including your target market, what factors will give you an advantage over competing businesses, and your financial plan for funding the business and making a profit. You’ll need this business plan if you want to apply for financing from a bank or an investor. Multiple sources have also found that taking the time to develop a business plan increases the chance of success.
Related: How to write a business plan
Step 2: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for an ATM business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 3: Choose a Business Name
Finding the perfect business name can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select Your Location
ATM businesses aren’t tied down to one specific address, but you’ll want to create a route of ATMs that are close together, so they are easy to stock and service. The priority for ATM placement should be areas that are open to the public for long hours and lots of foot traffic, such as gas stations, convenience stores, retail stores, bars, etc., to maximize daily transactions.
For an ATM to work, a connection to a phone line, internet, or cellular connection will be required.
Once you strike an agreement with a venue owner, having a detailed, sound contract can help to protect this agreement and ensure you receive the income that you’ve negotiated. Be sure to budget money for a business lawyer who can help you draw up an appropriate contract and review any modifications you may need to make.
Step 5: Apply for Business Licenses and Permits
ATM businesses have several regulations and licensing requirements.
Most states require licensing of any non-bank businesses, along with general business registrations such as a business license, state tax permit, Employer Identification Number, and Occupancy Permit, among others.
Step 6: Find Financing
Starting an ATM business can require significant startup costs, including access to plenty of cash to stock the machines. Finding financing can help with those startup costs. To get a business loan, a business owner will need to have good credit and personally invest 15-25% of the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get Your Marketing Plan in Place
Strong marketing can help you to connect with venue owners and secure locations for your ATMs. Online advertising, email marketing, direct mail, in-person visits, and phone calls can all be valuable marketing techniques to help you secure new spaces.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting an ATM business. A few of these include:
– General liability insurance protects the business if a vendor or ATM customer is ever injured while using the machine.
Commercial property insurance protects the business from damage that could occur to the ATM in an event like a fire.
– Commercial auto insurance covers a business-owned vehicle, offering protection against expenses a business might face if the vehicle were in an accident.
– ATM insurance covers risks like loss or damage to the ATM or loss or damage to the cash inside the ATM.
The cost to insure an ATM business will depend on factors like the value of the business’ ATMs and the amount of cash that the business keeps on hand. To get an accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider the differences between the premiums, coverage exclusions, coverage, limits, deductibles, and other important elements of each policy.
Step 10: Hire Employees
A business owner may be able to service and maintain a smaller route of ATMs, but to increase profits, the business will need to install more ATMs. Hiring staff can help with this. According to Salary.com, an ATM manager responsible for service and operations earns an average salary of $85,585 per year. Salaries can range from $63,151 to $110,062.
Besides covering staff salaries, a business’ budget will also need to include related expenses like paid time off and worker’s comp insurance.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your ATM business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start an ATM business?
Even when starting a smaller ATM business, the owner needs to ensure that they have enough disposable cash to keep the machines reliably stocked. Startup costs will vary depending on the number and quality of the ATMs to be purchased.
According to Lieberman Companies, ATM prices can range from $2,000 to $8,000. Typical freestanding ATMs range from $2,300 to $3,000, while used ATMs average $1,200 to $1,800. Installation fees can range from $200 to $300 per machine. ATMs fgo through an average of $6,000 to $8,000 in cash per month, requiring between $1,500 and $3,000 in cash per week.
Purchasing a used ATM machine may cost less, some people may be hesitant to use it as the machine looks older, not to mention the potential for costly long-term repairs.
Some other common startup costs for an ATM business include:
– Inventory of cash
– Repair, cleaning, and maintenance supplies
– Company vehicle
How much can an ATM business owner make?
An ATM business’s income will vary depending on the number of ATMs in business, the number of transactions completed each month, surcharge revenue, and transaction fee that the ATM business earns. ATM Brokerage notes that monthly income per ATM can be $150 to $200 on the low side and $250 to $300 on the high side.
What skills are needed to run an ATM business?
Starting an ATM business doesn’t require a business degree, but certain skills and experiences will be helpful.
Technology background. A background in technology will allow a business owner to better understand, use, and represent their ATMs to venue owners.
Troubleshooting and repair skills. Some basic troubleshooting and repair skills can help an ATM owner to keep the machines operating. An owner who can do some maintenance and repair themselves can save money over frequently calling in a professional.
Attention to detail. Attention to detail is essential when dealing with the large amounts of money used to stock ATMs.
Familiarity with the area. An ATM owner familiar with a certain area can better identify sites that are likely to generate a high volume of ATM usage.
Security experience. Some experience working in or training in the security industry is valuable. Knowing and following security best practices can help to minimize the risk of an ATM owner being robbed while servicing the machines.
Negotiation skills. Experience negotiating contracts can help a business owner to reach agreements with venue owners.
Networking talents. Building relationships with venue owners is an important element of running an ATM business. Strong interpersonal skills and networking talents will be an advantage.
Are there grants to start an ATM business?
It’s extremely rare to find a grant to start an ATM business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for an ATM business?
The NAICS code for an ATM business is 522320, which is classified under Financial Transactions Processing, Reserve, and Clearinghouse Activities.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?