Did you know that the US has more vending machines than any other country? Vending machines are undoubtedly convenient for consumers. But owning your ice vending machine is also a fantastic business opportunity that can offer passive income and a great return on investment.
Running an ice vending business can be as simple as owning one or more vending machines in well-placed locations. In addition, it is relatively recession-proof and benefits from very low overheads.
Business Overview
Ice vending machine operators provide and service automated machines that sell bagged ice as well as water vending.
An ice vending machine business stands out for its simple set-up, the medium barrier to entry, as well as low overhead expenses. It can be defined as a business where you earn an income from the sales generated by ice vending machines placed in carefully selected locations.
Leading US companies, such as Ice House America and Everest Ice and Water, have successfully applied their business model to this market. They have developed and refined a series of commercial ice vending machine models with varying capacities and functions. They are selling these to individuals to own and run their own businesses. Under this business model, machine owners will profit from access to a recognized brand and business support – very similar to typical franchise opportunities.
Related Business Ideas
Batting Cage
Bounce House Rental
Car Wash
Laundromat
Self Storage
Vending Machine
Industry Summary
The ice vending business involves the operation of standalone, self-service machines that produce and bag ice. The machines can be placed in various high-traffic areas, including convenience stores, gas stations, campgrounds, and event venues. They are typically owned by individuals or companies who service and restock the machines as needed.
The ice vending machine market is a fast-growing segment of the $4 billion retail ice business sector, selling more than 1.25 billion pounds of ice each year.
Seasonal trends continue to have a significant impact on the ice vending industry. Demand generally spikes during the warmer months and around holidays. To mitigate this, some businesses are exploring ways to create a more steady demand throughout the year, such as targeting more diverse markets or offering additional services.
The latest ice vending machines come equipped with advanced features like remote monitoring, cashless payment systems, and energy-efficient operations. These improvements enhance customer convenience and reduce the operational costs for owners.
Target Market
The target market for an ice vending business is extremely broad. Most people will get ice for their coolers to keep drinks chilled for a summer BBQ or keep their fish on ice when out fishing. In addition, ice is used for events, in the food industry, and for produce transport in general.
A lot of the success of an ice vending machine business depends on selecting its vending location. Successful locations are typically in high-traffic areas, campsites, and vacation spots.
Ice vending machines are also commonly added to existing services such as convenience stores, liquor stores, laundromats, car washes, and gas stations.
Checklist To Start An Ice Vending Business
Featured LLC Formation Services
Best for beginners
Pricing: $0 + State Fees
Most additional services
Pricing: $0 + State Fees
Best privacy protection
Pricing: $39 + State Fees
If you’re thinking about starting your own ice vending business, there are a few things you should keep in mind before launching. Here is a checklist of the essentials to get started.
Step 1: Research the market
Starting an ice vending business, like any other, involves doing a thorough market analysis before investing in resources or capital. Here are some steps you might take to ensure there is a market for your new business:
Local Demand Analysis: The first thing to do is to understand the local demand. Are there plenty of restaurants, gas stations, convenience stores, hotels, or event venues in the area that could use an ice vending service? Also, consider factors like climate; places with hotter temperatures or high outdoor activity levels may have a greater demand for ice.
Competitor Analysis: Look at how many other ice vending businesses are operating in the area. How many customers do they serve? What prices do they charge? What are their strengths and weaknesses? This will give you a better understanding of the market competition.
Demographic Analysis: Identify and analyze the potential customers in your targeted area. Are they mostly businesses or households? Do they often hold outdoor events or parties? This can help you understand the potential volume of demand.
Economic Indicators: Check the general economic health of the area. An area with a thriving economy will likely have more businesses and events that need ice.
Remember, research is the first and most important step in starting a business. It will save you from investing in a market that’s not ready for your service, and help you understand how to better cater to your potential customers.
Step 2: Create a business plan
A business plan is an important first step in starting an ice vending business. It will help you to map out the costs, revenue potential, and other important factors involved in running this type of business.
Not only will a bank require you to have one if you need a loan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 3: Secure funding
Fortunately, the cost to start a new ice vending business is relatively low; however, funding to start a business can be difficult. If you don’t have the cash on hand to purchase the equipment, you’ll need to find financing. There are a number of options available, such as loans from banks or credit unions, Small Business Administration (SBA) loan guarantee, or investment from family and friends.
If you are looking at the bank financing route, lenders (whether through conventional or an SBA guarantee is needed) are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Related: Where can you find the financing to start a business
Step 4: Find locations
Ice vending machines can be placed just about anywhere, but the location will make or break your business.
You’ll want to choose a location that gets a lot of foot traffic, such as near a grocery store, gas station, or other businesses. Also, locations near a body of water can be super profitable.
The location you choose should have adequate power and water hookups for your ice vending machine, but be sure to verify the reliability and quality of these utilities as well. When it comes to utilities, there are a few options on how to deal with them. You could run separate utility lines to the machine, sub-meter from an existing line of service, or simply roll the average cost into the monthly rent agreement. Having a proposal ahead of time will make everything easy for the landlord.
Unless you already own the location, a contract with the landowner will be necessary. Before signing any contracts, be sure to check with your local zoning department to make sure your intended location is zoned for vending machine operation. RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.
Step 5: Register the business
The next step in starting your ice vending business is to make sure it’s properly registered and legal to operate. It’s important to note, however, that the exact process can vary from state to state, so you’ll need to check the specific requirements for your location. Here’s a general guide to the key registrations:
Form a Business Structure: The first thing you’ll need to decide is what business structure is best for your business. This could be a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each of these structures has different implications for liability, taxes, and administrative complexity.
An LLC is often a good choice for small businesses, including ice vending operations, because it provides liability protection without the complex administrative requirements of a corporation.
Related: Comparison of business structures
Register Your Business Name: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
Obtain Business Licenses and Permits: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, food service license, vending machine permit, seller’s permit, and Employer Identification Number (EIN).
Step 6: Purchase equipment
After securing a location, getting funding in place, and registering the business, it’s time to purchase equipment.
The primary piece of equipment you’ll need of course is the ice vending machine itself, which is a significant investment. Start by researching different manufacturers to understand the features, capacity, energy efficiency, maintenance requirements, and price of various models. It’s also worth considering machines with advanced features such as remote monitoring capabilities and cashless payment systems for added convenience and efficiency.
Ensure that the selected machine can withstand local weather conditions and has adequate capacity to meet the anticipated demand. If purchasing a used or refurbished machine, inspect the machine thoroughly or have a knowledgeable professional do so.
Remember to factor in the cost of installation, which may include electrical and plumbing work. Consider the warranty, availability of spare parts, and access to servicing; it’s often advantageous to choose a well-known brand with good customer service.
Additionally, remember to invest in security equipment to protect your investment, such as surveillance cameras or alarm systems. Finally, always negotiate the price and terms of the sale; even seemingly small concessions can significantly impact your initial investment and future profitability.
Step 7: Establish marketing
Marketing an ice vending business effectively can involve multiple strategies that increase visibility and awareness among potential customers.
One effective method is location-based marketing, which targets customers in the vicinity of the vending machine. This could be achieved through localized digital advertising campaigns on platforms like Google Ads or Facebook Ads, allowing your ads to be displayed to people near your machine. Additionally, partnerships with local businesses or event organizers can be beneficial. Offer promotions or discounts for large orders related to local events or businesses.
Depending on the location, signage at the machine’s location and along nearby routes also plays a crucial role in attracting customers. Lastly, leveraging social media platforms to connect with the local community, share updates, and run promotional campaigns can significantly increase your business visibility and customer engagement.
Step 8: Launch the business
In addition to the steps above, there will likely be a few steps to complete before launching your ice vending business. A few of the other operational details to consider:
Business Insurance: Protect your investment by obtaining appropriate business insurance. This could include general liability insurance (to cover injuries or property damage related to your business), property insurance (to cover your machines and any other assets), and perhaps even business interruption insurance (to cover loss of income if your business is unable to operate for some reason).
Related: Types of insurance your business may need
Bookkeeping and Accounting: Keep track of your income, expenses, and tax obligations right from the start. You might choose to do this yourself using software like Wave Accounting (FREE) or Quickbooks, or you could hire an accountant or bookkeeping service.
Bank Account and Credit Cards: Open a separate bank account for your business to keep your personal and business finances separate. Consider also getting a business credit card for easier tracking of expenses.
Payment Processing: Most modern ice vending machines accept credit cards and digital payments, which require a payment processing service. Shop around for a service that offers competitive rates and reliable service.
Maintenance and Servicing Plan: Ice vending machines, like any mechanical device, require regular maintenance and occasional repairs. Whether you plan to do this yourself or hire a service, you should have a plan in place before you start operating.
Remember, these steps may vary depending on your specific business and location. But by taking care of these details, you’ll set yourself up for a smoother and more successful start to your ice vending business. As always, consider consulting with a business advisor or attorney to ensure you’ve covered all your bases.
This material is property of StartingYourBusiness.com
Common Questions When Starting An Ice Vending Business
How much does it cost to start an ice vending business?
Starting an ice vending business typically requires a significant upfront investment, with the total cost varying widely depending on numerous factors. A new ice vending machine can range from $20,000 to over $100,000 depending on its capacity, features, and the manufacturer.
Additionally, you may need to invest in site preparation, which could include paving, electrical work, plumbing, and installation, which could add an additional $10,000 to $15,000. Lease or rental costs for your location will also vary, but you might budget around $500 per month. Initial licensing and permit fees can also add several hundred dollars.
Therefore, the average total cost to start an ice vending business might be around $40,000 to $150,000.
Bear in mind, these numbers are rough estimates and the actual cost could be lower or higher. It’s essential to do your own detailed calculations based on your chosen equipment, location, local utility costs, and other specifics. Consulting with a business advisor or accountant can help ensure you have a realistic estimate of the costs involved.
How profitable is an ice vending business?
Determining potential earnings from an ice vending business can be challenging due to the numerous variables involved. However, a rough estimation can be formed based on a few factors.
Assume your vending machine sells a 10-pound bag of ice for $2.50. If you sell an average of 50 bags per day, you would generate $125 per day, or $45,625 per year in gross revenue. This might increase during hotter months and decrease during cooler periods.
Now let’s consider expenses. This business has extremely low overhead costs as you will likely have no employees, and you won’t have to rent storage or keep stock. On average, the cost of producing a 10-pound bag of ice could be around $0.25, including utilities and maintenance. This means your cost for 50 bags is about $12.50 per day, or $4,562.50 per year. If you’re leasing your location for $500 per month, that’s another $6,000 per year. Add insurance and miscellaneous costs, and you might have total operating expenses of around $12,000 per year.
So, your net income before taxes would be your revenue of $45,625 minus your expenses of $12,000, giving you a profit $33,625 per year.
Everest Ice and Water has a calculator that indicates a return on investment within 1.24 to 1.38 years.
Remember, these are simplified examples. Your actual income could be higher or lower depending on many factors, such as the capacity and efficiency of your machine, your location, local demand for ice, competition, and more.
When estimating your profitability, always do your own detailed calculations or consult with a business advisor when evaluating a business opportunity.
What skills are needed to run an ice vending business?
Research skills: Your ice vending business’ success will largely depend on how well you’ve done your market research.
Business management skills: A basic understanding of business management is always valuable when running your own business. For example, you will negotiate lease space and monitor and keep a maintenance schedule for your vending machine. In addition, you are responsible for reporting sales and income to meet tax requirements. Therefore, basic computer and accounting knowledge is a plus.
Basic maintenance skills: We recommend you understand the essential maintenance required to keep your ice vending machines performing without a hitch. It will save you costly repairs in the long run and avoid paying a contractor to do the service, keeping your overhead at a minimum.
What is the NAICS code for an ice vending business?
The NAICS code for an ice vending business is 312113, which is classified as ice manufacturing.
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?
Final thoughts
Starting your ice vending machine business can be a lucrative and attractive business opportunity in the US. It is not a heavily regulated industry, and entry barriers to the market are considered medium. It requires a low time commitment and minimal expenses. This makes it an excellent side-business option as well.
If you are looking for an opportunity to be your own boss, with the ability to grow your business over time, becoming an ice vending machine owner might tick all the boxes.
