How To Start An Ice Vending Business
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(s) is also a fantastic business opportunity in the US and can offer 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.
Ice vending machine operators provide and service automated machines that sell ice as well as cooled water.
An ice vending machine business stands out for its simple set-up, the medium barrier to entry into the US market 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 or Everest Ice and Water, have successfully applied their business model to this market. They have developed and refined a series of 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.
According to IBISWorld. vending machine operators commanded a $9 billion market in the US in 2020, and the industry consists of well over 18,000 businesses and employs some 55,000 people.
Although that figure includes all vending machines – such as coffee, snacks, newspapers, novelty, and gumball machines – ice manufacturers account for a respectable $835 million of that market.
Flake ice holds the largest market segment within the ice manufacturing industry, with just over 25%. This type of ice is commonly used to cool freshly caught fish, chill poultry, and transport fresh produce.
The industry had to deal with declining revenue and profit as well as a decrease in operators in 2020. This was mainly due to an overall 5% decline in consumer spending.
However, IBISWorld is forecasting a 2% annual growth between now and 2025. In addition, there are now fewer ice manufacturing businesses registered in the US, which may also increase profit margins.
It’s worth noting that connected vending machines are increasingly popular, and that particular market segment is expected to grow by over 16% between 2019 and 2024.
Your target market 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 for Starting an Ice Vending Business
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: Write 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 2: Name the Business
After you have a business plan in place, the next step is to choose a name for your ice vending business. Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 3: 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 ice vending 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 4: Select A Location
Ice vending machines can be placed just about anywhere, but there are some locations that are better than others. 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. You’ll also want to make sure the location you choose has adequate power and water hookups for your ice vending machine.
When evaluating a location, be aware that ice machines are often targets of theft and vandalasm.
Step 5: Apply for Business Licenses and Permits
Before you can start operating your ice vending business, you’ll need to obtain business licenses to legally operate. These requirements vary by state, so be sure to check with your local government to find out what is needed in your area.
Step 6: Find Financing
If you don’t have the cash on hand to purchase an ice vending machine, you’ll need to find financing. There are a number of options available, such as loans from banks or credit unions, investment from family and friends, or even crowdfunding.
Fortunately, the cost to start a new ice vending business is relatively low; however, funding to start a business can be difficult. Banks 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.
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
There are a number of ways to market your ice vending business, such as online advertising, flyers and posters, or even word-of-mouth. Whatever marketing methods you choose, be sure to let people know about your business and what you have to offer.
Step 9: Get Business Insurance
Another important step in starting an ice vending business is to obtain insurance. This will protect you and your business in the event of any accidents or injuries that may occur.
The cost to insure an ice vending business will differ according to factors like a business’ location, the value of the equipment to be insured, and the number of employees on staff. To get a more accurate idea of potential insurance costs, request quotes from multiple insurance companies. Compare the policies and consider factors like deductibles and coverage limits to find the policy that’s best for a business.
Related: Types of insurance your business may need
Step 10: Set up an Accounting System
Setting up an accounting system for your ice vending business is critical to your business’s long-term success.
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 ice vending business?
Your main investment will be the ice machine itself. Depending on the model, the purchase price can be anywhere between $43,000 and $150,000. Ensure you understand the capacity and size of the various models to ensure it is the right fit for their location and customer base.
Consider having reliable transport to empty coins regularly and maintain the machine.
Apart from that, this business has extremely low overhead costs. You will likely have no employees, and you won’t have to rent storage or keep stock.
How profitable is an ice vending business?
Everest Ice and Water Systems offer a valuable tool to calculate your potential profits. However, we highly recommend you do the math as part of your business plan to ensure you understand your likely return on investment. This will also be a necessary calculation should you need a business loan.
According to Comparably, over 80% of all US vending machine operators earn around $50,000 a year. On the other hand, using typical charges, sales volume, minimal overhead expenses, and average costs, the Everest Ice and Water calculator indicates a net profit of $36,000 annually with a return on investment within 1.24 to 1.38 years.
Are there grants to start an ice vending business?
It’s extremely rare to find a grant to start an ice vending 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 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.
For example, when considering a suitable spot, we recommend you ensure the vending machine will be in a highly visible place with high traffic. This might be foot traffic inside an existing convenience store or on a busy main street with a low-speed limit. Also, consider ease of access and ample parking options. You’ll want a truck and trailer to be able to quickly stop to get the ice.
We also recommend you secure the resources needed, particularly access to electricity and water for your ice vending machine.
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 overheads 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?
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 overheads. 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.