Have you ever been in an airport waiting lounge and feel the strong urge to get a quick drink? Or perhaps in a cinema with your special half and she suddenly urgently needs a drink? Or you just came out from church having a strong need to gulp down a drink after shouting one thousand hallelujahs?
What can you say about the day your train was cancelled and end up spending minutes or hours waiting for the next train, and you decided to get a drink while waiting? Or better still you are outside the school of your favourite child, waiting for school to close and you decided to have a drink, while playing with your phone?
The odds are very high that one time or the other, you may have found yourself in any of the above scenarios. What or who came through for you in such situations? It is a vending machine of course. What would have happened in any of those desperate situations or moments, where the shops were closed or none within reasonable distance? How would you have been able to cope?
I guess by now you are beginning to catch a glimpse of the picture we are trying to paint. In this practical guide, we will not be looking at how you can locate a vending machine for a quick drink, but rather, how you can start a vending machine business and make huge profit, meeting the needs of millions of people, who daily experience any of the above situations, you would have at one time or the other experienced.
Vending machine business is a very interesting one, imagine how profitable a vending machine business is in Japan with over 4.8 million vending machines and the numbers are still growing or the U.K, who in 2017 imported 67.7 million pounds worth of vending machines or according to Automatic Vending Association’s research statistics report that vending machines in the UK sell about six billion items every year.
We know you may never have considered starting a vending machine business, but we will in this guide provide the very detailed step by step guide on how to get started and profit from vending machine business.
As an entrepreneur or an aspiring one, do you know that vending machines requires little cost to start and has the possibility to generate revenue 24 hours a day, if you have the right products and locations.
The question on your mind right now definitely is, how then do I start a vending machine business? It is very important that you have all the information needed so you don’t rush into it and regret at the end of the day.
Products you can easily sell with a vending machine
- Fresh sandwiches and salads
- Water, fruit juices, sodas
- Granola bars, candy
- Baked chips
- Sugar-free gum
- Fruit cups
- Tech accessories
- Packaged detergents
- Head phones
- Phone charger
Best locations for your vending machine business
- Hospitals or medical centers
- Grocery stores
- Airports and shopping malls
- Apartment complexes
- Manufacturing plants
- Amusement parks
Special features of vending machines to consider
- Snack/drink combination machines
- Credit card and large bill functionality
- Touch or voice accessibility
- Remote monitoring software and low-stock alerts
- Branded “wraps” for the front of your machine
- Interactive screens
The followings are sure proof steps that will help you in your vending machine business if you follow through with each of the steps.
- Know your Vending Machine Products
The key important step is to know the vending machine products before getting started.
Most people erroneously think that vending machines only comes in the usual snack and soda standard variety, while in actuality, there are three different categories. So you have to consider all three types when choosing the machine whose products would be the best fit and hit with your target market.
Whichever type of vending machine you choose, start out with one or two machines with a specific market focus. That way, you can gradually learn about popular stock- and site-specific patterns, and add new machines accordingly.
- Food and Beverage Vending
According to Vending Market Watch’s 2019 annual report, food and beverage vending machines with snacks, soda, and candy make up the majority of the vending market share in the U.S., with beverages alone accounting for nearly a third of vending sales.
You can decide then to start with healthy snacks, beverages, fresh food, etc. simply start with a specialty, until you learn more about the industry.
- Bulk Vending
Starting a vending machine business with machines that stock gumballs, stickers, or rubber balls—also known as bulk vending—requires very little capital and low maintenance costs.
These type of machines are low maintenance and also have low product overhead. Most bulk vending machines are mechanical devices and hence don’t require electricity or battery power to operate, which means the cost of operation is low or none nonexistent.
- Specialty Vending
A vending machine business is no longer limited to foods and snacks. These days, in large public places like arenas, airports, and malls, vending machines now offer tech accessories, beauty products, or other specialty items, like hot beverages, phone chargers, packaged detergents, neck pillows, tobacco, etc. Some of these vending machines use the same technology as standard vending equipment, and some are differentiated as Automated Retail Machines.
By determining your vending machine products, you will then be able to develop a blue print for your business. For instance if you decide to go with foods and drinks, your blue print will then help you determine which food, confectionery, water products, drinks, your vending machine will offer.
Your blue print should also highlight your market area, demographic population and the product for that market. For instance, if you are going to be in an airport, large shopping complexes or gyms, you might want to offer snacks, drinks, water, phone chargers etc.
- Sourcing for funding
Starting a vending machine business doesn’t require nearly as much startup capital as most other small businesses do.
But you will still need some funds to get started, which will be dependent on the scale at which you want to start or if you already have personal savings.
So if you need a loan, you can consider these options:
- Short-Term Loan
If you have a good credit history, you might consider short term loans.
If you meet up with the requirements, you will have to pay back the loan with interests usually higher than long term loans, and loan duration is at most 18 months.
- Equipment/inventory Financing
As we have already stated, you don’t necessarily need huge capital to start a vending machine business. But depending on your present condition, you may decide to seek for an equipment financing loan. The terms of these loans depend on the value of your equipment, which also acts as collateral in case you default on your loan payments.
Vending machines when cared for, can last for up to 10 years and more, this can give the assurance of getting the equipment loan, since the equipment serves as collateral, as the lender is guaranteed of the loan repayment.
However, if you are going for equipment loan, you will need a business plan, equipment quotes for the machines and your own financial information. Additionally, if you need capital to purchase inventory, you may want to also consider inventory financing.
- Get a trusted Supplier
Your vending machine business will require a very trusted supplier for your products. Since you have identified your market based on products, you should then proceed to have a vending machine franchise that offers unlimited growth and potential. Some vending machines for instance have what it takes to get customers attention as the machines are very attractive, as it is this attention and attraction that will help your vending machine business grow.
A vending machine franchise is a one-time investment that enables cost savings by operating 24/7 all year round. Despite all the boom in vending machine business sub-sector, if you don’t have a reliable supplier, you will find it very difficult scaling your business.
You also need to always have in stock the products that sell well and that you can get when customers want more, this again is dependent on having a reliable supplier.
So buying a franchise is the easiest way to get a reliable supplier, as you would have done your research before choosing the supplier. The advantage of buying a franchise is that it will give you an established business model.
It is very important to know that aside the franchise one -time fee, the franchisor also takes a percentage of the profits or monthly fee.
- Pay for a Franchise or buy a machine
Every franchise has various costs depending on their machines, products, territory, and other services they provide. As an intending vending machine franchise business owner, you would have found out all these details before settling with a particular franchise.
On the average an initial start-up cost for your vending machine business can range from $5,000 to $40,000, which in most cases can give you 2 to 10 machines.
The major advantage of vending machines franchises is that a vending machine usually doesn’t require much of your own time, so you will be able to have a second job. On a typical day, you might just need to check your machine once to pick up your money and refill stock as necessary.
You have to remember that vending machine franchise businesses have very low overheads, with some of your primary business start-up costs being in transportation and electricity.
Aside getting a franchise you can also decide to buy your own machine. A new vending machine ranges from between $3,000 to $10,000 depending on size and features, while you can also get a refurbished vending machine ranging from $1,200 to $3,000.
Besides the machine itself, you will also have to consider the cost of inventory to stock your machines. How many machines you plan to start with will determine how much you will spend to stock them.
- Get a license for your business
Every state or country have different business operational requirements. So the requirements for your vending machine business license will vary depending on the state or local council in charge of your designated territory. Sometimes you may also need a street trading license or a paddler’s certificate.
It doesn’t matter what certification or license is needed, you are most times required to pay for the licenses. But the beauty of vending machines business is that they run for 24 hours, so you may not have to bother so much about your initial set up costs, as you will eventually make profit.
- Commission Requirements and Proprietor Contract
Even though vending machine business have very low operational cost, but before you pocket your profits, you will have to pay commissions to the proprietor who provided you with the location and the electricity required to operate your machine.
The average commission is around 7%, but they can vary widely depending on the number and size of the machines. As the owner of the machines, you will be obligated by contract to provide a statement of sales and commissions to the business or property owner at regular intervals.
Your contract should also specify:
- The machine types and products sold
- The length of the contract
- Termination clauses for breach of contract or if it becomes unprofitable
- Rights to replace, increase, or decrease the number of machines
- Obligations and expectations
- Vandalism and theft
As always, it is wise to have the contract drawn up or reviewed by a lawyer
- Other Investments to make
At this stage you now have a location selected, your machine is purchased, and you have probably also installed your machine, now is the time to make your vending machine business profitable.
The followings will help make the profitability possible:
- Invest in a Vending Management System (VMS)
Depending on the technology in your machine, your vending equipment may come pre-programmed with management software, which you can use to streamline operations, record inventory, and track revenue.
But most standard machines require you to manually manage your inventory, but if you have over 5 vending machines it is advisable to get a vending management system software, which allows you to remotely manage your vending machines from an internet-enabled device. Most VMS systems provide real-time inventory updates and reporting tools.
- Invest in Customer Service
Even if you only have one or two vending machines, it’s worthwhile to emphasise customer service. You can make this happen by following best practices.
Like many location-based businesses, vending operators are often dependent on word-of-mouth referrals and in-person connections. It is your duty then to foster relationships with business owners, join local networking groups for entrepreneurs, etc.
The most important customer service you can render is to ensure that your machines are always stocked and functional at all times.
- Invest Your Time
Just like any other venture, starting a vending machine business requires time and not just your capital investment.
A full-size vending machine might require you to collect money weekly, purchase inventory, visit locations, restocking, researching new products, trends in sales, etc. So you have to determine how much time you have available at your hands to carry out these tasks.
- The best way to succeed
Every successful business is a well marketed business, which also includes your vending machine business. One of the easiest way to become profitable is to increase your customer base and bring in as many new customers as possible. You can achieve this by building relationships with people in corporate buildings for instance and also placing your machines where you will get the most customer traffic, repeat business, referrals, and good publicity.
As with any enterprise, success in the vending machine business means providing good customer service. For a vending machine operator, this means:
- Scheduling visits to your locations as needed to keep the machines fully stocked.
- Keeping your machines clean and in good repair. Dirty, poorly maintained machines are a turn-off for customers.
- Provide contact information such as an email address on the machines so customers can report any issues.
- If applicable, rotate products by sell-by dates so that the oldest product sells first.
- Analyze sales and regularly consult with the business or property owners on which types of products are most desirable to customers. Stock the machines accordingly.
- Maintain good relations with the contact person at the machine locations, as they might be on the receiving end of complaints or demands for refunds.
- Conduct yourself professionally at all times.
The vending machine business drives billions of dollars globally each year. Luckily, you can break into this lucrative market with less than $1,000, the right market research, informed decision-making, and entrepreneurial energy.
Depending on whether or not you will continue to work another job, increasing the scope of your vending machine business gradually will allow you to take on more locations as your business becomes more profitable.
No matter where you are financially, the vending machine industry guarantees an opportunity to operate your own business, while only risking as much as you are comfortable investing.
We have through this guide provided massive value, it is then left for you to decide what to do with the information we have provided. But as we will always say, action is cure. Are you willing to take any action NOW?
What are your thoughts with regards to this practical guide and do you have any business idea you want us to write on? Let us know in the comments section.