According to the latest market data, revenue from vending machine businesses is anticipated to be over $7 billion in 2019. Given this large amount of revenue, you may be wondering how you can get a piece of this pie. It is possible to start and manage your own profitable vending business, and you can follow the steps below to get started.
Decide on Business Structure
When starting any type of business, a good first step is to decide on the type of operating structure you want for your business. There are several options available, and each comes with its own rules and tax implications. Some of your choices are as follows:
The most common choice for the structure of a small business, such as a vending machine business, is an LLC. An LLC provides for personal legal protection while not making things too complicated. It is also possible to create a single-member LLC which allows you to start the business without the need for additional partners or board members.
Select Your Market
Once you’ve setup your business, you’ll need to decide on the market you wish to serve. The term “market” here refers to both the location you plan to serve as well as the types of products you plan to sell.
Types of Products
Traditional vending machines serve typical snacks and drinks, and you’ve likely seen many of these before. Chips, crackers, and candy bars often fill standard snack machines, while sodas, water, and sports drinks usually are served in most drink machines. While these products still sell well, healthy options are beginning to overtake these items in sales.
In fact, healthy snacks outsell their less healthy competitors by 300%. Given this fact, it would be a good idea to offer some healthy options in any snack machine. Thinking outside the box, there are even vending machines available that sell toys, sandwiches, and even hot pizza!
Once you’ve determined the types of products you’d like to sell, you need to consider the types of customers who are likely to buy those products. What locations do those customers frequent? Think about the amount of traffic that your machines will see at any particular location. You want to make sure that the location you are considering will see plenty of traffic from the types of people you think are likely to buy your product.
You should also consider the amount of competition at the location. If there are many other options available at the same location for drinks and snacks, then it’s likely not a good place. For instance, a vending machine selling snacks inside a convenience store likely doesn’t make sense because there are countless other snack options available in the store.
Some possible high-traffic areas with little competition may be as follows:
- Schools / colleges
- Office buildings
- Car repair garages
Secure Your Machines
After you have decided on the products you will sell, you can then start to look for machines. Since many machines are product-specific, this step should always be done after you select a product. Vending machines can also range in price from $50 for a small, single-product machine like gum or candy to over $3,000 for a digital machine capable to accepting credit card payments.
The machines you select can have an impact on your sales, so be sure to choose wisely. You’ll want machines that look professional and have all the features that your ideal customer wants. You have a few options when it comes to obtaining vending machines, so you’ll need to decide which works best for you.
Buying new machines is a great way to ensure that you have great equipment; however, it also requires the most upfront capital. Given that some of these machines can cost over $3,000, you may need a loan in order to buy a few when starting your business. This can be intimidating and too risky for some people, so you may want to consider other options if that is the case.
You can also find plenty of used vending machines on the market today. Buying used allows you to purchase your machines, but at a lower price than buying new. This can be a good option if you want to own the machines you’ll be using but don’t want to spend a fortune on startup costs.
If buying used, make sure you thoroughly inspect the machines before purchase. The last thing you want to do is spend money buying a problem machine that does not function properly. You should likely even consider having an expert look over the machines before finalizing a purchase.
It is also possible to lease vending machines, so you don’t even have to make a purchase at all. While this option will generally eat into your profits because it costs more in the long run, it can be a great way to get started for a smaller initial investment.
Negotiate Contracts for Placement
Now that you have your machines, it’s time to start approaching the owners of the locations you’d like to place your machines. Talk to them about placing the machines on their property and try to work out a deal. Typically, you’ll pay them a percentage of your revenue as “rent” for your space. When negotiating a deal, there are a few things you should be sure to address.
- Contract length
- Termination rights of both parties
- Types of products you plan to sell
- Commission terms
- Process for adding or removing machines
Buy Products and Stock Machines
You’ll want to obtain your products at the lowest possible price in order to keep your profit margins higher. Consider looking for wholesale sellers of the items that you need in inventory. If you don’t have access to a general wholesaler yet, you can get items at wholesale big box stores such as Sam’s Club or Costco. You can also do some internet research or talk to others in the business to see where they purchase their products.
Now it’s time to load up and stock your machines! Take the products you’ve purchased and fill up all the machines that you’ve placed. Make sure that you keep track of the products that you have stocked so that you will know what needs to be replaced when items sell out.
Perform Route Maintenance
About once a week, you’ll need to go out to each of your machines to perform maintenance. This includes restocking your products, gathering the money from the machine, and refilling the change cartridge on the machine. In high-traffic areas, you may need to perform this maintenance more frequently. Poorly maintained machines lose out on sales and make you lose money!
Occasionally machines malfunction, and a customer may need to request a refund or report an issue. Make sure that your machines clearly display some type of contact information such as a phone number or email address. When customers do contact you, always provide great customer service. Be prompt to respond to inquiries or issues, and always be polite and take care of the customer. This will lead to happy customers who will return to your machines to buy again and again.
Starting a vending machine business requires some work, but it is a viable option for operating a profitable business. With the right selection of products and the proper placement, you can make sales and money day after day. Make sure that you have clearly thought through your business plan, and then take action and get started if you think vending machines may be right for you.