How to Start a Vending Machine Business in 9 Steps

What if you suddenly had a desire to earn extra money by vending? You could start your own business, but it might be harder than you think. This article will walk through how to successfully launch and grow your vending machine business in nine steps.

The “how to start a vending machine business for free” is a guide that will teach you how to start your own vending machine business. The steps are easy and simple. It’s the perfect way to make some money on the side.

Vending machine companies are a unique mix of product and service-based enterprises. They’ve endured the test of time and are distinguished by continually evolving and cutting-edge technology. Before you begin, you must consider vending product possibilities, location, investment and profit margins, and sales methods. It’s also crucial to have a well-thought-out business strategy and to be aware of the legal ramifications of operating a vending machine company.

If you believe you’ve got what it takes to succeed in the high-stakes world of frozen delights and fierce competition, keep reading to learn how to get a piece of this multibillion-dollar pie.

Step 1: Consider Your Product Options

One of the advantages of beginning a vending machine business is the wide range of items available to pick from and sell.

The usual cold beverage, snack, and candy selections will account for slightly over half of revenues from the over 1.75 million individual vending machines in the United States in 2020. The remainder is made up of a variety of food and non-edible materials. Source: Market Watch for Automatic Merchandisers and Machines for vending

In fact, the nonedible (“other”) category, which accounts for 17.5 percent of sales, has had the fastest recent growth in the market, indicating increasing dynamism and revenue diversification. Vending goods that aren’t edible include:

• CBD oil
• Products for personal hygiene
• Medicines
• supplies of paper
• Electronics
• Movies
• Games
• Condoms
• Magazines
• Toys
• First-aid supplies
• Souvenirs
• Cosmetics

Some of the most popular vending machine goods in 2020, according to an Automatic Merchandiser user survey, included:

• Miss Vickie’s Jalapeno kettle-cooked potato chips are a salty snack.
• Fieldstone Bakery Grains 2 Go Bars are a healthy snack.
• Jack Link’s Cold Crafted Linkwich is a protein and meat snack.
• International Delight’s Iced Coffee Caramel Macchiato is a cold beverage.
• Sara Lee Individually Wrapped Mini Cheesecakes (cookie & pastry)
• Trident VIBES 12-count candy

The selling price of many of these tiny and basic consumer products ranges from $1 to $5. The higher-ticket products, on the other hand, provide a higher profit margin for merchants, but they also need more inventory and, if they’re food-related, more rigorous laws. Investing in a product area that you are acquainted with, interested in, or enthusiastic about never hurts. As long as there is a need, clearly the sky is the limit.

Step 2: Assess Your Sales Channels

Consider the market’s two leading sub-categories: vending machines (50 percent of the vending market) and micro markets (50 percent of the vending market) (11 percent of the vending market). Which channel is the best for you?

Vending Machines

When we think of the industry, we usually think of self-contained, automated, stand-alone vending devices. These businesses may sell one, many, or many different sorts of items from one or more machines at one or more locations.

Micromarkets are small-scale markets.

Micro markets thrive in business settings, as well as hotels, hospitals, industrial plants, and airports. They may be manned on occasion, although they often depend on automated point-of-sale systems and kiosks. (Image courtesy of VendingConnection.com)

Micro markets, also known as Grab-and-Go markets, first appeared in the early 2000s and, like their vending machine counterparts, have grown, evolved, and thrived with lively, congested, high-efficiency locations throughout time. Custom-designed vending markets/marts with a self-checkout kiosk give a convenience store atmosphere with vending choices and pricing in this style. Consider the clean little sides at huge airports or the cafeterias of hospitals and business buildings. They operate particularly effectively among captive audiences in offices, which is why the typical micro market is located in an office with 100–150 people.

Micro Market versus. Vending Machine

The biggest difference between vending and micro markets is the initial investment. Vending machines are self-contained, automated, stand-alone equipment that need just maintenance and inventory once bought and installed.

Micro markets, on the other hand, are more akin to a miniature restaurant or convenience store, with higher inventory and build-out requirements, more advanced point-of-service purchasing technology, more food storage and display options, and sometimes even part-time or full-time employees to staff them.

Step 3: Assess the Time and Money Invested

After you’ve decided on your preferred sales channels, you’ll need to weigh the costs and benefits of each alternative. Starting from scratch, buying a company, or investing in a franchise are three options for obtaining a vending machine or a micro market business. Here are the expenses you may anticipate to pay if you pursue any of these choices, with a concentration on vending machines (rather than mini markets) because of their cheaper initial costs.

However, keep in mind that these beginning fees may only be enough to keep the firm afloat for the first six to twelve months. Inventory and supply costs, payment processing, vehicle costs (at least gasoline and maintenance), and vending machine repair, equipment, and maintenance charges are all ongoing expenditures.

Expect to invest between $3,000 and $10,000.

Starting a vending machine company from the ground up involves the smallest financial commitment but the most time and effort. You could be cut out for a startup vending firm if you want to construct it, operate it, and see it grow. This model also appeals to me since it allows me to start small, create a brand and reputation, and then expand as I see fit. Vending machine features and capacities vary, but a single new vending machine may cost anywhere from $1,500 to $10,000.

The self-start technique necessitates inventory, branding, marketing, sales activity, and inventory management, in addition to all of the other back-office operations and expenditures associated with operating a beginning firm, such as accounting and legal compliance. This strategy allows you to start small and gradually expand in accordance with your lifestyle and objectives. Because various machines are made to suit different items, Naturals2Go has compiled a list of typical machine costs:

• Machines for making soda start at $3,600.
• Snack Machines start at $3,000 and go up from there.
• Candy Machines start at $1,500 and go up from there.

Expect to spend at least $15,000 on this project.

If you want to acquire an established firm, you’re probably looking for a way to have some creative influence while taking on a bit less risk than a startup. While purchasing an existing firm is more expensive than beginning with one or two lone vending machines to test the waters, it reduces the risk of starting from scratch and offers a number of advantages, including an established customer base, product, branding, and reputation. The previous owner handled the left-brained tasks, infrastructure, and formalities (ideally), but there is much of space for change, development, and a fresh new perspective.

For established companies for sale, we suggest BizBuySell, where you can get a modest vending machine company—complete with two machines—for as low as $15,000.

Expect to spend at least $20,000 on this project.

Similarly, if you decide to invest in a vending franchise, a new vending machine franchisee should anticipate to spend anywhere from $20,000 to $300,000 or more, depending on the investment and franchise fees. It all relies on the products you wish to sell, the characteristics of the machines, and the franchisor’s reputation and development potential.

When you purchase a franchise, you are purchasing the whole package: branding, inventory choices, suppliers and relationships, machine type, and procedures.

Visit FranchiseAmerica to look at some examples of vending machine franchises and the investment money needed to get started.

Step 4: Calculate Profitability

Before you commit to the concept of beginning a vending company, you should first figure out how much money you can make, particularly after learning about the initial expenses connected with your preferred market entrance strategy.

First, use Vending.com’s profit calculator to determine your vending machine’s earnings (s). Variables such as the number of machines, sales per day, profit per product, and others may be simply adjusted.

The typical vending machine earns more than $75 each week ($300 or more per month). Some people earn less, while others make more. The money in our sector comes from volume.

The vending machine business is incredibly scalable, which adds to its attractiveness. For some (defined by two or three vending machines), it is a side hustle; for others (defined by hundreds of thousands of vending machines), it is a lifestyle. The simplest method to estimate your forecasts for the business plan and decide whether vending is the correct market for you is to start with the lowest figures and scale up to assess profit potential.

What if I told you that

Compass Group PLC has a 3% market share and will generate $202.4 million in vending-specific income in 2020, according to IBISWorld.

It’s quite simple to stake out a desirable spot to measure foot traffic, in addition to utilizing market data and industry standards from trade journals and other resources (we give a list of these resources in Step 9). If they’re interested in the related rent or commission from vending sales, some firms may even disclose this information with you. In a moment, I’ll go into site selection in further detail.

Profitability is likewise contingent on the same factors that govern any small firm, including a comprehensive plan, capitalization, a defined target market, clever product mix, smart placement strategy, and healthy profit margins. The profit potential and ultimate profitability of any firm, even a vending machine company, may be harmed by a weakness in this underlying fabric of the business model.

Step 5: Make a Business Plan

Even in this day and age of the one-page business plan and the business model canvas, you’ll be hard pushed to find a bank loan officer who doesn’t need a business plan. If you don’t need money, there are many of wonderful business planning approaches and models, but if you do, you’ll need a business plan. Here’s a quick rundown of the structure we suggest, particularly if you’re searching for funding:

• Summary of the Report
  • Business Objectives, Mission Statement, Keys to Success, and Financing Request are all included.
• Summary of the Business
  • Startup Summary, Startup Capital Summary, Location, Ownership, and Competitive Advantage are among the topics covered.
• Services and Products
  • Business Model, Products, Services, Fulfillment, and Future Products and Services are among the topics covered.
• Analysis of the Market and Industry
  • Market segmentation, target market, industry analysis, and competitor research are just a few examples.
• Summary of Marketing Strategy and Implementation
  • Marketing Strategy, Sales Strategy, Sales Forecast, Pricing Strategy, and Milestones are just a few examples.
• Summary of Management and Organization
  • Background on the Ownership, Management Team Gaps, and Personnel Plan
• Operations
  • Suppliers, Machine Service and Maintenance Plans, and Stocking Decisions are just a few examples.
• Financials
  • Break-Even Analysis, Projected Profit and Loss, Projected Cash Flow, Projected Balance Sheet, and Business Ratios are among the topics covered.
• Appendix

You’ll be well on your way if you stick to this plan. Review a sample business plan on BPlans.com, consult the SBA’s business plan starting guide, or use the guided LivePlan.com subscription if you need additional help.

Step 6: Select a Sourcing and Supply Source

You’re ready to obtain your supplies after you’ve devised a strategy for beginning a vending company and secured finance. Your important elements are the machine(s) and inventory, in addition to any required office items such as a working computer and phone.

Machines

The first significant expenditure you’ll make in your vending machine company is purchasing one or more machines. You may purchase new or secondhand, finance or lease it, much like many other pricey things. Vending machines have evolved through time to become smarter and more specialized, allowing merchants to pick from a broad range of alternatives based on their product. Take a look at some of the latest, high-tech variations available on Vending.com:

As previously said, a new vending machine may cost anywhere from $1,500 to $10,000, depending on the features required. Vending machines may be purchased directly from websites such as OnlineVending.com and Vending.com. Companies like Naturals2Go and eVending.com can help you finance new and used equipment according on your requirements, product kind, and other factors.

DiscountVending.com is an example of a vending machine retailer that offers new, used, and reconditioned units. You may even be able to find vending machine providers in your area, ensuring that your purchases benefit the local economy.

Inventory

There are a few methods for safeguarding initial and continuing inventory, depending on how many machines you have. When it comes to vending machines, it’s a one-and-done situation. When it comes to inventory, though, it’s all about building a long-term relationship with your supplier, so select wisely and do your homework. Consider the following factors when selecting a supplier for your product:

• Financial: Look for suppliers in your price range that provide financial incentives like loyalty programs, rebates, and bonuses, as well as speedy delivery and flexible payment arrangements.
• Goods: Look for suppliers that can provide consistent supply, fresh product, and the features and attributes you’re looking for in your inventory. Check to see whether your suppliers provide a warranty and stand behind their products.
• Any commercial partnership is defined as a relationship. Examine how the firm treats its clients, credibility, and customer service, especially if you’ll be dealing with sales and delivery personnel.

As previously said, the kind, characteristics, and quality of the inventory you wish to supply your vending machines with will influence your supplier decision. We’ll look at suppliers through the prism of cold drinks since they account for almost a quarter (23%) of vending product sales. For a small vending machine company with just a few units, here are some examples of cold beverage suppliers:

• Clubs for Members
  • BJ’s Wholesale Club, Costco, and Sam’s Club are just a few examples.
  • For new vending firms that don’t require pallets upon pallets of merchandise for their vending machines, membership clubs may make more sense. Plus, as a civilian shopper, you may take advantage of the benefits of a membership club! Keep in mind that not every membership group is the same. We searched each of three clubs for a 35-case of Classic Coca-Cola 12-oz cans, and the pricing varied from $10.99 (or $0.31 per can) to $13.21 (or $0.38 per can) in a wonderful case study for comparison shopping. Even if you stick to the retail mantra of a 100 percent markup and only charge $0.62 a can, you’ll still make $0.31 per can profit. If you round up to account for inflation, demand, overhead expenses, and equivalent market pricing, and price each can at $0.75, your profit is $0.44 per can, or a healthy 58 percent profit margin.
• Specialty Retailers, Wholesalers, and Distributors in Ecommerce
  • Vistar, Gumball, and Amazon Business are other examples.
  • In addition to the numerous shipment-based providers online, look locally for vending machine supply and inventory shops, distributors, and wholesalers.

Keep in mind that when you grow, you’ll want to look at wholesalers who can provide you with bigger quantities at a reduced per-unit cost. It’s the advantage and perk of purchasing in bulk: A lower profit-per-unit-sold indicates a lower price-per-unit.

Step 7: Decide where you want to go.

Securing sites that will enable a vending machine company to grow is both an art and a science. Apart from product mix, the placement of a vending machine is the single most crucial factor of its business strategy and potential success. The good news is that, unlike many other companies, vending machines can be picked up and relocated if a site isn’t profitable. When choosing a location for your machine(s), keep the following parameters in mind:

• What is the location of my target customer?
• How close are you to a captive audience?
• What is the location’s and vending machine’s access?
• What is the distance between you and other meal options?

Vending machines are most often found in industrial plants and office buildings in the United States, which means that captive, daytime employees are the primary users of these machines. Micro market locations are mainly found in manufacturing and office buildings. These sorts of places abound in various sections of the nation, providing excellent market potential for newcomers.

If you’re still having trouble finding excellent locations, Robert Patterson’s book The Secret Formula to Getting High Traffic Vending Locations is a good place to start. Also look at VendLoco, a free online location list generator from Vending Connection. It may be worth the investment in the long term at $1.25 per location potential.

Sales, relationship management, and mutual gain are all part of the machine placement process. When it comes to paying for a site, there are typically two options: space leasing or participation location.

• Space Lease: Paying a set monthly payment, rent, or space lease to the owner of your machine space is one alternative. Regardless of machine income, this remains constant. The current fee varies depending on your location and cost of living, but you should anticipate to spend about $50 per machine every month. Don’t sign a lease for more than six months; the site may not be as appealing as it first seems, and you’ll want to be able to move the machine if necessary.
• Vending Machine Participation Site: Some vending machine operators pay a profit-share fee to the location landlord based on machine gross. A 60/40 split, or a 10%–25% portion of vending machine income, might be the result. Although the landlord may already have a strategy in place for approaching this opportunity, go into the meeting with your objectives and desired results in mind.

Remember that a good collaboration is a win-win situation for both sides, therefore work out a strategy that benefits both parties.

Step 8: Verify Legalities & Formalities

Each industry, sector, and company type has its own set of regulatory requirements to meet. Here’s a quick rundown of the procedures and laws for a vending machine company:

1. Legal Entity and Name

• • Find a business name, check the availability of a website, then register your company on the Secretary of State’s website.
  • While it is not legally needed, any firm that is structured properly as a legal entity (such as an LLC) is more likely to succeed. Following our proposed laws and formalities is extremely encouraged, as it will guarantee that you are forming legally, officially, and sensibly.

1. Taxes must be filed.

• • File an EIN: Even if you just have one vending machine, you must file taxes. After you’ve filed your company structure, go to the IRS website and apply for a Tax ID or EIN (Employer Identification Number).
  • Process Sales Taxes: Visit your state’s Department of Revenue website after you have your company registration and EIN information. Proceed to register your business by searching for or selecting “Sales and Use Tax.”

1. Establish a company bank account and/or credit card.

• • Set yourself up for success by taking care of this business requirement as soon as possible. Separating your company and personal finances can simplify your business, taxes, and life, as well as help you to establish good business credit.

1. Permits and Licenses

• • Federal: The federal licensing requirements for a vending machine company are greatly influenced by the products offered.
    • Food/Beverage Service License: A food service license may be required if your micromarket or vending machine sells food and drinks. To learn more about the criteria that may apply, see the FDA Food Business Guide.
    • Vending machine access is subject to compliance with the Americans with Disabilities Act, or ADA, since vending machines are a physical operation placed in public locations. Although the ADA handbook is lengthy, you may get a quick overview of the principles by reading the ADA Small Business Primer.
  • State: A vending machine business’s state licensure is determined by where it operates. Visit get started, go to CandyMachine.com’s Vending Regulations by State page.
  • Local: In order to operate vending machines, your county or city government may require a vendor’s license, a local food service license, a resale license/permit, a vending location license fee, or more; check with your county and city, as well as the local health department, to see what applies to you.

1. Contracts

The contracts that apply to each vending machine company will differ, but here are a couple that you’re likely to come across:

• • A rental agreement should be established to protect all parties involved if a company owner chooses to rent or lease their vending machines, or if a business owner pays rent for vending machine location.
  • A service agreement lays forth the parameters of a particular service between a service provider and a consumer. This is an important document to keep safe with suppliers, customers, and other business associates.
  • Certificate of Occupancy: Depending on the nature of your company and machine’s occupancy, you’ll most likely need a certificate of occupancy (CO). This document certifies that all parties followed all construction rules, zoning laws, and government restrictions.

A company owner may join LawDepot.com for $7.99 per month and have unlimited access to customizable contract templates, such as rental agreements, service agreements, and more.

1. Insurance

Every firm should, at the absolute least, have general liability insurance. Consider talking with your insurance carrier or visiting internet providers like Next Insurance to safeguard your business and personal interests, depending on what you offer.

Step 9: Press the Enter key.

Assistance from the industry, resources, news, publications, and trade associations and organizations abound in certain sectors. One of them looks to be vending. It’s critical to keep on top of trends, technology, and markets in such a continuously changing environment. Here are a few resources that anybody contemplating starting or running a vending machine company should check out:

• Vending Market Watch is a go-to resource for information on the vending, micromarket, office coffee service, and convenience services industries.
• Vending, micromarkets, office coffee service, and foodservice management are all covered by the National Automatic Merchandising Association. Publications, industry statistics, trade exhibitions, an app, and more are all available to members.
• VendSoft is an excellent resource for industry statistics, information, publications, and more, in addition to its patented Vending Management Software.
• Vending Times is a trade journal that covers the vending and convenience services industries in the United States.
• Vending Connection: This site has news on vending machines as well as a Vending Resource Directory.

Advantages and Drawbacks

Every industry has advantages and disadvantages. Consider everything and determine whether the benefits of the industry, the company, and day-to-day operations exceed the disadvantages for you. IBISWorld outlines some of the key benefits and drawbacks of the vending machine sector.

Advantages

• Concentration is low.
  • The vending sector is extremely fragmented and split among nonemployers and small businesses, thanks to the top four operators controlling 6% of the market.
• Startup expenses are cheap, and overhead is modest.
  • Inventory, vehicle fuel and maintenance, and equipment maintenance are the primary recurring expenditures in your sector once you start. Not to mention the fact that anybody can get started in this market for about $5,000, which is a relatively modest investment for any firm.
• Optimistic growth forecasts
  • This sector is expected to expand moderately but positively in the next years, with annual revenue growth of 2.1 percent forecast through 2025.
• Globalization has a low risk.
  • Globalization and foreign competition have put many industries, sectors, and enterprises at risk. However, the vending machine business is not open to foreign commerce.
• Scalable
  • One of the nicest aspects of the vending machine market is how simple it is to start small, run a successful business, and then build up. A vending machine business may be started with a few units and scaled up to hundreds of machines over time.

Disadvantages

• The life cycle is deteriorating.
  • Despite the fact that industry revenue is likely to expand somewhat in the next years, the number of operators is expected to fall significantly.
• Industry assistance
  • There are no tariffs or industry-specific aid in place for this business.
• Changes in high technology
  • Rapid technological development may not be seen as a disadvantage by tech-savvy industry operators, but it does represent a challenge to more conventional firm owners. Many proprietors are forced to shift their hands and operations to stay up with business development and public demand for ease.
• High levels of competitiveness
  • This business is threatened not just by new entrants and increasing rivalry, but also by automation deployed by external operators such as convenience shops, medicine stores, and grocers that stay open late and provide automated checkout for speed and convenience.

Conclusion

Vending machines, like any other company, may be highly successful if you put in the necessary study, effort, time, and money. Vending machines, on the other hand, rely on quantity for better profit, therefore in order for a vending machine company to be self-sustaining, it must have a large fleet of devices rather than just a few. You may be the next vending industry monarch if you focus on location, consumer availability, a good profit margin, product diversity, and machine volume.

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