Vending machine businesses have long been a reliable source of income for entrepreneurs of all stripes. The low startup costs associated with setting them up coupled with the passive income they provide have made them a go-to business idea for anyone looking to generate a consistent and hassle-free profit.
But what exactly are the steps involved in starting a successful vending machine business? This article will provide you with an in-depth answer to that question and walk you through the process of getting your own vending machine business running.
Why Start a Vending Machine Business?
There are many reasons to consider starting a vending machine business. As a matter of fact, the advantages that the business offers are numerous and unique to the vending machine industry. Here are some of the benefits that you can expect from this small business venture:
- Low initial investment: As mentioned, the startup costs involved in setting up a vending machine business are relatively low. Operating a vending machine doesn't require staff, which means new business owners won't incur any wage expenses. Moreover, you don't have to pay high upfront rental fees for a physical store. You can also expect low monthly operating costs since vending machines consume very little power.
- Easy to manage: This is one of the main benefits that make operating a vending machine such a great business opportunity. Managing a vending machine doesn't require any know-how and the maintenance requirements are very simple. You can be your own boss and manage your business on a part-time basis if you want to.
- Consistent cash flow: Unlike any other type of business, a vending machine can operate 24/7. Depending on the location and foot traffic in the area, it's possible to generate robust cash flow throughout the year.
Now that you're familiar with the advantages that vending machines can offer, let's delve into how you can start your own vending machine business.
Steps to Starting Your Vending Machine Business
Like any venture, starting a vending machine business requires a coherent strategy and a plan on how to execute it. The sections below will outline the necessary steps that you need to take to get your vending machines up and running.
Create a Business Plan
The first step of the process is creating a business plan that clearly defines your goals, the resources at your disposal, and the operating framework of your business. Here's a brief overview of what your business plan should consist of:
- Executive summary: While the summary generally appears at the beginning of the plan, it is the last thing you should write. Its purpose is to provide a concise and optimistic overview of your business. It should highlight the most important information that you want your business plan to convey.
- Business strategy: This part should clearly describe your strategy and outline how you plan on generating revenue. In the case of vending machine businesses, this is where you should specify the type of products you want to sell, the legal structure of the company, a breakdown of resource allocation, and the sales milestones that you aim to achieve.
- Industry analysis and market research: This section needs to provide an industrywide overview of the vending machine business. Some key points to address here include the size of the vending machine industry in dollars of sales per year, your main suppliers and competitors, a growth forecast, a prevalent pricing model in the industry, and whether the market is expanding or contracting.
- Operation plan: The operation plan should detail the processes you need to implement to achieve your goals. This should cover everything from how products are procured to the maintenance requirements of each machine.
- Financial projections: In this section, estimated financial data is used to forecast the potential income and expenses associated with running a vending machine business. This part of the business plan should include your financing options, startup expenses, sales forecast, the cost of goods sold (COGS), estimated operating expenses, estimated cash flow statement, projected profit margins, and a break-even analysis.
Legally Form Your Business
After creating your business plan, the next step is to put your strategy to action. This starts with forming a business entity. First, pick a short, simple, and catchy name for your business. You may need to check with your Secretary of State to ensure it's not taken by another business. You'll want to take your time with this, as your name will help set you apart from your competitors.
Next, you need to form a legal business structure and create a business bank account. For your legal structure, your main options are a sole proprietorship, C corporation, partnership, and limited liability company (LLC). Most business owners prefer LLCs due to their simple creation procedure and the high degree of asset protection they offer.
Once you've set up your legal structure, the next step is to secure the applicable licenses. While the procedures and requirements might vary from one jurisdiction to another, some states require a vending machine license. Make sure to check your state's regulations to get a better idea of how to obtain the necessary licenses.
Find Locations for Your Vending Machines
Finding the right location for your vending machines is essential for the profitability of your business. Naturally, you should narrow your options down to areas with high traffic and little competition from other vending machine operators. Here are some machine location ideas you should consider:
- Apartment complexes
- Office buildings
- Shopping malls
Keep in mind that you're going to need permission from the property owners to place your vending machines on their premises. In some cases, the contract you sign with the owners might also stipulate a revenue split between the two parties.
Purchase Vending Machines
Now that you have a location in mind, it's time to buy the vending equipment. There are a few factors you have to take into account when buying a vending machine. The first thing you need to make sure of is that the vending machines are equipped with a credit card reader. Credit cards are more ubiquitous than ever, with over 60% of the U.S. population carrying at least one credit card. As a consequence, it's paramount for your business to accommodate credit card payments.
The other consideration relates to whether you should opt for a new vending machine or a used one. Each option comes with pros and cons. Used vending machines are cheaper and might be the ideal choice if your budget is tight. Having said that, the drawback of used machines is that they're more likely to malfunction or become outdated quicker than you expected. On the other hand, new vending machines typically come with a warranty and may boast advanced features, such as touch screens and alarm systems to protect against vandalism. However, you should expect to pay substantially more for new equipment.
Install and Manage Your Vending Machines
Once you have your vending machines in hand, you can install them and stock them with products. The logistics of installing a vending machine are fairly straightforward. Moreover, little effort is required on your part, as vending machine servicing is generally provided by the manufacturer who sold you the units.
After installing the vending machines, you can begin the monitoring and optimization processes. Establish a maintenance schedule to ensure the machines are always working properly and keep track of which products are selling the best. Make sure to stock up on high-selling products and experiment with healthy snacks, candy and/or gumballs, and energy drinks to increase your chances of finding additional hot-selling items.
Monitor Your Business Finances
Operating vending machines involves significant income and expense items flowing through your account. A proper business finances management system is necessary if you want to stay on top of your financial affairs.
Skynova's accounting software is a good example of such a system. This all-in-one solution features everything you need to keep track of your income, expenses, and taxes. Using this software, you'll be able to record the sales of products from each vending machine, track supplier payments, and generate annual reports with the click of a button.
Grow Your Vending Machine Business
Once your business is up and running, your focus should shift to exploring growth opportunities. Expand your reach by putting up leaflets and fliers around the locations of your vending machines and reinvest your earnings to add more units in new locations.
It's important to note that scaling your business is not something you should do on a whim. Generally speaking, you should only consider scaling up when your business is generating strong cash flow and consistent vending machine sales over a long period of time.
Manage Your Vending Machine Business Finances With Skynova
While managing a vending machine business is relatively easy, keeping track of every financial movement can be challenging at times. Luckily, Skynova's accounting software is here to handle all the hassle for vending machine business owners. Head over to our product section to learn more about all the features and functionality you can expect from our all-encompassing accounting and financial solutions.