Vending machines are everywhere.
You probably find yourself wandering to those snack machines in the break room to grab a Snickers bar. But if you take a deeper look, you’ll be surprised to learn that the vending machine industry is big business.
If you want to be your own boss and have been searching for a new business opportunity, then take a look at starting a vending business. It requires little special skills or training and can offer great profit margins.
But why should you start a vending machine business?
The vending industry is an attractive option for new business owners for a variety of reasons. The low startup-costs, low involvement, low risk, flexibility, and potential for growth are why this business idea is growing in popularity.
With the right placement, the right location, and the right products, a vending machine can help you earn passive income.
But before you decide to buy a vending machine and stuff it with snack foods, here’s what you need to know.
Before you venture into a vending machine business
Starting a vending machine business can be a lot of fun. After all, you’re buying a vending machine and stocking it with delicious snacks for people to purchase. But like any new business venture, you must plan beforehand if you’re going to build a successful vending machine business. Here’s what you need to look at before you start.
1. Understand your personal financial situation
Before getting into business, you need to financially plan. How much can you afford to invest upfront? With any new business, it will take time to become profitable, so it’s important to understand your personal financial situation. This way you’ll be better equipped to seek the right kind of small business financing or ride it out until you’re profitable.
2. Pick a market
Do your homework by visiting retailers, shopping malls, business centers, and other public places with vending facilities to decide what you want to focus on. For instance, are you focused on healthier snacks and foods, or are you looking to provide a more standard snack and beverage service? Maybe you want to switch it up and do something completely different from food, like offering hot beverages or technology.
Whatever it is, answering these questions will help you focus on getting the right equipment and finding the right location.
3. Be realistic
Finally, set realistic expectations about profits, time, and costs. The vending business is attractive for its relatively low startup costs, but in the beginning, you will have to commit some time to stocking and maintaining inventory, and periodically collecting money from each machine you own.
To start a profitable vending machine business, you should consider your target market, choose the location, find the right machine, and stock it with inventory that meets your market’s demands.
5 steps to starting a profitable vending machine business
Any advantage or insight you have on vending machines will help you make fewer mistakes in this niche business. The more knowledge, the better. For example, you may want to reach out to the owners of an existing vending machine company to learn more about the vending business. They could be a great resource, especially if you’ve identified an area you want to capitalize on.
Here are some considerations to be mindful of:
1. Consider your options
When people think of vending machines, they think of the traditional snack and soda machines. However, many more options exist and although various vending machine goods can be enticing, it’s best to start out with one or two machines dedicated to addressing a specific market.
Three types of vending machines to consider include food and beverage, bulk, and specialty.
Food and Beverage
By far, the most popular variety of vending machines is food and beverage. According to Vending Market Watch’s 2018 annual report, food and beverage vending machines stocked with snacks, soda, and candy make up the majority of the vending market share in the United States.
Food and beverage vending have been evolving in recent years. Newer vending machines and micro-markets (i.e. a self-serve kiosk people purchase fresh food and beverages from) are offering healthier vending services.
You can get a machine that offers only drinks, only snacks, or a combination of both. You can also choose to purchase different types of machines for one location or place one kind of machine in multiple locations.
Regardless, you need to target a specific niche, like healthy snacks and beverages, or even fresh food. Customers identify with a targeted product.
For instance, if you place your food and beverage machine at a gym, then it’s wise to stock it with protein bars, shakes, sports drinks, etc. Your sales will rely on where you place the machine and the type of products you want to sell. Learn more about the local food and beverage market demand, and stock your vending machine with the appropriate products.
Bulk vending machines include items like stock gumballs, stickers, toys, and novelties. This type of vending is a separate segment of the vending industry and different from full-line vending (i.e. snacks and soda). It involves different products and strategies.
The sale of bulk items has low associated costs, so it can be more cost-effective than other types of vending machines. If placed in the right environment (i.e. an amusement park), then that gumball machine can provide a secure, reliable, passive income. It offers great potential for long-term profitability with little maintenance.
Sports arenas, airports, car shops, and malls often have machines that offer items like tech accessories, coffee, or other specialty goods.
Here are some examples of what specialty vending looks like:
- Hot beverages: Coffee or hot beverage vending is great to include in corporate break rooms, universities, and conference centers.
- Retail: The essential travel items of today’s tech era can make this a great option, especially in places like subway stations or airports. Phone chargers, headphones, sleep masks, and neck pillows can be lucrative vending products. You can also offer luxury products like watches, bracelets, and other accessories. Inventory may be costlier, so do some market research before going this route.
- Toiletries: Individually packaged toiletries (i.e. detergents, toothbrushes, toothpaste, etc.) can make great vending products depending on the location. The ideal spot for this would be a boarding school or university dormitories and laundromats.
Once you’ve decided on what you want to sell, you need to consider where you’re going to sell. As with many business ventures, location is everything.
2. Location, location, location
When you decide on the specific target market you want to focus on, the next step is deciding on your vending machine’s location. This is crucial to position yourself for profitability.
Here are some location ideas to consider for your vending machine:
- Apartment complexes
- Schools and universities
- Hospitals and clinics
- Grocery stores
- Shopping malls
Ideally, you should try to place your machine in an area with foot traffic.
Wait, don’t forget about state laws
Different vending regulations also exist depending on the governing state. You can look up your state’s small business regulations online or work with your local municipality to navigate those laws. Each state will have different rules, regulations, and restrictions about what products are allowed to be sold in specific locations.
3. How can I find a vending machine?
You can find a vending machine with a simple online search. Talk to local and national suppliers to get an idea of the different prices and offerings. Don’t forget to consider inventory costs when looking at vending machine prices — since that can dictate your profit margins as you grow.
Vending machines now come with a wide range of special capabilities.
Some of these state-of-the-art features include:
- Credit card reader functionality
- Large bill processing capability
- Touch or voice accessibility
- Interactive screens
Some vending machines have adopted special features to stay up to date with technological and societal trends. If these features fit within your budget, they could help you reach more customers and better serve your demographic.
4. Stock your machine
When you’ve found your ideal type of vending machine, you obviously have to stock it with inventory to sell. You can get pretty creative in your product selection to boost sales, but pay attention to local and national trends as well as economic reports to help you spread out those products.
For instance, the trend now is to go after healthy vending machines to offer healthier food, beverages, and snack options. It may not be smart to offer chips and soda. You may be better off with a vending machine that includes water, coconut water, and granola bars. Factor in local demand before deciding on what items to stock in your vending machine.
5. Will I need to finance this vending venture?
One of the most attractive aspects of starting a vending machine business is the fact that it doesn’t require nearly as much startup capital as other types of businesses. You don’t need a building or office space. Other than a vehicle to service your route, no other equipment or machinery is required. You just need to spend on vending equipment and inventory to make this happen.
Other financial advantages of starting, owning, and operating a vending machine business include:
- Scalability: You can start with a few machines and expand your portfolio over time.
- Simplicity: Once the machines are set in place, you just need to maintain and restock them as needed (and collect your proceeds, of course).
- Payment-upon-purchase transactions: Money owed to your business does not exist (i.e. accounts receivables), unlike many other businesses. Buyers will pay with cash or credit card, so revenue is immediate.
- Flexibility: You can easily train your spouse or children to help with purchasing, stocking, bank deposits, accounting, and more
All these advantages are why many are entering the vending machine industry.
Succeeding with your vending machine business
The vending machine business drives billions of dollars globally each year. With the right market research, informed decision-making, and entrepreneurial energy you can easily grow your business operations.
Start with a specific target market and one or two vending machines to learn your niche inside and out. Then continue building from there. Invest in tools to help you operate your inventory remotely.
Most importantly, don’t forget to invest in providing exceptional customer service (consider a customer help line) to help you carve out a loyal market for yourself. This will help differentiate you from another vending business, even if you own just one.
Once you take all the steps mentioned above, you can generate passive income sooner rather than later.