Have you been searching for an investment opportunity that you can run on a part-time basis and one that does not need any special training? Then you should consider investing in a vending machine business. You don’t have to hire anyone to manage a vending machine as you can do it yourself or ask a member of your household to do it. This saves on labor costs.
Today in the United States, there are roughly 5 million operational vending units. Unsurprisingly, a 2018 report shows that food and beverage vending machines are leading the line. They occupy 56% of the market share. So, if you are looking to start on a business line that’s tested and proven, then you should try the food and beverage product line. You can dispense anything from snacks to soft drinks.
Maybe you are thinking that vending machines only sell sugar stuff like candies and chocolate bars. This is not entirely true as you decide on what foods to stock. So, you can sell healthy choices if you want to. Other benefits that come with a vending machine include scalability and cash-based transactions. You only need one vending machine to start with and it can generate the capital you need to set up another.
As for the payments, customers can’t buy on credit. The machines can only dispense when cash is slotted or when a payment card is swiped. Moreover, a vending machine is simple to maintain. All that is needed is regular restocking and maintenance. After all this, you must be asking, are they profitable? Let’s answer the question below.
Establishing the Profit Index
The National Automatic Merchandising Association (NAMA) estimates that roughly $20 billion is generated in the United States yearly by the 5 million active vending machines. On average, this means that each vending machine barely makes $5 a week. The survey shows that vending machines are not an instant jackpot and so you shouldn’t expect to make thousands of dollars from them.
Most vending machines entrepreneurs think that setting up several machines is critical in generating more revenue. This might be true but it’s necessary to establish your profit index first. Look at it this way:
Setting up a beverage dispensing machine allows you to sell 20 bottles per day on average. If your unit price is $1, this means you’ll be making $20 daily in sales. But suppose each bottle cost you $0.80 – you’ll only make $4 a day. This implies that you’ll be making $28 a week and $120 a month.
But remember, there are a few costs that are tantamount to deductions on your sales. For example, you’ll have to cater for electricity cost if your vending machine is an electronic type. You’ll also have to pay a vending machine professional to inspect and maintain your unit once. Furthermore, sourcing your supplies from afar means you’ll have to incur transportation costs if they don’t offer free shipping.
Steps to Making Money
Since a vending machine can be profitable, it all boils down to the decisions you make before and after setting up the business. To improve your chances of making money, here are key steps to follow:
- Detailed research – When it comes to buying a vending machine, you can buy a new machine and build the business from scratch or buy an already operational vending machine. The latter means having access to immediate and consistent cash flow. If you decide to settle on the former, you’ll have to wait before cash can start flowing.
- Identify a niche – You should identify a gap in the market that you can exploit. If it’s food that you want to sell, go for healthy options. You can also diversify to offer hot options. This decision should be arrived after studying your target audience.
- Moving items – Buyers are always looking for snacks, hot drinks, and cold beverages. So, dispensing such options means more opportunities to make more sales. You can also dispense personal items like OTC drugs, toothpaste, and hygiene supplies. They also move easily.
- Strategic location – You may be selling moving items but fail to generate as much money as you want if your vending machines are not strategically located. You need to set up the machines in heavy-traffic areas like shopping malls, bus terminals, airports, and main streets. You can also set up your business in a school, hospital, an office complex or within a company.
- Extra investments – Though you may not be there all the time, you should hear the grievances and suggestions of your customers. This means investing in the right customer service. You can attach an SMS number or email address on the vending machines that they can use to talk to you.
You also need to invest in the right VMS (Vending Management System) if your vending machine is electronic. This allows you to manage your inventory and monitor your revenue seamlessly. Last but not least, you should invest enough time into the business. You need to be checking up on the machine as frequently as possible.
- Bulk sourcing – When sourcing your products, you should learn to do it in bulk so as you can earn a valuable discount. This allows you to improve your profit index. You also save on transport cost.
- Proper maintenance – No customer likes a poorly maintained or filthy-looking vending machine. It’s a turn-off. You need to clean your vending machine regularly and have it serviced by an expert occasionally. If any repairs are needed, you should learn to respond punctually.
The first and most important startup cost is the cost of the machine. Generally, the price of buying vending machines depends on machine type, brand, size, and customization. On average, you’ll spend $2,000-$3,000 on a mechanical machine and $3,000 or more on an electronic type. Other notable startup costs include:
- Stock – For your vending machine to be operational, you must stock it. At least, you need to budget for the opening stock. What you earn from it can be reinvested into the business.
- Installation cost –If you are installing a vending machine within an existing business such as a shopping mall or a company complex, you may be required to pay rent. This is a major cost you need to budget for.
Without a doubt, vending machines can make you money. You just have to be realistic with your expectations and understand what the market needs. Selling the right items and targeting the right customers is critical in making money. So, it’s a decent business idea for someone looking to generate some cash on the side.