Start a Vending Business: Essential Guide
Starting a vending machine business has always piqued my interest, so my wife and I started this journey 4 years ago. Since then I’ve spent considerable time researching and “living” the industry, but most importantly doing the work to make sure we stay profitable. If you were searching on how to start a vending business, you’ve come to the right place. We have a lot of articles focusing on various aspects of what it is like and ideas that can help you think about your business in a different way.
So, why did we take the plunge into investing into these seemingly random vending machines? Well, perhaps it’s not so random. Vending machines are everywhere we go, providing convenient access to snacks, beverages, and various products with just a few buttons, a swipe of a card, tap of a card or even digital swipe via Apple Pay or Google Pay. As a passive income stream, this business model seems to offer flexibility and scalability, especially for those who want to be their own boss. Okay, well actually it is semi-passive. We all like the idea of passive income, and everyone always markets passive income, but in reality, we always need to do a little work. The main reason it is passive is that once you fill the machines you can still earn money and not have to stand at the machine and take people’s money and hand them a product. It’s truly an automated retailer, but you still need time to buy the product, stock the machines and update your inventory/accounting system. (More on that later).
After extensive research and being in the business, I’ve discovered that the key to establishing a successful vending machine business lies in its strategic planning, location, product selection, and maintenance. My goal in this article is to share some insights, tips, and practical advice for entrepreneurs like myself, who are considering embarking on this exciting journey.
To help you understand the process and make informed decisions, I will cover various aspects such as understanding the vending industry, selecting the right machines, finding suitable locations, and managing the business, among others. This information will serve as a guide as you prepare to start your own vending venture.
Here’s an interesting statistic
As of 2023 there are over 17,000 vending machine businesses in the United States. You might think that is a lot, but it shows that there is a lot of opportunity and obviously people make it work, right? TIP: Be the last man standing after others quit.
Choosing the Right Vending Machines
When I decided to start my vending machine business, the first step I took was selecting the right type of vending machines. In my research, I learned that vending machines come in various types and capacities which significantly influenced their profit potential.
I started by analyzing my target audience and their preferences. In my case, offering snacks and drinks was the best option, since it catered to a wider audience. So, I decided to purchase combo vending machines that dispense both snacks and drinks, maximizing customer satisfaction and profits. Also, this works well when you try out a smaller location that might not warrant having two machines (i.e. a dedicated snack vending machine and a dedicated drink machine). A combo machine also saves space. The disadvantage of a combo machine is that you can only hold so many drink types, and if that location happens to really like a particular drink you have to come back and fill more often. But, anyway, we recommend filling machines at least once a week so that people see that you are present and that the machine is stocked with a healthy-looking inventory. I believe that if machines look half empty they don’t look as appealing and less appetizing because people aren’t sure if the items are expired or not. (More to come on providing excellent service).
Then, I compared different brands and models of vending machines, considering factors such as:
Another aspect I considered was choosing between new or used vending machines. I weighed the pros and cons, keeping in mind that used machines might require more maintenance, but could save me money upfront. In the end, I decided to invest in new machines, as they proved to be more reliable with longer warranties and better support from the manufacturer. (Read this article here on refurbished machines). I think depending on your comfort level it might be worth considering used or refurbished vending machines.
In conclusion, choosing the right vending machines is not as easy as it might seem. Also, there are actually not that many vending machine manufacturers in the United States. You can also buy machines from overseas (for example China), but I don’t recommend that right now due to the additional complexities of sourcing the machines. With the right machines and proper planning, I was able to set myself up for success in the vending machine industry. (I’ll add an article later that specifically goes over all the different options in buying a machine.)
- Capacity: The machine should have sufficient storage to hold the items without getting jammed or requiring frequent restocking.
- Security: It should be robust and secure, discouraging potential thieves or vandals.
- Ease of use: The machine should be user-friendly for customers and easy to maintain for me.
- Price: It should be within my budget while offering good quality and features.
Selecting Your Product Line
When starting a vending business, one of the main decisions to make is what products I’ll be vending. It’s essential to know my target audience and choose products based on factors like location, demand, and profit margin.
First and foremost, I’ll research the demographics and the needs of the people in the area where I’ll place the vending machines. For instance, if the location is an office area, healthy snack options and hot beverages might be in high demand. I decided to brand the company as healthy and lead with that message, but in the end bend to the customer’s choice on products. In other words, mix with traditional items too (more on this later on the strategy). In summary, we always start with healthy, people get excited, but in reality we have to stock with traditional or unhealthy because honestly and for some might say unfortunately JUNK FOOD SELLS!
Another factor to consider is the competition. In order to stand out, I can offer unique products, which in many cases that is what the healthy products are, or themed vending machines, focusing on organic snacks, locally sourced items, or eco-friendly packaging to create a niche that would help differentiate my vending business from others.
Maintaining a balance between popular items and novelty products is also key. While some clients will appreciate the familiarity of popular snacks or drinks, adding unique options can help attract a wider audience, increasing my sales. However, when you offer unique or maybe less known brands you have to do your job of marketing that item. (We’ll add more later on marketing and talking with the location contact to get the word out). Additionally, I can periodically rotate my product offerings to maintain interest and cater to the changing preferences of my customers.
Lastly, considering profit margins is essential. I will study the cost of stocking each product and its selling price to ensure that I’m generating a sustainable income. Offering a variety of price points can help accommodate customers with different budgets, making my vending business more appealing. You really want to make at least 0.75 to 1.00 per product. Sometimes you can make a higher profit margin per product. (We’ll talk more about ways and ideas to make more money per machine).
Scouting for Ideal Locations
When I first started my vending business, I knew that finding the perfect location was crucial for success. It is essential to scout for high-traffic areas with a good mix of people who can benefit from the convenient snacks and beverages offered by vending machines.
As I scour different locations, I focus on places like office buildings, distribution centers, manufacturing plants, schools, apartment complexes. Hospitals and Shopping Malls can be great locations, but they are harder to secure. I recommend visiting these places at different times of the day to observe busy hours and foot traffic patterns. That way, I can better evaluate the potential profitability of placing a vending machine there.
Tip: Instead of focusing on one home run location, focus on consistency and volume and placing more machines. If you have a long term strategy the business will be successful. Time is your friend if you can afford it.
While searching for the ideal spot, I keep the following criteria in mind:
- Visibility: The vending machine should be visible and easily accessible to potential customers.
- Foot Traffic: The area should have a steady flow of people during business hours.
- Demographics: The location’s demographics should align with the products I plan to offer in my vending machine.
- Competition: Having a look at the existing vending machines in the area helps me ensure there’s enough demand and room for my machine. Don’t be afraid to put yor machine next to an existing one. For example, if you offer healthy products you can put yours next to a traditional vending machine.
- Security: Ensuring that the vending machine is in a secure area where the risk of vandalism or theft is minimized.
In addition to these criteria, I also consider the costs associated with each location – such as rent or commissions that some establishments may require. Negotiating these costs beforehand can make a significant impact on my profits as a vending machine owner. If you can try to get out of paying rent or commissions. (We’ll talk more about ways to get out of it later, and flip the script where they pay you! We have a proven method that works!)
Obtaining Necessary Permits and Licenses
When starting a vending business, it’s essential to obtain the necessary permits and licenses to operate legally. In my experience, this process varies depending on the state, city, and local regulations. But fear not, as I will guide you through some general steps to ensure smooth sailing.
First and foremost, I had to register my business with the appropriate state agencies. This usually consists of filing for a sales tax permit and obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The EIN is crucial for tax purposes, and it helps identify your business as a separate legal entity.
To find out the specific requirements for your area, I recommend contacting your local government office for guidance. (We’ll add more info on this later too)
Keep in mind if you are selling to schools they have requirements on the ingredients of the snacks if it is for students. If it is in a teacher lounge it does not have this requirement. (We can add more info on this later too)
Developing Your Sales Strategy
As I started my vending business, I quickly realized the importance of a solid sales strategy. In this section, I will share my experiences and insights on developing a sales strategy that works for a vending business.
First, I analyzed the target market for my vending machines to understand their needs and preferences. This helped me to select the right products that would appeal to the users of the machines. I considered factors such as surrounding businesses and traffic patterns, looking for locations with higher foot traffic to maximize sales.
In order to provide the best customer experience, I regularly maintained and cleaned my vending machines. I also made sure to respond quickly to service calls and out-of-stock situations. This helped me build a reputation for reliability, which aided in securing prime vending locations.
Lastly, I implemented a pricing strategy by researching competitive prices in the area and setting prices slightly lower than my main competitors. This strategy attracted more customers and encouraged them to choose my vending machines over others. I also offered promotional offers, such as bundle deals or discounts during certain hours, which helped boost sales and increase customer satisfaction.
Managing Inventory and Maintenance
As I started my vending machine business, I quickly learned the importance of managing inventory and maintenance. Efficient management is essential for keeping the machines well-stocked and functional, ensuring customer satisfaction.
For inventory management, I found it helpful to establish a consistent restocking schedule, which I recommend once a week or once every two weeks. To keep track of the product levels in the machine, I use vending software where the data is automatically updated via cell signal. This is way better than trying to maintain a spreadsheet which would be a nightmare. Some of the metrics to track include:
- The machine’s location
- Product names and which coil they are in
- Quantity of each product in the machine
- Restocking dates
By having a detailed inventory record, I can anticipate product demand and avoid running out of popular items or overstocking slow-moving products.
Aside from inventory maintenance, I also focus on the machine’s physical condition. At each visit, I examine the machines for any wear or damage. I make a point to address minor repairs immediately, preventing potential issues from escalating into more significant problems. When necessary, I call in professional technicians to handle more complex repairs.
Periodic cleaning is another vital aspect of maintenance. I ensure that the machines are kept clean and sanitary, wiping down visible surfaces, and cleaning the glass display window. This not only improves the machine aesthetics but also provides a positive impression to potential customers. Your customers don’t want to buy from a raggedy-looking machine. They want to buy from something nice and clean!
By adhering to these inventory and maintenance practices, I ensure my vending business runs smoothly, retaining customers and maximizing profitability.
Start a Vending Business – Financial Planning
Starting a vending business requires careful financial planning, budgeting and an upfront investment. As an entrepreneur, I always make sure to thoroughly analyze my initial investment, equipment costs, product inventory, and ongoing expenses. This will help me create a budget that will guide my vending business towards profitability.
Before purchasing vending machines and inventory, I will research their costs to understand how much capital I need to have at my disposal. Doing so will also help me avoid underspending or overspending on essential resources. (Contact us if you need advice about this)
When it comes to inventory, I need to remain vigilant about remaining stocked with popular products, while regularly reviewing and replacing low-performing items. Furthermore, I make certain to keep track of any fluctuations in product pricing, which can affect profitability.
While establishing a budget, it is essential for me to consider the ongoing operational costs, such as maintenance fees, lease costs (if applicable), and insurance premiums. These expenses will directly affect my profit margins and must be accurately projected in my budget.
Additionally, here are a few significant budgeting aspects I pay close attention to:
- Machine repair and maintenance costs
- Logistical expenses, such as transporting machines and stocking inventory
- Property rental or lease fees (if applicable)
- Legal and licensing expenses
- Marketing initiatives and promotional efforts
By carefully analyzing and accounting for these financial aspects, I will have a more accurate and reliable budget, allowing my vending business to thrive and achieve profitability in the long run.
Measuring Success and Growth Opportunities
As I embarked on my vending machine business journey, I quickly understood the importance of measuring success and identifying growth opportunities. Regularly tracking key performance indicators (KPIs) played a crucial role in this process. Some of the essential KPIs I monitored included:
- Revenue growth
- Operating expenses and profit margins
- Customer satisfaction
- Machine uptime and maintenance costs
By analyzing these KPIs, I was able to assess the health of my vending machine business and make informed decisions to drive growth. For example, customer satisfaction played a significant role in developing loyal customers and creating word-of-mouth referrals. I conducted regular surveys to gather feedback on product selection and overall experience. This information helped me make adjustments and ultimately improved my business performance.
As my vending machine business expanded, I also kept an eye on new growth opportunities in the market. I discovered that strategic partnerships with other businesses could lead to mutually beneficial collaborations; for instance, placing my vending machines in their spaces significantly boosted my customer reach. Here are some of the potential partners I approached:
- Shopping malls
- College campuses
- Transportation hubs (airports, train stations, etc.)
- Gyms and fitness centers
- Large office complexes
Overall, the process of measuring success and identifying growth opportunities was an essential aspect of my vending machine business journey. By regularly monitoring my business performance and seeking new opportunities, I successfully expanded my vending machine empire and built a sustainable and profitable enterprise.
A Great Vending Machine Business Website is VITAL!
You must have a great website for your vending machine business that is optimized for SEO, and you must register your business with the right directories, one that you CAN’T miss. We’ll help you put one together. This is actually how I got a lot of leads from. We’ll talk more later on very specific strategies on getting new accounts.
Who is this article for?
This article is for anyone who wants to start a vending machine business in Ohio, Texas, Florida, California and other great States. Where are you from? Let us know so we can help you! Let’s dialogue. What challenges are you facing? What questions do you have? We would be happy to help.