If you think that starting a vending machine business and running it is easy money and you will be making a six-figure income with four hours a week of work, don’t waste your money. If you’re only looking to work a few hours a week after securing a few locations the vending business allows for it, but your income is directly tied to how many and the quality of accounts you have. It is possible to make a in the hundreds to low thousands a month with this amount of time given the right locations.
The vending machine business is a lot harder than it looks because of all the problems that can and will happen. If you plan on running this business part-time you may want to limit yourself to 20-25 (or fewer) machines depending on the distance. If you can make the business work at this level part-time the next hurdle is getting from 25 to 50. Less than 50 and you have more that part-time effort but probably not enough profit to do full-time.
The vending business is quite popular with people because of the perceived passiveness (meaning you don’t have to make the sales directly) but this business can get quite expensive if you don’t know how to troubleshoot, repair, and replace parts and machines. I’m not saying that if you are not handy to stay away from this business, but after $75 service calls, you will probably try to learn pretty quickly.
Many people have tried to get started and eventually fail at vending. In the beginning, many people are mainly concerned with a few basic things like; what machines to buy, what locations to get and where to buy products.
There is a lot more to it and it is a business, but there are going to be problems (that is what makes a business, solving problems) A few of the struggles include; lost money, machines breaking down, complaining clients. All in all it’s a great business, make no mistake there is a lot of hard work that goes into making it successful (this is true for any business by the way).
For ease of record keeping, use a separate money bag for each location. This will give you the time after you have services the vending machines to tally the revenue for each unit and update records. While a little extra time is needed to do it this way, you will be able to track sales trends and make better management decisions.
Servicing the Equipment
When servicing your machines, don’t strive for the quickest time for getting in and get out. While it’s nice to walk in, fill your bags with money, refill product and go home, that is rarely the case. Many times you will find that staff will chat with you and tell you of any problems or recommendations for products. Who are you to turn down free advice on what products to stock? That is easy money. In addition, talking with staff builds the relationship on the chance that another vending machine operator tries to take the account away.
The question of whether/how much insurance your vending machine business will require varies from state to state and also how you plan to operate. Keep in mind though that most large vending accounts will not let you in the door unless you carry at least $1,000,000 of liability insurance which should cost about $50 bucks a month.
In most states, you will need permits to run your vending machine business. Potentially, you will need to register your business name with the state and obtain a sales tax number. In addition to that you may need to obtain a city business license for every city that you have a vending machine in.
Until you know for sure, assume $50 – $150 for the business license, even for bulk vending machines and many cities require a per machine rate and you will place a sticker to place on that machine showing that it is licensed. Check with your local business development office to be sure.
One often debated question in the vending business is whether or not to use a contract with a location owner. My opinion is that a contract is a waste of time and will just prolong the inevitable if a customer is wanting to change vendors. Contracts are not going to help you if your service is poor or machines break down. If you avoid these two problems, the account typically not want to get rid of you and take a chance on someone that could be worse. If a location owner wants a vendor out, they will move the machines out themselves or they will just stop from buying. Why risk damage to your equipment? Many times the reason for changing a vendor is due to poor service, but there are cases of the owner putting in their own machine.
The only time I would consider using a contract would be for a large account for the exclusivity but they will tend to be in the driver’s seat anyway during the negotiations and may balk at the mention of a contract.
Depending on your location commissions from vending operators across the country range from 0% to 40%. Many locations are happy to have someone dependable to provide snacks and drinks for employees at reasonable prices and reliable service. Others though want to be just reimbursed for the electrical cost or provide money for a staff fundraiser while others know they have a high-traffic location and they want a piece of the sales.
Never be the one to bring up commission when discussing your vending because then the account will expect it and is money out of your pocket. If the account brings up commission take the angle that by paying a commission raises your costs which impacts the ability to provide low prices, newer equipment and more frequent service. Hopefully you don’t put yourself in a situation where you are so desperate to get a location that you get into a commission commitment that you later regret. Commissions will not assist you in getting and keeping accounts, only great service at a reasonable price will. That being said, unless it is a really good location, I would recommend giving no more than 5%-10% and stipulate a sales threshold before paying the commission. Some locations that are high-traffic such as schools and tourist related locations typically require high commissions because there really isn’t any benefit to them if you are there rather than providing additional income through rent and can fetch up to 40% of sales. Your call whether it is worth it, but that is a huge amount from your profit margins.
Flat fee commissions are an arrangement that you should avoid at all costs as you are taking all of the risk. In this arrangement, if sales are slow you could end up losing money due to the commission structure.
Be careful when looking at the so-called business opportunities promoting vending machines. While the sales guy at the 800 number is very convincing, that is his job. Trust then verify. There are a lot of people out there in this industry who would love to take your money.
A few of the things to watch out for include:
- Equipment – Many companies are selling old, poor quality or obsolete equipment that are more expensive to repair than replace.
- Locations – Sometimes the locations offer very little volume while some guarantee high commissions that never materialize but you pay a commission to the company. Also the location is about to change to a new owner and you will quickly be out when the new owner comes in.
- Product – In some cases you are required to buy all your product from the company at an inflated price.
Keep in mind that the United States is pretty saturated already with vending machines. Anyone making outrageous claims should be looked at skeptically.
Always remember that starting a vending machine business, the servicing the machines are but a small part of what you do on a day to day basis. Great service, record keeping and building relationships with location owners more about what you will deal with every day.