How to Start a Vending Machine Business
A Step-by-Step Guide to Your Launching Your First Machine
In This Article
A vending machine business?
Making money off the vending machines that you...get a soda out of?
Let’s be honest: starting a vending machine business may not sound like the most exciting entrepreneurial pursuit.
Buying items in bulk.
Stocking the machine.
Collecting change and weathered bills.
Managing machine repairs.
But a vending machine business has some profitable upsides.
Starting a Vending Machine Business
Take Jaime Ibanez’s story for instance.
After graduating high school in 2018, he spent $2.5k on a refurbished snack machine and placed it at a local barbershop in Dallas, TX. Today, Jaime owns 35 machines that gross $10k in revenue every month. His best location earns him $2.8k while his worst sometimes only sees $200.
That’s some serious profit that's largely passive.
Profitability of a Vending Machine Business
What’s more, the vending machine industry is growing.
- The industry is expected to earn over $26 billion in 2021.
- U.S. vending machines collect $22 billion in bills and coins each year
- 70% of Americans use at least one type of vending machine every day
- the National Automatic Merchandising Association (NAMA) estimates that the average American spends $62 on vending machine purchases annually.
- The vending machine industry isn’t owned by large corporations — no single entity owns >5% of the market. What’s more, more than 75% of American vending machine companies have 3 or fewer employees.
Before we dive into how to start a vending machine business step by step, let’s take a deeper look at the advantages and disadvantages to help decide if it's right for you.
Advantages of a Vending Machine Business
Low Startup Cost
While many startup ventures cost tens of thousands to get off the ground, you buy a vending machine and inventory for under $3,000.
With responsibilities of mainly restocking, collecting money, and ensuring the machines work, vending machine operators have a flexible work schedule with the ability to set their own schedule.
Compared to other business ventures, a vending machine business is relatively simple.
Once a machine is bought, stocked, and placed at an ideal location, all you have to do is maintain the machines on your own schedule.
Quick to Earn Cash
With a vending machine business, you can see a return soon after you open the machine for business.
No Limit to How Much You Can Make
There’s no limit to the amount of money you can make with a vending machine business.
If you have 30 machines spread across the US that bring in $300 a month per machine, you’re well on your way to a multi-million dollar business venture.
Disadvantages of a Vending Machine Business
A vending machine business is not without its disadvantages. These include:
Depending on what type of vending machines you purchase — new, used, or refurbished — you'll have to maintain the machines if they break down over time.
If you’d rather repair them yourself, this can become time-consuming, taking your attention away from other entrepreneurial pursuits.
Vending machines need electricity. If the power goes out more than once, it can affect your return on investment. there's no power or water available at the location, then it won't work properly.
How to Start a Vending Machine Business in 6 Steps
If you’re excited about the prospect of starting a vending machine business, here’s how to get started step by step.
Step 1: Create a strategy
The first step of starting a vending machine business — and any business endeavor — is creating a business strategy.
In this business strategy, it’s important to think both short term and long term as you answer the following questions:
How big is the need for a vending machine in your local area?
Who are your competitors? What do they do well, and what could they be doing better?
Are there any voids in the marketplace that you could fill? For example, maybe your competitors don’t offer any healthy snack options. That could be an opportunity.
How active or passive will your vending machine business be?
- Buy one or two machines and keep things simple?
- Buy an existing vending machine company?
- Lease the machines?
- Follow a franchise model?
Determine Business Structure
A business structure, or business entity, is a way to classify your vending machine business.
Business structures dictate taxes on your business, but they also help protect your business from liability issues.
Here’s a rundown of the major business structures for your vending machine business.
- Sole proprietorship: One person is responsible for profits and debts.
- General partnership: Similar to a sole proprietorship, a general partnership splits all profits and debts between two people.
- Limited liability company (LLC): A hybrid of a partnership and corporation, it allows the business owner to have complete control over the business but have protections like a corporation.
- Corporation: A corporation structures a business as separate from its owners.
How much money will you need to start your business?
How will you fund the upfront investment?
How much do you need to make to consider it a profit?
What products will you sell?
How much of a profit margin are you going to see with these products?
Where will you get them?
Where will you keep your inventory?
How often will you check on the machines? Once a week? Once every other week? Once a month?
Are you going to be the only worker, or will you need to hire a second person for help?
The IRS stipulates that if you make more than $600, it must be reported.
Will you create an entity, such as an LLC, for your business?
How will you keep track of your finances, both spent and earned?
Who will do your taxes?
When will you do your taxes?
Answering questions like these at the beginning of the process can help ensure that you maintain your vision throughout the duration of the business.
Step 2: Buy a vending machine
Next, it’s time to put that plan into action by obtaining your vending machine, whether it’s one or a few.
The three types of vending machines that you can choose from.
We’ll look at each one in-depth next.
Used Vending Machines
Cost: $1 - $2,000
While a used vending machine is the cheapest option and easiest for those entrepreneurs with a tight budget, keep in mind it will likely be the most costly with repairs in the long term.
Cost: $1,500 - $3,000
While a refurbished vending machine is also used, it’s also considered in good condition.
It may need repairs, not nearly the amount or cost of repairs for a cheaper and used vending machine.
Cost: $5,000 - $6,000+
A new vending machine is not previously owned and will require the least amount of maintenance to get it up and running, but it will also cost the most.
If you are looking for items such as a touchscreen, this will be your best route.
Where to Buy Vending Machines
After you determine which of the 3 types of vending machines you’re going to utilize, the next step is to find those vending machines.
Here are 5 different vending machine companies, listing sites, and discount stores in the United States that you can purchase a vending machine from.
- A&M Vending Machine Sales
- Facebook Marketplace
- Local Craigslist
Step 3: Find and Secure a Location
Location, location, location.
A location can make or break your vending machine business.
If there is little foot traffic near a brand new vending machine, it could be a financial loss. That’s why it’s so important to choose your location wisely.
Consider locations that:
- Are well lit
- Have a consistent flow of foot traffic
- Sheltered from weather elements (rain, sun, snow)
Some of these options include:
- Inside a store, like a popular gas station
- Mall/Shopping plaza
- airport/train station
- Near a Food truck
Once you’ve made a list of the ideal locations for your vending machine, the next step is to speak with the property owner of each location.
Be respectful, but also be persistent. Keep in mind it may take many calls to make a deal.
You can expect to pay the owner a commission of anywhere 10%-25% of gross sales to drive home the deal.
Step 4: Stock your vending machine
By now, you have your vending machine business plan, at least one vending machine, and a location in mind.
Next, it’s time to stock your vending machine.
What will it include?
It depends on your business plan. Your options include:
- Traditional Snacks/Beverages
- Healthy Snacks/Beverages
- Specialized Products, like skin care or electronics
- And more
Step 5: Find a quality supplier
Once you know exactly what you’ll be offering, the next step is to find a supplier.
You can do so at places like VendingConnection.
Keep in mind that a quality supplier will help you keep your margins low, but isn’t the most crucial role in stocking the machine. You will need to observe buying behavior at each vending machine site because each will have a different clientele.
Vending machine owners often overbuy for their vending machines and then find out an item isn’t popular with their customers.
Because of this, take the time to observe demand at each machine before buying in bulk.
Otherwise, you can lose a lot of money — money that was meant to be profit — on the wrong supplies for your vending machine business.
Step 6: Maintain the Machine
Maintaining a vending machine is a key part of your vending machine business.
If your regular customers think of your machine as inconsistent, then they will stop buying from you.
- Take the time to do regular restocks.
- Clean the machine and keep it looking presentable.
- Use marked test coins to see how your machine is functioning.
Most machines can benefit from screws being tightened from time to time, and visiting your machines to test them will help you identify areas to fix.
Once your vending machine is placed and up and running, keep in mind the administrative aspect of your business plan — tracking income and expenses not just to determine a profit margin, but also for taxes.
The Bottom Line: How to Start a Vending Machine Business
Whether you are an active entrepreneur looking for your next venture or someone looking for additional income, starting a vending machine business can be profitable — if done the right way.
The right way involves creating a business strategy and sticking to it.
But don’t stop with one vending machine. Don’t stop with a vending machine business, either. Commit to learning more about the art of entrepreneurship so that you can maximize your profit now and into the future.