Whether you are looking to purchase your first vending machine or the 100th, we want you to learn some key things you should avoid while building your vending empire.
Starting a business like this could be a great alternative to a traditional franchise or starting a business from scratch, and you may have even arrived here looking for alternatives to make side income and are curious how so many others are earning on semi-auto pilot with vending machines.
Don’t worry… We’ve organized some quick insights on how to avoid risks in a vending machine business. Hopefully what you’ll learn in this article today will help you save thousands of dollars in operational mistakes.
Before we get to that, I want to answer an important question… Why should you start a vending machine business in the first place?
Vending machine businesses have been a standardized industry more or less, since the first one was released more than 100 years ago.
Among other benefits, one of the most attractive parts of this industry to business owners is the low start-up costs. You can buy a used or refurbished vending machine for around $300-$500 and a super fancy pizza making vending machine for around $10,000. In both scenarios it’s a steal, and since you don’t need a huge investment you can grow at the pace you need to with the budgets you have.
If done well, a vending machine business is also much less complex than other types of businesses and simplicity is one factor that can be a bit tricky. Sometimes we believe complicated means better, but as you’ll find in this article, there’s a right way and wrong way to do things.
Beyond these major benefits to become a vending machine business owner, the most valuable factor is the flexibility to set your own schedule. Not many businesses or jobs allow you to do that. Even if you’re the boss!
With all that being said, launching a vending machine business is like any other business in the sense that you have decisions to make.
You will need to find the right machines and products to sell. You’ll need to partner with the right supply chain, find the locations, set up routes and more. A 24/7 operating model might require some work, so if you are not doing the work directly, you also might need to be hiring and dealing with employees and personnel. Depending on the time required, be aware your operating cost might increase.
But instead of telling you what to do, I want to be clear what NOT to do when launching a vending machine business.
1. Are You Clear What Your Operating and Business Model Is?
DO NOT! I repeat… DO NOT start a business you don’t understand. This is helpful for vending machines or any other business for that matter. This can create a huge issue because it will not be clear what to invest in and at when to invest in it.
You may feel inspired to buy vending machines right this moment but you need to answer some questions first like “what are you selling?!”.
You’d be surprised but a lot of newcomers to vending machine businesses think that healthy vending machines are a great offering and money maker if you plan to be selling food. It turns out that’s not true and the numbers have proven it over and over again for the last several years since the emergence of healthy vending machines.
Without doing the proper research and understanding this can create a hot mess for you and will become an increasing headache. Investing in something you can’t really figure out the ROI on is bad news.
2. “The Financials”
Honestly one of the best reasons to start a vending machine business is the financials and potential earnings based on the effort. A close friend of mine calls this the “ROE” or Return on Effort. To actually be able to calculate the business case you want to account for three things.
The Entry Investment:
The first investment is one of the most important things to plan for. Knowing how much you will need to invest within what timeframe while you secure locations is extremely important.
Cost of Operations:
Ok, you got everything running now it is time to actually get some feet on the ground. Calculating the cost of operations can be estimated and through iterations you can actually get closer to the intended business case you will project in this step. If you need help with this, you can contact an accountant to identify operating costs and build it into your projections. Do not forget things like taxes, services, etc.
ROI (Return on Investment):
ROI is calculated by subtracting the initial value of the investment (in this case the cost of machines, spare parts and anything else to get started) from the final value of the investment (how much you actually spent). This will give you something called The Net Return. Then divide the new number by the cost of the investment and then multiply by 100. This will give you your ROI percentage.
Aside from just financial benefits, there are huge advantages to a vending machine business, and these are purely based on deciding what is the type of lifestyle you want to live.
- Scalability and Growth Potential: You can start as low as your budget needs to be, and the business can increase in size and volume overtime. Keep in mind that if you plan to pay for your cost of living from your vending machine business and not just have a side income, you will need to have multiple vending machines at multiple locations.
- Simplicity: Once the machines are set up and in place, you need to make sure they are restocked, functional and that you are regularly collecting any cash or coins. This is where your route planning becomes increasingly important. You want the business to work for you. Not for you to work for the business.
- Payments and Digital Systems: The magic of this business is that you are able to deliver the value to your customer without any human contact. This should be extended to how you are collecting income and revenue. Accepting digital payments can distance you from added headaches of route planning.
- Flexibility and Simplicity: You don’t need a license or regulatory permission to operate a vending machine business. All you need is your ambition to create a long lasting business that grows at your pace.
All these advantages are the reason why hundreds of thousands of people are entering the vending machine industry and getting a lot of value from side income and sometimes creating empires.The warning here is to be conscious of getting in over your head with fixed overhead. You need to spend money to make money. Yes that’s true. But the part they don’t talk about in the phrase is you need to be ready to spend money.
3. Picking the Right Market and Locations
Word to the wise… Once you understand your products and market you need locations and as we all know… Location. Location. Location.
Don’t start your vending machine business until you’re clear where to put your machines. Choosing the right market and locations is a matter of getting the right product for the right audience, meaning you need to answer “who am I selling to and what are they buying and where will they buy it?” early in the business. In a lot of cases your assumptions will be wrong like the “healthy food” example above. Know your customers and the rest gets easier.
Here are some location ideas to consider for your vending machines:
- Locations Nearby Apartments or Complexes
- Schools and Universities
- Health Care Services
- Grocery Stores (this works well if this is a specialty service or item, not something that competes with the products they already sell)
- Shopping malls
- Gas Stations
Ok ok. So we’re talking a lot about the risks (which we should be) but let’s discuss actually being successful with your vending machine business.
Keep an Eye on Profit
Choose an external accountant or get direct insights through technology. You MUST be aware that getting this information is crucial to keep the business running and growing. If you don’t know the actual numbers, there’s no real way to make impactful decisions.
Keeping Stock and Availability
If someone wants to buy, but there is nothing to buy you will lose that customer. You can compare this to a standard store. Sold out is only a good indicator when it happens once or twice. If it’s happening consistently your customers will learn they cannot rely on you.
Really 24/7? Yes! But Consider a Few Things
Yep it is. As long as it’s connected to a power source, vending machines can operate 24/7. The question is if you’re placing them inside, whether or not the location is open. That’s the reason many vending machine business owners try for an outdoor placement. This helps ensure access even when the local or location is closed.
In summary there's a major opportunity in starting a vending machine business, but you need to be aware of the many pitfalls involved in a failed vending machine operation.
If you’re really serious about starting a business and one that earns you income on auto-pilot we suggest looking more into what we can offer you at Cosmic. We created the world’s first and only transportation vending machine that enables you to earn on rentals of e-bikes and scooters.
Since we implement our entire value delivery through a unified and digital system everything is fully automated. All you do is check your bank account and spend your money and time however you want.
We even help you find locations to place your mobility and transportation vending machines.
BUT! And this is a big one… Just as we said above we believe you need to be educated on the subject. So we created the Mobility Academy. It’s a 4 week training and certification program to teach you the ins and outs of mobility as a business and how you can be earning serious income and ROE (return on effort).
Since you made it all the way to the end of the article you will get your first week free with no credit card required.