Do you want to start a vending machine business on your own? If YES, here is a complete guide to starting a vending machine business for FREE with NO money and no experience plus a sample vending machine business plan template.
Consumers mostly settle for convenience in their purchases, this means that rather than walk to a retail store for a snack, they would prefer to use a vending machine. This is especially why most vending machine operators are constantly coming up with niche ideas that would be of convenience to the consumer while making the operator money in the process.
What is a Vending Machine?
A vending machine business is a retail business that does not require face-to-face interaction with customers and can be run for 24 hours a day depending on the location.
This business is one that offers operators flexibility, because it can be tailored to suit the lifestyle of the owner, thereby creating a balance between work, life, and family. Entrepreneurs can also go into other businesses, while others can decide to make it a part-time business venture.
A vending machine dispenses items such as beverages, snacks, lottery tickets, alcohol, cigarettes, tattoos, toys, candy and so much more. There are very strict laws regarding the sale of alcohol and cigarettes through vending machines due to concerns regarding underage buyers.
In the UK for instance; cigarette vending machines have been banned, and in Japan, Germany, and Italy, age verification has been made mandatory.
What Does It Take to Start a Vending Machine Business?
Before starting a vending machine business, there are certain questions you would need to answer, so as to get an idea of what you intend to achieve. The questions are:
- Do you intend to go into the business as a part or full-time owner?
- Will you be a sole operator, get into a partnership with someone, or buy into a franchise?
- How much capital is needed and how much is available and where you would need to source finances for the business?
- What your goals are, short, medium, and long term?
- What kind of machines would you need to get? Would they be new or used?
- Are you going to buy an existing route or start afresh by securing your own routes?
As an entrepreneur, you must be aware of existing policies and laws regarding the product you intend to go into. This is especially pertaining to your location.
For instance; most beverage and snack vending machines are being pulled out of elementary schools in the united states, so if you intend to locate your vending machine in an elementary school, you would need to think of healthier food or products that are not consumables.
Steps to Starting a Vending Machine Business for FREE
1. Understand the Industry
According to a market research report on Vending Machine Operators, the industry has revenue of $8 billion to $20 billion and has an annual growth of 0.7%. The number of operators in the business was 24,110; with 65,137 people being employed.
Interesting Statistics About the Industry
According to the United States Bureau of Labor Statistics, 70.5% of industry establishments consisting of sole operators, partnerships, small businesses, and medium-sized companies employ less than 5 workers. These statistics cover small, medium, and large-scale operators and franchises.
Those operators who are into generic snack and soda vending machines have seen their revenue decrease even though beverages and snacks still lead in the vending machine industry because customers have changed consuming priorities to wanting healthier snacks and products.
An industry survey reports that 83% of vending operators have requested from customers requiring healthier products. This customer-consuming change will keep the industry from growing as it should, and expanding aggressively.
The vending machine operators in the United States in 2015 have been characterized by a moderate level of market share, with three top operators taking 46% of the market share. Small-sized operators on the other hand with a revenue range of under $ 1 million, make up 51% of the industry’s total operations.
According to the National Automatic Merchandising Association (NAMA), only 18% of vending machine operators make between $1 million and $5 million yearly.
This is as costs of operation have continued to rise, and the operating environment is more favorable to small and large vending operators, while the medium-sized operators with $5 million to $10 million in sales have lost more of their market share.
In other countries such as Hong Kong, Vending machines were introduced due to high labor costs and limited space, with the majority of the machines being stocked with drinks or snacks. Niche ideas have been for mobile phones and cameras, umbrellas, and so on.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographics of vending machine users depend on the location of the machine, and the products offered by the machine. For example; gumballs vending machines are likely to cater to the needs of children and young adults.
Coffee vending machines will cater to young adults and adults of whatever sex, while of generic snacks and drinks will likely cater to almost all age groups except those who are extra health conscious.
3. Decide Which Niche to Concentrate On
Majorly the similarity across operators of the vending machine industry is the machine itself, regardless of the peculiar product the machine will dispense. This means that the niche services that will be offered by the machine, depending on the owner of the machine.
This is of importance in this trade, especially as it is an industry that is limited only by the ideas of the entrepreneur. Furthermore, it is a full niche industry that continues to evolve as more ideas on what the vending machine can dispense is brought to the fore.
For example, there are vending machines that dispense food but have niche ideas where some entrepreneurs dispense only healthy foods or drinks only for health nuts. Other niche services are:
- Vending machines that dispense work tools in manufacturing industries
The Level of Competition in the Industry
Anyone can start a vending machine business; it isn’t financially tasking to start, as you can purchase a used vending machine even that of a popular brand at a cheap price, and still get the most out of it. The vending machine business doesn’t require any expertise or know-how, and any serious-minded entrepreneur is likely to make a good profit out of this business.
As a result, for those who own one or a few vending machines within the same locality, operating costs will be minimal. This means that the owner of a few or even one vending machine can compete with those that have several vending machines in different locations.
The leverage in the vending machine business for any competitor is in strategically placing the vending machine at a location that has the right amount of traffic, as well as ensuring that the vending machine has the right product for the traffic.
4. Know Your Major Competitors in the Industry
In any business, there are always brands that stay ahead of the rest. These brands might not all use the same strategies and approaches in their businesses, but the basic strategies regarding the four marketing Ps of publicity, product, pricing, and place for the vending machine business might be the same somewhat.
Therefore there are several well known brands in the vending machine business that have gone ahead to set a great pace for others to follow. Here is a list of the popular brands in the vending machine business:
- Fresh Vending
- HeslthyYOU Vending
- Healthy Vending
- A-United Marketing Vending Machines
- Alco Checkpoint Breathalyzer Vending Machine Co.
- DVDNow Kiosks Inc.
- Glamour Nail
- Healthier 4U Vending
- Naturals2Go Healthy Vending
- Red Hot Vend
- Arrow Vending
No serious entrepreneur starts a business without carrying out a feasibility study on the industry they intend to enter. The study enables the entrepreneur to understand better the need for the business, where it is likely to be located, what products should be offered in the location that might be chosen, how profitable the business will be, as well as potential and existing competitors.
In the vending machine business, the most important factor needed for any entrepreneur in this field is having the vending machine at the right location.
This is because no matter how your products may be of high quality, you might have no turn-over if your machine is placed in a poor location. Vending machine owners who have made a loss in this field have learned the hard way about location.
The economy has taken a terrible turn globally, but this has hardly affected the vending machine industry especially those that are strategically located with the right product. Placing the right product in your vending machine for your traffic means that your vending machine becomes indispensable.
For example, in hospitals, having a vending machine that dispenses coffee and soda is likely to bring a faster turnover than a vending machine with gumballs regardless of how the economy fares.
5. Decide Whether to Buy a Franchise or Start from Scratch
Deciding how best to start a venture either from the scratch or from a franchise is a huge decision, as each path has its own pros and cons. Before carrying out this decision, you should be able to carry out a self-assessment on if you prefer the freedom to innovate, have total independence; or fully follow a prescribed ready-made system that a franchise brings.
In starting a business from the scratch, an entrepreneur needs enthusiasm and passion to ensure that the business becomes successful. Financing your business is cheaper than buying into a franchise. Also, you can control every detail and your decisions are purely yours.
In buying into a franchise, you buy into the brand and will be keyed into the brand’s uniformity and consistency. Customers like and purchase from familiar and favorite brands over new businesses starting out. Also, a franchise can help you learn the ropes about the industry, with their marketing and advertising providing a cover for your business, and most times suppliers can extend credit to you due to the brand name.
6. Know the Possible Threats and Challenges You Will Face
A vending machine business doesn’t have much risk associated with it, as it requires less time, effort, and money at investment. However, before starting a vending machine business, it is best to know the possible threats and challenges you are likely to face and how to combat them, so that your business succeeds and you don’t lose your investment.
Possible challenges might come from ordering defective machines, staying in the wrong location hence pulling less traffic, or losing your investment by selling unpopular products in your machine. Other challenges and threats might stem from vandalism and legal risks.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
The decision to choose a legal entity for any business is dependent on the kind of business one is running in the first place. The nature of the vending machine business is such that one can start it on a very small scale as a sole proprietor especially as the scale can be determined by how many machines one has, and how far in between the locations where they are placed are.
If you are considering starting on a medium or large scale, then it would be advisable to enter into a partnership or form a corporate organization such as a Limited Liability Company (LLC) but you would need the services of a lawyer especially for a partnership so that a partnership contract can be prepared that will make sure all the aspects of the business agreement are clear and legal.
8. Choose a Catchy Business Name
Choosing a business name for your vending machine is an important task, especially as some companies pay close to $35,000 in hiring business-naming experts. Any business name chosen is that which will protect your business and its image and either make it become a brand or not. Your business name also suggests what your business does, and shouldn’t limit your expansion to other services.
You should also do a registered search to be sure that your proposed business name hasn’t been taken, or trademarked. This is why it is important you carefully choose a name for your business. Below is a list of suggested names suitable for your vending business:
- Fizzy ‘n’ Crunchy Vending Company
- Healthy Treat Vending Services
- Frozen Edible Vending Company
- Fresh Farmer’s Vending Services
- Healthy Start Vending
- Vending ‘n’ You
- Candy Rush Vending
- Smooth Vending Services
- Sweet and Sticky Vending Services
- Inky Vending
- Bob’s Reverse Coffee Vending
9. Discuss with an Agent to Know the Best Insurance Policies for You
Even though a vending machine business is an easy venture- especially as it allows you to set up your machine anywhere, and have people put money in it, for later retrieval. Yet you need to protect yourself and your business, especially as you won’t be around the machine to monitor it and this is where the problem lies.
It doesn’t matter if you are an individual wanting to venture into the business, a registered corporation, or in partnership with someone else; you need the basic protection that insurance offers, especially as you cannot guarantee the quality of all the products in your vending machine.
Here is a list of the basic insurance cover you should consider when going into the vending machine business.
- Foodstuffs and Liability Insurance for Vending Machine Operators.
- Property Protection and Vending Machine Business Insurance
- Commercial Auto Liability Insurance
- Commercial Property Insurance
- General commercial Liability Insurance
- Workers’ Compensation Insurance for Vending Machine Operators
- General Liability Insurance for Vending Business
- Business Owners Policy (BOP) for Vending
- Business Auto Policy for Vending Machine Business
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
A vending machine dispenses products – whatever kind – that are stored inside to someone who needs them after a button for that item has been depressed; for this act, no intellectual property is needed.
However, if you come up with a new idea for a vending machine, either changing its shape, or creating better way products will be dispensed, then the business would need intellectual property protection, and in this case a patent. A patent protects a new and non-obvious novelty.
11. Get the Necessary Professional Certification
No, anyone looking to go into the vending machine business does not require professional certification. This is one of the businesses where as an entrepreneur, you aren’t required to be around your machine all day, giving you time to venture into other tasks.
You can also employ someone who will ensure that products are in the machine and that there isn’t any problem as regards machine breakdown. Your employee also does not require certification.
12. Get the Necessary Legal Documents You Need to Operate
Depending on the laws and regulations in the state where you will be operating, the documents needed for a vending machine business are very strict, but listed below are the basic documents that will be needed to run a vending machine business:
- Business License
- Business tax regulations
- New Vending Machine License
- Sales and use tax permit
- Home occupation permit
- State withholding information packet
- Special vending machine permit
- Self-employment tax
- Zoning license
13. Write a Business Plan
Any serious-minded entrepreneur knows that one needs a well-detailed business plan, no matter how easy the business might look like. Business analysts have continually stressed the need for a well-thought-out plan on how the business will be run.
The business plan might vary comprehensively depending on how intricate the business will be. No entrepreneur should invest their time and money into a business that they either intend to start, or buy into without seeing a clear guide on how the business will be run, and how profit will be made.
A vending machine business is no different even though the business does not require the constant presence of the owner, and might not require an elaborate business plan; a business plan is needed all the same. A business plan is a detailed and clear guide that is needed by a serious entrepreneur to run a business and shows the strategies and objectives that the business intends to achieve during the lifespan of the business.
A business plan requires certain information that must be contained in the document, and entrepreneurs who have found writing a business plan daunting have hired business plan writers to help put into place a clear guide, or browse the internet and download a sample template that would make writing a business plan easier, especially if you are trying to minimize start-up cost..
A business plan must have the following key components; the aim of starting the vending machine business, how you intend to generate start-up capital or what capital is at hand, attract more traffic, where you intend to locate the vending machine to fully maximize its usage, and how many vending machines you intend to own and operate.
Other information that should be contained includes; the description of what your vending machine is about, your company’s vision, mission, short and long-term business goals; your marketing and sales strategies, especially in regards to how you intend to pull traffic,
How you intend to boost your brand and create awareness for your vending machine, what strategies are in place to effectively compete with other vending machines in the same location or with same products, what products or niche ideas for your vending machine will be offering, SWOT analysis, your financial projections for at least 3 and at most 5 years, your advertising and customer retention strategy, and so on.
14. Prepare a Detailed Cost Analysis
The cost of starting a vending machine business isn’t fixed, it varies depending on several factors, such as how many vending machines the entrepreneur is willing to start with, if he wants to get new or refurbished machines, the location for the machines, and how far it is from the owner, and so many other factors.
This is why an entrepreneur should always try for the least minimum start-up cost so that he or she might be able to recoup on initial investment faster.
The intended detailed cost breakdown is intended as a guide only as the cost for vending machines varies depending on the product you intend to offer to your customers. The basic financial requirements that would be required for a start-up, especially in the United States are:
- The total fee for incorporation (filing and annual fees) will cost $500
- Fees for insurance, licenses, taxes, and permits depending on the kind of products sold
- cost a maximum of $800
- Machine maintenance will cost $400
- Monthly rentals or commission paid to business owners $400Launching a website will cost $100
- The cost of acquiring, maintaining, and fueling a van, computer, and any other equipment will cost $2000
- Additional expenditures such as business cards, and advertisements will cost $200
- The cost of acquiring used three snack and soda vending machines will cost $1,000
- The cost of stocking the machines with products will cost $800
From the above report, it takes between $6,800 and $10,000 to run a small-scale vending machine business in the United States of America.
Those that would want to go into a medium scale which might need employees would need to budget between $20,000 to $50,000, while those intending to go on a very large scale would need to budget between $60,000 to $100,000.
15. Raise the Needed Startup Capital
Financing a business from scratch is not easy for any entrepreneur, and the hassles in this process have led to the death of many business ideas and start-ups.
Most times, your personal savings might not cover a quarter of the financial requirements for a start-up, and it is then your business plan that can be used to get funds from other places. This is why it is always insisted that your business plan is clear, providing concise strategies on how you intend to run and grow your business.
There are several options available for those who want to finance their vending machine business start-up, and they include:
- Small Business Administration (SBA) Loan
- Bank Financing
- Home equity Loan
- Loan from family
- Using your tax return money
- Getting business start-up funding from Vending Machine Suppliers
- Selling un-used and un-needed items
- Bottling Company’s alternative funding options
- Lease purchasing
- Personal savings
16. Choose a Suitable Location for your Business
Finding and securing the right location for your vending machine is important in building a successful vending machine business.
Most successful vending machines are located in areas where there is high foot traffic such as, movie theaters, shopping malls, community centers, hotel and bank lobbies, restaurants, medical centers or hospitals, schools, public farms, and office complexes.
Another key factor to consider whilst seeking a suitable location for your vending machine business is the products you intend to dispense from your machine, for instance, it wouldn’t make any sense if you place vending machines that dispense hot coffee in restaurants, as you won’t get many people using your vending machine, or if your vending machine dispenses toys in a college setting. If you sell the wrong products, your vending machine business might struggle.
Another thing is the purchasing power of the clients where your vending machine is placed. You cannot hope to sell premium goods in a low-priced mall or shopping center, especially as the people that would patronize such places are low-income earners.
Thankfully, you can operate from home for this kind of business, especially as the vending machines need to be placed in places of high traffic, therefore working for you even when you aren’t there, but once you begin to employ people to help monitor the machine, you would need an office facility, where your employees can report to, it doesn’t necessarily have to be a big facility but it should be at a central point to the location of your vending machines.
17. Hire Employees for your Technical and Manpower Needs
You don’t need a new vending machine to start this business especially if your start-up isn’t that much to begin with. Most people prefer to go for a used but reliable vending machine especially those of popular brands. Fairly used vending machines can be gotten from those who no longer want to be in the business, from online stores, or from retailers.
The repair of a vending machine is usually done by experts, and therefore is not amongst the equipment you would need. Listed below are the equipment needed to ensure your vending machine is efficiently run:
- Digital LCD Screens
- Conveyor Belt Dispensers
- Electronic Eye
A vending machine business with 3 or 4 machines might not need an employee, as the owner can handle the business alone at that point, except if the owner is an entrepreneur with other businesses, then he can employ one employee. A medium or large-scale vending business machine with machines in far and varied locations can employ a minimum of 2 and a maximum of 5 employees to handle the supplies.
The Service Delivery Process of the Business
Except for those who might want to build their vending machines from the scratch, so as to give it certain specifications that might be required, there really is no technical production process to a vending machine, because it is basically a service industry that deals with tangible products.
The process involved in a bending machine business is the dispensing of tangible products and/or services to customers, as at when needed.
18. Write a Marketing Plan Packed With ideas & Strategies
The right marketing channels for a business are necessary and might sometimes be tweaked to suit a particular business such as the vending machine business. This is why a business plan helps articulate the marketing strategies and ideas that would be used for a business.
Marketing your business achieves two things; it generates income for your vending machine business, and also boosts publicity for your company or business.
It is important for an entrepreneur to take this aspect seriously, by either researching deeply and widely, seeking the help of experienced owners in the same industry and/or seeking the help of a consultant that would help make marketing ideas workable for the intended target market.
Below are some marketing ideas and strategies for your vending machine business:
- Print handbills about your vending machine and its location, or give your vending machine a unique look, by painting it with bright colors or putting a large neon sign on it, so that it is easily recognizable to customers.
- Advertising on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across, so that those on the social media or read blogs can know where to go, if they need a quick snack, especially if your vending machine business deals in snacks.
- Create a basic website for your business, so as to give your business an online presence.
- Advertising in local newspapers and magazines, or appropriate magazines that are related to the stock the vending machine is offering. For example, a vending machine that offers fresh and healthy food can advertise in local food or farmers’ magazines.
- Directly market the services offered by your vending machine.
- Join local vending machine associations for industry trends and tips
- Attend seminars that would help improve your vending machine business. These seminars could be one that are for best marketing practices for business or other such seminars.
- Provide discount days for your customers, even if it is for products that do not sell well.
19. Work Out a Reasonable Pricing for your Services & Products
The major factor that will ensure that you give the right product pricing to your products and services in your vending machine is in keeping your operating overhead at the lowest possible minimum.
The products in a vending machine are basically priced the same especially if your vending machine is dispensing popular products brands,
But if your vending machine dispenses unique products like niche smoothies, or services like tattooing, getting the right price that will be affordable to the customers, while keeping you afloat is use the least business operations without compromising on certain qualities, like getting a fairly used vending machine of a good brand.
20. Develop Iron-clad Competitive Strategies to Help You Win
Competition is good for business, and helps a business remain proactive by seeking for ways to stay ahead of competition.
The products offered by vending machines are usually priced low because of the low operation cost used in running the business, like not paying for business space, so there isn’t much competitive Pricing Strategy that can be used against competitors except in niche products or services.
The first competitive strategy can be in uniquely giving your vending machine unique colors that will make it immediately identifiable, so it doesn’t blend in with other vending machines in the same location, but stand out. Also, one’s vending machine can solve a problem for customers, like dispensing pampers for toddlers, bikinis in popular hotels or prepared meals.
Another competitive strategy is in adding services that your competitors or even regular retail stores aren’t offering. Extra services will not only increase sales but also the loyalty of the customers to the brand.
21. Brainstorm Possible Ways to Retain Clients & Customers
The vending machine business is unlike other kind of businesses when it comes to retaining customers especially as what represents you or your brand is a machine. To build lasting relationships and retain your clients you would need to provide great customer service.
One of the best ways at retaining customers is ensuring that your vending machines do not break down by carrying out preventive maintenance, or even if they do that they are quickly repaired. This act will save your reputation and show your seriousness in retaining your customer.
- You can get customers to submit requests for preferred stock and then take a vote, with the highest votes for a stock getting included in the vending machine. This is a good way of interacting with customers, as well as building a customer base for the vending machine.
- Another way at retaining your customers is to ensure that you provide only the best products in your vending machine, so as to ensure that your customers get the best.
- Ensure your customers get alerted of new products in your machine by using a colorful sticker, giving out incentives periodically or on special occasions, or hanging around after restocking to convey the information.
22. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
The aim of crafting strategies that would boost your brand is so that the strengths of both the products and company can be emphasized. This means positioning yourself in an aggressive but innovative way in places such as trade shows, on the internet, and within the industry.
As an entrepreneur, you would have to realize that it is more expensive to attract a new customer than to retain one, and any entrepreneur that cannot handle this part of the business might need to hire a consultant to help out, as this is an aspect of the business that cannot be overlooked.
Below are the strategies you would need to boost the awareness for your brand as well as create a corporate identity for your vending machine business:
- First off, the mission statement of your company has to be one that boosts your brand as this provides a guide to the employee who through their actions help boost your brand’s awareness.
- Your marketing objectives have to be clear and strategic, such as an increase in market penetration quarterly, and also boosting brand awareness by getting reactions and feedback from customers.
- Financial objectives have to be defined with the customers in mind, which could be a lesser but more effective cost of acquiring customers. This could take the form of giving discounts on certain products.
- Another strategy is in positioning yourself by leveraging your strengths to have a competitive edge over other competitors.
- Lastly, brands can be boosted by a continuous increase in market penetration, developing a customer base, and building strong customer loyalty.
23. Create a Suppliers/Distribution Network
Regardless of whether you own just one or several vending machines, you would need a network of suppliers or distributors that will make your job of sourcing for products, or getting the available products on time for your customers.
This means being in a good business relationship with these distributors as it will help you be more reliable to your customers, especially in regards to filling the machine immediately the products have finished. If the right relationship is cultivated, the distributors might not only help in the timely delivery of products but might also pass along certain information that might be beneficial to your business and help retain customers.
24. Tips for Running a Vending Machine Business Successfully
Running a vending machine might look like an easy business but it can be a quicksand for entrepreneurs that run the business badly. To run this business successfully, there would be the need to create a template that would not only help the owner but also the ones that might be employed as well.
The first thing to always remember is that customer is king, and to give them the best treatment by not getting lazy at filling the machine on time. The easiest way for the business to fail is not to bother about whether your machine is empty or filled.
Also ensure that the machine is kept clean, and well maintained. If it has got a problem, it shouldn’t be out of order for a long period. Another tip at running a vending machine successfully is to ensure that the machines are kept at the best and most accessible locations, a location that doesn’t inconvenience the customer when they intend to use the machine.