How to Start a Vending Machine Business?

People often start their small-scale business with time for better financial control and flexibility, which becomes their passive income source. Vending machine business is an income-generation strategy for earning profit and prevents you from getting involved in the complications of opening a store, restaurant, or franchise.

Why Should You Start a Vending Machine Business?

Here are some reasons to get into this business:

1. Suitable When You Have Limited Budget for Starting a Business

The business requires minimum equipment; it only needs a computer printer, cell phone, and a vehicle. Thus, the initial investment cost is less.

2. Flexible Schedule

You can decide when the vending machine needs to be restocked and when the money needs to be collected. There is no compulsion to work according to tight deadlines.

3. Flexibility for Selecting Products

When you focus on the performance of your business and the market needs, then accordingly you can make alterations in the products offered by the vending machine to attract more customers. For example, if people of a locality like a certain flavour of ice cream then you can increase its stock compared to the others. The same is the case with savoury items.

4. Grow Your Business at Your Own Pace

In a vending machine business, you are the sole decision-maker of how fast you want the business to grow. You have the freedom to do this based on your time and finances.

5. Ease of Operation

Running a vending machine business is not complicated once the required contracts are secured with business locations. The machine needs to be kept in working condition with goods restocked as per the requirements. Make sure to look after the administrative duties cautiously, such as recording the financial transactions, paying taxes, and handling customer issues. Suitable tools like OKCredit can be used to ease these things.

Process of Starting a Vending Machine Business

When you have the right product to cater to the needs of your target market, then starting as a vending machine operator is a great idea. The initial investment needed for it is less but it opens up the opportunity of revenue generation 24 x 7 at the right location.

Here are the steps for starting this business:

1. Market Study for Deciding the Product and Place Where You Want To Sell

Decide a catchy name for your business, which people can remember easily. It is important to analyse the probability of success before jumping into the venture. For this, in-depth market research is needed to know if the product you want to sell is something that the target customers need. Products like coffee, tea, water, and snacks can be easily sold at any location. However, if you aim at selling sandwiches, or meals, then the business will grow well only near offices, schools, and colleges. For other non-food items also, it is important to analyse the consumer needs before starting the business.

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2. Considering the Features of a Vending Machine

Some features that an ideal vending machine should have included:

• Visually attractive with LED lights, graphics, and branded wraps
• Accepting card payments
• Interactive user interface with voice-activated features
• Dispenser for food and drinks
• Facility for remotely monitoring stock levels using the software

3. Legal Permits

Since the vending machine will be used for trading products, it will need a trade license. Make sure it adheres to all the vending regulations of the state besides following the compliance standards. Complete the relevant legal formalities to get the legal permit.

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4. Funding

Pitching your business plan to investors is a good way of getting funded. Another way is to purchase a franchise that doesn't need a lot of business skills or investment in marketing or promotions.

Here are some ways of getting funding for the business:

a. Avail a short-term loan: Those having a good financial history and creditworthiness can try for a short-term loan for buying a vending machine.

b. Equipment financing and inventory financing loan: The value of your equipment will decide the terms of such a loan. It will act as collateral in case you fail to pay back the loan amount. If you maintain your vending machine by timely servicing it, then its longevity can be as long as 10 years. Your business plan, financial information, and equipment are needed for applying for an equipment financing loan. Similarly, inventory financing loans can be availed for buying inventory.

5. Choosing the Right Machine

When you want to start a vending machine business, here are the options available for you:

a. Renting it out when you have investor funding

b. Purchasing the machine when you want to start a franchise

The type of machine you chose can be either of the following:

• Bulk machine: It is a small machine meant for heavy products, which are expensive.
• Electronic machines: It is a high-tech expensive model but quickly dispenses products and lets customers purchase using credit cards.

It is always better to get a new vending machine rather than on rent as this would be expensive in the long run. It can be because of breakdown, maintenance, and fewer features. Thus, the ROI would be less.

6. Sourcing the Products

When you start a vending machine business, ensure to offer quality products as this plays a major role in helping you succeed. When supplying food, get clean and hygienic supplies to encourage buying behaviour. Double-check non-food products to prevent chances of damage or defects. The product delivery should be on time to avoid low stock in your vending machine. For this, reach out to local vendors with a good commutation facility.

7. Streamlining Your Vending Operations

Streamlining can be done with the vending management system. Technology pre-programs a vending machine with such management software. It helps in staying ahead in the competition and remotely managing the vending machine inventory. It plays a major role in providing premium customer service by optimising the system with the latest technology. Service the machine regularly to keep it updated and running.

8. Keep an Eye on the Sales Pattern

This is essential to ensure that you perfectly cater to your customers’ requirements. The system needs to be updated as per the latest sales pattern to help the business grow. Losing track of the sales pattern will leave you behind in the competitive market and make it difficult to sustain.

Drawbacks of Vending Machine Business

Though there are numerous advantages of getting into a vending machine business, it has some drawbacks too, which you need to be aware of. These are as follows:

i. Investing time: You need to devote a good amount of time and energy to running a vending machine business. This includes looking after the transactions, taxation, stocking of items, servicing the machine, and collecting money at regular intervals.

ii. Chances of theft: Since vending machines are often kept on the streets, they are prone to theft. So, it is important to choose their location wisely for safety and security.

Bottom Line

Vending machine business starts at a small scale but with the right market research and taking calculated risks, it has the potential to make huge profits. If this is your primary business, then you can invest more time and energy. However, if it is a passive source of income, ensure to make a business plan that can earn you profits. It gives you a perfect chance to scale it up and boost your profits as per your requirement.

Also Read:

1) How to Answer the Phone Professionally at your Business?
2) How a Good Market Research Can Give You a Steady Start?
3) 10 Ways how to operate your small business easily with a smartphone
4) How to Create a Customer-Centric Culture for Your Business?

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FAQs

Q. Is it profitable to start a vending machine business?

Ans. Yes, but it needs efficient market research to identify the needs of the customers, based on which you will decide the products to be sold.

Q. Do vending machine businesses have to pay tax?

Ans. Yes, this business is also subject to sales tax like other businesses. The rate of tax varies with location, so check with your state regulations to get a clear idea about it.

Q. Which is an ideal location for a vending machine?

Ans. The most important point to consider while deciding on the vending machine location is to avoid chances of theft as it will cause you a huge loss. Based on the products you are selling, decide the location where the maximum number of potential customers are concentrated to make good profits.