10 steps to start a vending machine business

No two businesses are exactly the same, but following a series of logical steps can help you build a successful business. Consider incorporating these steps into your business plan.

1. Conduct market research

Before you buy your first machine, you might want to perform basic market research. This can help you make important decisions, such as what type of product to sell. Consider a mix of primary research and secondary research.

Primary research involves collecting the data yourself. For example, you may want to send a survey to people in your neighborhood. The survey might include questions about snack preferences and other related topics. Surveying potential customers directly may make it easier to choose a vending machine location or set your prices.

For secondary research, you review data that journalists or marketing agencies have collected. Reading government reports and trade publications can help you better understand the retail trade industry, which includes vending machines and other direct-to-consumer businesses.

It might also be helpful to perform a competitive analysis. This involves gathering information about other vending machine businesses in your area. If you can’t find competitor information online, consider visiting local stores, laundromats and other vending locations. You can use these visits to gather data on each competitor’s product mix and pricing strategy.

2. Choose your equipment

Many vending machines have snacks and drinks, but there are other options. Once you understand the industry, think about which business niche is right for you. You might want to consider these factors:

• Anticipated operational budget
• Product knowledge
• Market demand
• Local competition
• Storage requirements
• Consumer trends
• Personal interests

Bulk vending

You’ll often find these vending machines at arcades, outside retail shops, and in office waiting areas. They store small toys and trinkets in a central chamber. They release an item when a customer inserts payment. Bulk items may not bring in a lot of profit at once, but they’re cheap to purchase and their simple design requires minimal maintenance.

Food and beverage

Many U.S. vending machines have soda, water, snacks, energy drinks and candy. Food and beverage machines have higher operating costs than bulk vending machines, but the demand for snacks and drinks may be higher than the demand for other items.

Specialty vending

Some vending machines contain specialty items instead of standard snacks and drinks. The most common examples include ice cream, deli products and coffee. For example, you might be able to set up a coffee machine in a local office building.

To increase your profit margin, consider investing in a specialty machine filled with makeup, cell phone chargers or even over-the-counter medication. Specialty vending machines are usually more secure than other types, with advanced technology to handle payments and provide refunds for vending errors. Because you can customize the slots to fit certain products, this type of machine usually costs more to operate.

3. Develop a budget

Budgeting, or budget management, means tracking your company’s revenue and expenses. Revenue is the income you generate from sales. For example, if a customer pays $1 for a candy bar, that represents $1 in revenue.

Expenses are the costs you incur while running your business. After purchasing a vending machine and starting inventory, you might need to buy office supplies, business cards or other items. These are business expenses.

Consider following these budgeting best practices:

• Make a list of all anticipated expenses: Unless you rent commercial space, you won’t have to budget for rent and utilities. However, you might have to pay for insurance, inventory, machine maintenance, location fees and repairs. Location fees are what you pay property owners to host your machines—either commissions or rental fees.
• Estimate your revenue: Gross revenue is the amount of money a business earns in a specific period. To estimate your revenue, consider visiting popular vending machines in your area. Note how many customers make a purchase during each visit. For example, if you observe 30 people buying a $2 item over eight hours, you might want to estimate $60 in daily revenue (about $1,800 per month).
• Include your start-up costs: When you first start a business, you’ll have some start-up costs, such as business licenses, permits, vending machines and market research. Including these costs in your budget can help you prepare for your first few months in business.

4. Develop a pricing strategy

Pricing affects your profit margin and sales volume, so it’s helpful to think about your pricing strategy before you set up your first vending machine.

Competitive pricing means basing your prices on what your competitors charge. With cost-plus pricing, you add a markup—such as 15%—to your product cost. You can even set your initial prices low and then raise them once you have steady customer traffic.

You can change your pricing strategy anytime. You can always adjust your prices to better meet customers’ needs.

5. Identify funding sources

If you need funds to cover your start-up expenses, consider applying for a business loan from your bank or credit union. Another option is to borrow money from family members or use a crowdfunding platform. Crowdfunding involves raising small amounts of money from a large group of people. If you go outside the banking system, consider formalizing your agreement in writing.

6. Register the business

Your city or county government may have registration requirements for local businesses. If you aren’t familiar with these requirements, seek support from experienced business owners. For example, many communities have a chamber of commerce. Other chamber members can offer resources to support your new business.

7. Scout locations for your vending machines

The more foot traffic a location has, the more opportunities you have to make sales. Before you buy a vending machine, you might want to scout multiple locations. Consider grocery stores, hospitals, office parks and other large buildings. You can also hire a locator service to scout locations and identify those with the most foot traffic.

8. Install and stock your machines

Once you obtain a vending machine, you can either move it yourself or hire a mover to transport it. If you prefer to do the moving, you’ll need a large vehicle. When it’s time to restock, count how many units of each item you sold. Tracking sales can help you determine which products are popular with your customers.

9. Maintain your machines

Since you’ll leave your machines unattended for long periods, create a regular maintenance schedule to keep them clean, functional, and well-stocked. During a maintenance session, you can clean your machine, remove graffiti and ensure all the buttons, card readers and lights work.

10. Continue investing in the business

You can reinvest your profits by buying more vending machines, upgrading your existing machine, purchasing an inventory management system or even hiring a part-time employee. If you decide to hire someone, ask each property owner if they require background screening.

You might also want to consider having your new team member wear a uniform or carry an ID badge. Something as simple as khaki pants and a polo shirt can help position your company as a professional enterprise.

FAQs about starting a vending machine business

Where can I install a vending machine?

You can install a vending machine almost anywhere, provided you have permission from the property owner. Hotels, college campuses and amusement parks are just a few of your options. If you find a desirable location, consider contacting the owner via telephone or email.

How much time does it take to run a vending machine business?

It depends on how many machines you have and how much you want your business to grow. If you have one machine, it might take just a few hours per week to restock inventory, collect money and make bank deposits.

It’s common for the time commitment to increase with each new machine you purchase. You may also want to set aside extra time for cleaning, maintenance and repairs.

Should I get a vending machine that accepts credit cards?

You might want to get a vending machine that accepts credit cards, as not everyone carries cash. Offering an additional payment option makes it easier for customers to buy from you.