Start a Vending Machine Business in 2023
- The vending machine industry is booming and expected to reach over $25 billion value by 2027, according to Allied Market Research.
- Vending machine businesses have low startup costs and can be highly profitable if managed effectively.
- You don’t need to have the funding saved up and may qualify for small business loans or business credit cards for a vending machine business.
- Learn what a vending machine business is, the types you can run, the pros and cons, how to get into the vending machine business, and what funding is best for this type of small business in this article from Nav’s experts.
What Is a Vending Machine Business?
A vending machine company is run by a business owner, often called a vending machine operator. The vending machine operator purchases one or more vending machines, scouts out locations to place them, negotiates with property owners, and maintains the stock inside of the machines themselves. The operator doesn’t always restock the machines themselves; they may hire employees for that, but it depends on the scale of the vending business.
A successful vending machine business depends on your goals. You may not want to go full-time. Owning a vending machine business can also be a lucrative side hustle. Small business loans and credit cards can help with upfront costs, but the initial vending machine costs don’t have to be huge. You can choose refurbished equipment and start with a single machine to keep costs reasonable.
Types of Vending Machine Businesses
You don’t have to sell soda if you don’t want to — you have options. Although drink machine sales still tend to be the most profitable, there are countless kinds of vending machine businesses you can run. Here are the four main categories of vending machine businesses:
- Food and beverage vending
- Bulk vending
- Specialty vending
- Franchised vending
It’s important to research the hurdles of each type of business before you decide which route you want to go. Choosing one kind and sticking to it in the beginning can make ramping up your business easier and decrease how much you have to learn as you go. What you choose to sell will impact the type of machine you buy, as some products need refrigeration and electricity while others only need a quarter and a turn.
We go into more detail about each vending machine business type in the next section.
Vending Machine Business Ideas
The type of machine business you choose should be easy for you to manage, sell well in your area, and fit within your budget. Feel free to use your imagination. For example, the company SouveNEAR brings locally made gifts to airports and travel hubs that customers can purchase out of vending machines while they’re on the go. Keep in mind that inventory costs money, so make sure you can afford to restock.
Snacks, food, or beverage vending
Many vending machines sell drinks or food. For beverage vending machines, you can choose to partner with and sell a specific brand, like Coca-Cola. Or you can stock it with what you want to sell. It’s best to choose drinks only or snacks only in the beginning to limit the amount of education you need from the start.
With food or snack vending machines, you also have options on what you can sell. For example, placing a healthy snacks vending machine in a private gym might be a success. As long as you do your market research and place the machine in the right location, it has a good chance of creating income.
Bulk vending is often the most affordable type of vending to get into since you’re selling nonperishable items like small toys, stickers, or gumballs. You don’t need to worry about keeping your stock refrigerated. And many bulk vending machines only need the customer to put in a quarter and turn the knob, so you also may not have to worry about electricity. These machines are typically cheaper to buy and stock than other options, as well.
Specialty vending machines run the gamut. You can sell anything from local gifts to portable electronics to laundry products (placed in laundromats or dorms). Selling coffee and hot chocolate from a hot beverage vending machine is another option. These types of vending products may be more complicated if you’re new at running a vending machine business, but that doesn’t mean it’s impossible.
Get into a franchise
If you’d prefer more support and training than starting your own business, you can look into franchising a vending machine business. You’ll be able to take a business model that works and run with it rather than starting from scratch. However, keep in mind that you’ll have to pay part of your income to the franchiser, which may not make the higher support worth it.
Pros and Cons of Owning a Vending Business
There are positives and negatives to starting any business. Here’s a breakdown of what to think about before starting your own vending machine business.
- Low startup and overhead costs
- Potential for high profit
- Doesn’t need to require a lot of time
- Can be passive income
- Takes quite a few machines to become highly profitable
- Requires you to track stock
- The machines may require maintenance
- Have to consider vandalism and theft
How Profitable Is Owning a Vending Machine?
Your profit margin per vending machine will depend on the type of machine, the cost of your inventory, and the vending machine location. A good location and a desirable product that fits into your budget make it more likely that you’ll be successful.
Your overall profits depend on how many machines you operate. You typically need quite a few machines to be able to take this business full time. Owning a vending machine business is not a get-rich-quick scheme. Each machine brings in between $5 and $100 per week, on average. You might only be making $20 per month on a single vending machine, but remember that it’s passive income. If your business has many vending machines, you’ll have a lot more work on your plate — but also the potential to make up to $400 per month on average on every one.
How Do You Fund a Vending Machine Business?
The method you choose to fund your vending machine business depends on your personal circumstances and the type of machines you want to operate. If you have savings, you might be able to fund a standard machine from your own money. For mechanical machines, you’ll spend an average of $2,000 to $3,000, while an electronic machine will usually cost more than $3,000. You can often find refurbished machines for less than that, too.
If you don’t have savings, however, you can still start a vending machine business. There are business credit cards and small business loans that you may qualify for to fund your vending machine startup or expansion costs.
Are Credit Cards a Viable Option for Financing a Vending Machine Business?
Yes. You can use business credit cards to fund a vending machine business. Because the price of a single vending machine is relatively low, the credit limit on business credit cards can often cover the cost. You may even be able to get a credit card with a limit high enough to cover multiple machines at once.
Your credit limit depends on factors like your personal credit score, however, so make sure to check yours before applying.
Best Business Credit Cards for Vending Machine Owners
Here are some of the best credit card options for your vending machine business. Work with Nav to get personalized card recommendations based on the details you enter securely about your business. The more information you provide, the better your recommendations.
Can You Get a Small Business Loan to Buy a Vending Machine?
Business loans are another option when you’re looking to fund your vending machine business. Typically, business loans are used for larger purchases, but you may be able to qualify for a loan if you want to purchase multiple vending machines at one time.
Here’s a shortlist of items you’ll need before you apply:
It is usually difficult for a brand-new business to get a traditional bank loan, but there are alternative lenders (see the list below) that require only six months to one year in business.
Some lenders also look at your business credit. Learn how to establish business credit in this guide from Nav.
Can You Get a Loan to Start a Vending Machine Business?
Here are some of the best small business loan options to use to launch or upgrade your vending machine business.
What to Know Before Buying a Vending Machine
Before diving into your own vending machine business, there are a few things you need to understand. You’ll need to research local regulations to see how to remain compliant. You’re technically a vendor, so check with your local Chamber of Commerce to learn how your state regulates vendors. You’ll probably need to obtain a vending machine license — and one for each machine. This shouldn’t be a dealbreaker because they’re inexpensive and relatively easy to get, but it is one more to-do item on your list. You’ll want to make sure you have your machines licensed so you are operating legally. Additionally, your machine must follow ADA standards, so make sure the machines you buy are accessible to all.
Also, you’ll likely pay sales tax on everything you sell. The amount of sales tax you’ll owe will depend on your location, but it can eat into your profits.
Finally, you’ll usually pay part of your commission to the person or company that owns the property or properties you choose for your vending machine location. The property owner wants to get something in return for allowing you to use their property, as well as cover any electricity costs that add up from your machine. Expect to pay 10% to 25% of your profits to the property owner.
Should I Purchase a New or Used Vending Machine for My Small Business?
Buying a vending machine is daunting. Whether or not you might choose a refurbished machine or a new machine depends largely on which stage your business is in. Used vending machines are a good place to start for new businesses. You’ll decrease your investment, and therefore your risk, because refurbished machines cost less. They may or may not require fixes before you use them, so be sure to inspect it carefully and ask for demonstrations from the vendor.
Meanwhile, experienced vending machine business owners might choose a new machine if they have access to the capital. New vending machines are more expensive but will probably require less frequent maintenance.
Questions to Ask Before Buying a Vending Machine
You might be brand new to buying something like a vending machine and aren’t really sure where to start. Here are the questions you’ll likely need to ask when starting a vending machine business:
- What kind of machine do I need? Once you decide what you want to sell, that will help guide you toward the type of machine you need. Beverages need refrigeration, while snacks may not, for example.
- What’s my budget? Consider new vs. used, as well as whether you need a card reader. Think about whether or not you need a card reader (and its associated fees) for customer convenience.
- Where do I buy a vending machine? As always, the internet comes in handy. Search for manufacturers or wholesalers for new machines or for secondary market sellers (or even on Craigslist or eBay) for used machines.
- Do I need to store it? Factor storage costs into your budget if necessary.
- Where will I get my inventory? Make sure you have a plan for where and how you’ll get the products to restock your vending machines.
- Who will stock the machines? Figure out whether you’ll restock your machines yourself or you need to hire someone to take care of that work. Calculate any payroll into your budget.
Scouting Locations for Your Vending Machine
When figuring out potential locations for where to put your vending machine, look at foot traffic. High-traffic areas like airports or train stations are more likely to be successful than locations that don’t get as many people walking by. These locations may be more difficult to get into, but it could be worth trying.
You’ll also want to consider what you’re selling. If you’re selling bulk items like small toys, outside of grocery stores and convenience stores could be a good spot since children often accompany parents to these places. On the other hand, if you’re selling hot coffee, looking into office buildings and motels might be a good idea. Get creative with your location scouting and don’t be afraid to pitch your vending machine to the property owner.
Additionally, consider the safety of your location. Vandalism and theft are issues for vending machines since they are often left out in the open, so try to make sure the spot is well lit and in a populated area. You could even choose to place your machines inside of buildings that are locked at night if vandalism is a big concern.
Stocking and Replenishing Inventory
Keeping up with your inventory is essential for your business’s success, so come up with a plan to track it. Rather than personally driving around to each of your vending machines (which would take a lot of time), you can use inventory management software to stay on top of your restocking needs. Then you’ll know when you need to go back and replenish your inventory — and you’re never losing out on a potential sale. There are also specific vending management systems that are worth looking into since they specialize in vending machines.
You may want to hire employees to do the physical restocking for you, or you may be happy to do the work yourself (at least while it’s manageable).
Tax and Compliance Considerations
There are a few things that are important to plan for before starting your own small business. Keep in mind: Even if you only run one vending machine, you’re legally a small business and must file business taxes if you make over $400 per year.
Business structure and formation
First, you’ll need to think about what business entity you want to run as. If you want to protect yourself from personal liability as a vending machine owner, it’s best to not operate as a sole proprietorship. Becoming a limited liability company (LLC) gives better liability protection and more options for how you’re taxed than a sole proprietorship. You can also consider becoming an S-corp or a C-corp.
Setting up an LLC is much easier when you use a business formation service. These services know the laws based on where you’re located and make sure you’re compliant — without you having to do all the research yourself. Use Nav to find the best business formation service for your business quickly and efficiently.
Tax and accounting software
You’ll probably have to pay sales tax on what you sell out of your vending machines, unless you’re stationed in one of the five states that doesn’t charge sales tax. The percentage of tax you pay depends on the sales tax rate in the state. Turning to a professional to file your business taxes can help you stay compliant with all local, state, and federal laws, as well as get you the highest possible return.
Additionally, having an organized accounting system from when you form your business is ideal (although it’s not too late to organize it if you’re already up and running). Bookkeeping and accounting on a spreadsheet for all of your vending machine sales can quickly get out of hand. Instead, use accounting software to keep everything in one place and to be able to pull financial statements quickly that tell you how your machines are performing.
POS Systems: How to Accept Payments
You have several choices in how you accept payments: coins only, cash and coins, and credit cards. Accepting cash means you’ll have to keep your machine stocked with change.
Allowing credit card payments is a great way to boost your sales since most customers expect to be able to pay for items with a card. Machines with card readers cost more up-front, but it may be worth it to increase sales. You will have to sign a contract with a payment gateway and pay various fees to the payment gateway provider, so do your research before choosing one to make sure you’re paying a fair amount.
How to Optimize Profits
The location of your vending machines and the items you’re selling are the biggest indicators of how well your products will sell. If there is a lot of foot traffic — and it’s the right kind of foot traffic — you’re likely to make money. Think about who the regular clientele is in the area and make sure it matches up to what you’re selling, like to-go snacks in dormitories and coconut water in a gym.
Additionally, make sure you negotiate a fair rate with the property owner so you aren’t giving up too much to place the machine in that location. If the property owner isn’t willing to work with you, it may be worth looking elsewhere. Ensuring you aren’t overpaying for your payment gateway (if you have one) is another way to maximize your take-away income.
Protect Vending Machines With Business Insurance
Owning a business is inherently risky, and a vending machine business is no different. Business insurance can provide you with protection and peace of mind so you can get back to operating your business. Having insurance covers you if one of your vending machines is vandalized or there is a liability claim against your business. Nav partners with Mylo to provide personalized business insurance tailored to your unique business’s needs.
The vending machine industry is great for new or first-time business owners, because the overhead and startup costs are smaller than many other businesses and each machine shouldn’t require daily attention. Opening a vending machine could provide passive income on the side — or become a full-time business. Whether you use business funding or open it with your savings, a vending machine business could be a great path to making more income.
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